Over the last decade or so, the sky-scraping rise of portable devices, all connected to the internet and equipped with near-unlimited data, has triggered a seismic shift in the music industry.
Streaming companies such as Apple Music, Pandora and – biggest of them all – Spotify now have deific influence on artists’ success or failure, such is their control over the global market’s listening preferences.
Spotify launched in 2008. That year, streaming accounted for less than two per cent of the global music industry’s $25 billion revenue.
Now, at a time when Spotify itself is worth more than $30 billion, streaming makes up almost two thirds of the industry’s revenue.
Streaming’s boom has coincided with the collapse of physical music sales and, more recently, a decline in downloaded music.
Downloading music onto an mp3 player was en vogue as physical sales dropped, but the popularity of piracy software – think Limewire and Napster – played a substantial role in the industry’s revenue dip.
Yet, while battles over piracy’s legality bubbled away, Spotify was plotting its path to monopolisation.
The market was growing sick of the cost and inconvenience of going to a shop to buy a CD, and Spotify, through its ultra-cheap, über-convenient customer model, capitalised.
Offers of $12 a month – and half that for students – for unlimited, ad-free music listening were, and still are, too appealing for most to turn down, hence streaming’s rise and downloads’ fall.
Contrary to popular belief, not all artists receive the same payment per Spotify stream.
Spotify splits its revenue, with approximately 70 per cent going to rights holders and the remainder staying with the streaming giant. However, artists’ profits differ based off, among other factors, their record deals and listeners’ Spotify account plan and location.
Converting non-paying users to premium customers is integral in Spotify’s success. In 2021, premium subscribers’ monthly fees made up 88 per cent of the company’s revenue.
The major player from the outset of streaming’s growth, Spotify’s annual revenues – 70 per cent of which are funnelled back into the music industry – have continually been about 60 per cent of the industry’s total streaming revenue.
In recent years, many music fans have collected vinyl albums to physical complement their digital libraries.
A desire to own art in tangible form, as well as the societal trend of appreciating old-school works, has fuelled vinyl’s rise from comprising 0.5 per cent of Australian music revenues in 2012 to 5.5 per cent in 2021.
