Constantly Evolving Music Business: Stay Independent Vs. Sign to a Label: Artist's Point of View

Constantly Evolving Music Business: Stay Independent vs. Sign to a Label: Artist’s Point of View Sampo Winberg Bachelor’s Thesis Degree Programme in International Business 2018 Abstract Date 22.5.2018 Author(s) Sampo Winberg Degree programme International Business Report/thesis title Number of pages Constantly Evolving Music Business: Stay Independent vs. Sign to and appendix pages a Label: Artist’s Point of View 58 + 6 The mark of an artist making it in music industry, throughout its relatively short history, has always been a record deal. It is a ticket to fame and seen as the only way to make a living with your music. Most artist would accept a record deal without hesitating. Being an artist myself I fall into the same category, at least before conducting this research. As we know record labels tend to take a decent chunk of artists’ revenues. Goal of this thesis is to find out ways how a modern-day artist makes money, and can it be done so that it would be better to remain as an independent artist. What is the difference in volume that artist needs without a label vs. with a label? Can you get enough exposure and make enough money that you can manage without a record label? Technology has been and still is the single most important thing when it comes to the evolution of the music industry. New innovations are made possible by constant technological development and they’ve revolutionized the industry many times. First it was vinyl, then CD, MTV, Napster, iTunes, Spotify etc. Development has opened up new possibilities for independent artists. Recording, distribution and marketing have become possible for eve- ryone. “Evolution of Music Business” -chapter will be going through the major changes that have shaped the industry to its current state. Today’s artists’ need to have many sources of income. After piracy and downloading services almost killed all record sales in the early 2000s, artists’ revenue streams needed to diversify. Streaming has become the most popular way to consume music and people pay for access to music rather than owning it. As streaming royalties usually don’t leave artists with enough money they are forced to look elsewhere. “Artist’s Revenue Streams” -chapter goes through the main sources of income today’s artists have and presents the differences signed and independent artists have in their income streams. To conclude the research, I’ll be evaluating whether it still makes sense to sign a record deal or would it be better to remain as an independent artist. Keywords Music industry, Record Labels, Independent Artists, Business Models, Artist’s Income Table of contents 1 Introduction ................................................................................................................... 1 1.1 Approach, Research Problem & Objective ............................................................ 2 1.2 Research Methods ................................................................................................ 3 1.2.1 Research Plan ........................................................................................... 4 1.3 Record Labels & Record Deals ............................................................................. 5 1.4 Glossary................................................................................................................ 7 2 Evolution of Music Business .......................................................................................... 8 2.1 Early Years ........................................................................................................... 8 2.2 Broadcasters vs. Royalties .................................................................................... 9 2.3 Vinyl, TV & Payola ................................................................................................ 9 2.4 Rock ‘n Roll Revolution ....................................................................................... 10 2.5 Age of MTV ......................................................................................................... 10 2.6 Piracy & New Business Models ........................................................................... 11 2.6.1 Renegade P2P ......................................................................................... 12 2.6.2 Online Downloading Services .................................................................. 12 2.6.3 Commercials ............................................................................................ 13 2.6.4 360° Deals ............................................................................................... 13 2.7 Digitalization & DIY Tools .................................................................................... 14 2.7.1 Online Music Distribution – Example CD Baby ......................................... 17 2.7.2 Social Media ............................................................................................ 17 2.7.3 YouTube .................................................................................................. 18 2.8 Streaming Era ..................................................................................................... 19 2.8.1 Spotify ...................................................................................................... 20 2.8.2 Spotify Playlists ........................................................................................ 21 3 Artist’s Revenue Streams ............................................................................................ 25 3.1 Artist Managers ................................................................................................... 25 3.2 Performance Royalties ........................................................................................ 25 3.3 Mechanical Royalties .......................................................................................... 26 3.4 Licensing ............................................................................................................. 27 3.4.1 Master Use License ................................................................................. 28 3.4.2 Synchronization Royalties ........................................................................ 28 3.5 YouTube Monetization & Partner Program .......................................................... 29 3.6 Shows & Touring ................................................................................................. 32 3.6.1 Signed ...................................................................................................... 33 3.6.2 Independent ............................................................................................. 33 3.6.3 Booking Agents & Agencies ..................................................................... 34 3.6.4 Social Media & Streaming Service Demographics.................................... 34 3.7 Artist Branding .................................................................................................... 37 3.7.1 Brand Collaborations & Sponsor Deals .................................................... 37 3.7.2 Merchandise ............................................................................................ 38 3.8 Independent Artist’s Revenue Streams ............................................................... 39 3.9 Signed Artist’s Revenue Streams ........................................................................ 40 4 Discussion & Conclusions ........................................................................................... 43 References ...................................................................................................................... 51 Appendices ...................................................................................................................... 59 Appendix 1. The Rolling Stones / Jovan Poster 1981 .................................................. 59 Appendix 2. How much do music artists earn online?.................................................. 60 Appendix 3. Global Recorded Music Revenue Forecasts ............................................ 61 Appendix 4. Global Music Market 2016 in Numbers .................................................... 62 Appendix 5. Number of Global Active Spotify Users 2012 – 2017 ............................... 63 Appendix 6. Most Expensive Keywords in Google AdWords ....................................... 64 1 Introduction “The only industry in which after, you pay off the mortgage, the bank still owns the house.” - U.S Senator Orrin Hatch Music industry has gone through many drastic changes during the last 100 years and is constantly evolving. It’s regarded as one of the most unpredictable industries in the global business world. This creates both, challenges and opportunities for artists and companies trying to make it in the field. Business models must continuously adapt to technological change. And the changes affect everything, distribution, marketing, artists management etc. Despite the ever-changing business models one thing hasn’t changed, artists are aiming to get signed by labels. (Tschmuck 2017; IFPI 2014) In this thesis I’ll look in to the business side of the industry and do so from an artist’s point of view. First going through the most important changes during the last century, how the business has changed and how relationships between artists, record labels and consumers have evolved. With the changes in the industry and new possibilities created through digitalization, there are

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