By Michael Schmitz
A New Type of Music Industry
Over the past 15 years, the music industry has shifted toward music streaming, away from individual music purchases. This has given rise to a handful of oversized conglomerates. Music streaming accounts for 84% of all music revenue. Spotify, Apple, and Amazon control 90% of music streaming.
The streaming model characteristically differs from the traditional record label industry. Rather than paying for individual songs, albums, or artists, consumers subscribe to the platform itself. This has opened the door to new forms of monetization, even while musicians have become more alienated from their audiences. Platforms like Spotify are highly dependent on data aggregation and algorithms. They use their proprietary song recommendation system to outperform their competitors while, at the same time, attracting advertisers. Their large reservoir of user data is leveraged to zero in on the demographics marketing teams want to target.
These unique features of the music streaming industry have had a centralising effect. Large companies benefit from having access to greater amounts of data, further increasing their market size. Eventually, there are less than a handful of companies capable of gatekeeping the entire music industry.
Musicians Have Lost Control
Market consolidation has put individual musicians in a desperate position. In order to reach large audiences, they must work through these streaming platforms. When Neil Young left Spotify in 2022, he lost 60% of his streaming revenue. This was 10% of his overall income, but for more recent and less established musicians, the costs can be even greater. According to one music industry insider, exposure through Spotify is “not only a major vehicle for discovery, [it’s] also a huge way to build a song’s popularity and an artist’s career.” By not staying active on a streaming platform, independent musicians may quickly lose their digital fan base as listeners shift to stream other, readily available artists on the platform.
The necessity for musicians to participate in the music streaming platforms, however, erodes their collective negotiating power. Seeing that musicians will join their platforms regardless of the working conditions, streaming companies feel compelled to offer little in return. Looking into Spotify’s recommendation system, one finds that musicians are not treated impartially. A study conducted on bias in music recommendation found that “major labels are over-represented in the recommendation process.” Such labels as Universal and Warner Music Group in addition to supplying music to Spotify, own substantial equity in the company. Spotify is incentivized to promote label-affiliated artists, and independent musicians are in no position to complain.
Since the rise of the music streaming giants, there have been repeated questions as to whether these companies provide a fair working environment. Musicians have little influence over the existing system of music streaming industry. The blatant inequity has been the source of much complaint; in 2024, 0.6% of Spotify artists received at least $10,000. Nonetheless, the trajectory is set to magnify further. With their reservoirs of user and musical data, music streamers like Spotify could become a lightning rod for artificial intelligence (AI) music.
What New Technology Means for the Future
Other industries have rightly voiced concerns over AI’s potential impacts. The Screen Actors Guild-American Federation of Television and Radio Artists went on strike in 2023, demanding that their contracts be updated to account for the theft of intellectual property by AI. Creators and artists fear that their work may be stolen and used to automate their industry. If a script and scene can be made without a human being, studio executives will be able to make millions with minimal expenses.
The exact same threat exists for the music industry, yet the difference is, unlike the film industry, musicians’ collective organizing has been so undermined that they have been unable to resist AI copyright theft. Since a 1984 NLRB ruling, musicians have been barred from unionizing. 10 Thus the enforcement mechanisms which should be protecting musicians are weak, favoring distributors over creators. The protections provided by the Digital Millennium Copyright Act have been described as a “game of whack-a-mole.” The onus is placed on artists and their music labels to report individual infringements on their intellectual property – a threadbare defense against an endless flood of AI-generated tracks.
Because independent artists are forced to “take whatever terms dominant online platforms offer for their work,” AI music is enabled to run rampant. As this technology advances, the threat to creatives in this industry becomes greater. Olivia Finlayson writes, “If fewer musicians are incentivized to create and commercialize musical works, whether they are beginning their careers or are already an Independent Music Creator, then the public loses out on a more diverse, creative, innovative, and competitive music industry, as well as the opportunity to discover great talent.”
Stemming the Tide
In order to protect musicians from the erosion of their intellectual property, the U.S. government should stifle the anti-competitive pressures in the music industry. If musicians can collectively demand better treatment, the industry will be forced to respond.
The solution can start with
1) The Department of Justice and Federal Trade Commission investigating whether the music streaming market is too concentrated, undermining the rights of authors
2) Congress rescinding the existing restrictions on musicians’ ability to organize. Passing the Protect Working Musicians Act would enable musicians to negotiate directly with music streaming companies, as opposed to the current indirect relationship, whereby music labels are the first point of contact
3) The music industry adopting transparency in the contractual structure of streaming platforms, preventing “paid prioritization” on music streaming platforms, which artificially obscure independent artists while promoting well-connected ones