How power and interdependence relationships influence the allocation of sales in the electronic music scene.
The music industry has seen many changes over the course of the last few years. The big changes in technology and music consumption have proven to be challenging for both artists and record companies. Illegal downloading is one of those aspects that would come in the news whenever the music industry was mentioned. More recently, Subscription Based Music Services (SBMS) emerged and opinions differ if this development increases or decreases music piracy. Along with challenges regarding income streams from selling digital music files and offering streaming options for music, it is challenging for record companies and artists to generate their revenue.
Artists normally release their music through the services of a record company, who in their turn, offers the music through sales platforms and promotes it through media platforms. Nowadays artists also have the opportunity to directly sell their music, without the use of a record company. These are artists who are referred to as ‘independents’. Recent research presents various insights in new business models for artists. For instance, a study on how media and sales platforms configurations for young artists differ for different types of artists. However, research on power and interdependence relationships between the artists, record companies and the media and sales platforms remains scarce. This has lead to the research question of this study:
How do the power and interdependence relationships between the artists, record companies and the media and sales platforms influence the allocation of revenue from sales?
This study focuses on the electronic music scene, since it is a large and growing industry despite the challenges of the market for music. This scene also has a large variety of record labels and a high volume of music being released.
Power relationships can be of a coercive or non-coercive type. The first means that there is some form of force, intimidations and penalties, while the latter is more based on “rewards, legitimacy, expertise and reference”. The power relationships between artists, record companies and sales & media platforms are of the non-coercive type. The power relationship can have a relative power in which there is buyer dominance, supplier dominance, or a balanced status. In the relationship between artists and record companies, there is buyer dominance. The artist is trying to sell their music at first to and after that through the record company. There is also buyer dominance with media platforms towards record companies. The interdependence is moderate for both relationships.
There are several sales & media platforms that are being used in the music industry. For the electronic music scene, traditional and more modern platforms are used. The media platforms are divided in the traditional media platforms and the newer social media, social networks, content communities and other virtual communities. For the sales platforms, roughly three categories can be discerned: physical products (while not as large any more, it is still existing), digital music files and streaming services. The revenues from each platform seem to differ significantly.
The revenues are highest for physical products, then digital files and lastly, streaming services. Based on average royalty rates, a streamed song needs to be played around 1500 times for the same royalties of one sold digital song, or 2250 times to equal royalties from one sold song on a physical sound carrier.
These royalty rates and resulting revenues emphasize the importance of social media marketing. The revenue per song is low and therefore a high volume is necessary without high costs. Social media marketing is essential for the profits in the music industry, but it also is a social way to interact with fans of both a record company and an artist. Record companies seem to focus their marketing on platforms that they are more familiar with and that generate the highest revenue. These aspects coincide with the speciality stores for DJs, who are the target audience for record companies in the electronic music business.
The relationship between artists and record companies is influenced by several factors. The main factors that influence an artist to choose a record company are: the expert power a record company has within the music industry and the referral power a record company can have. This specific expert power can be defined as the knowledge and know-how a record company has within the music industry, this is likely to be more than an artist has, especially since a record company represents multiple artists and has some economy of scale in the direction of sales & media platforms due to the multiple artists and related music. A record company has more music to offer from multiple artists than an individual artist can offer. The referral power is based on the representation of multiple artists and the affiliation an aspiring artist can have with both the record company and the related artists. There appears to be a balance in place between artists and record companies. More established record labels release music of more famous artists, with very few exceptions. As a result, in these relationships artists have an equal input with regard to contractual terms and there is no one-sided influence of power on the allocation of revenues among artists and record companies.
There are three main power relationships and interdependencies discerned: (1) between artists and record companies, (2) between record companies and sales & media platforms and (3) between artists and sales & media platforms. These relationships and interdependencies resulted in propositions that are being validated through qualitative research. This specific research took place through expert interviews in two focus groups: artists and record companies. In these two focus groups selected artists and record company representatives responded on specific questions designed to study the propositions. Responses from the focus group are being used to discuss the propositions and from there, the sub-questions and eventually the research question.
Among the respondents there were no artists with experience in releasing their music independently of a record company, hence the power relationship and interdependency between artists and sales & media platforms could not be studied further. There is a power relationship between artists and record companies, where the record company has more power. Between record companies and media platforms there is also a power relationship, where the media platforms have more power. Record companies and sales platforms do not have power relationships; record companies are free to choose how they want to sell their music.
There are different types of sales & media platforms that play a role in the music industry, nevertheless no respondent indicated to have experience with doing business directly with a sales platform; all contacts go through their distributor. This for them the one point of contact to offer their music among several stores and services. All media platforms are all important in the music industry, since there is a vast amount of music being released on a daily basis. Every bit of extra exposure could be used to promote the sales and streams of music.
This is also the reason why the use of social media (marketing) is essential in the music industry. Since the revenues per sold or streamed song are low, the importance of low- cost promotion is increased. The social media marketing is essential to generate the
necessary attention to the music in the large amount of music that is being released at a relatively low cost. The use of social media marketing has nonetheless its own challenges and difficulties but in order to make profit, their use is essential within the music industry.
The knowledge and know-how a record company has, is of a big influence on the relationship between artists and record companies. Within the electronic music scene, artists reach out for a record company mainly because a label has a better reach, an established fan base and a catalogue of earlier released music by multiple artists. A fan base of the artists can help, on the other hand, in being more interesting for a record company as well. The relationship between record companies and media platforms on the other hand, is being influenced by reach and not by reputation. Record companies offer their music through every sales platform but the main promotion and attention goes to the platforms that serve the target audience best. Concerning the media channels, the main factor is additional reach and attention to the music. Creating relationships with media platforms, other than using social media, proves to be a difficult challenge.
There are definitely power and interdependency relationships between artist and record companies, as well as between record companies and sales & media platforms. The relationship between artists and sales & media platforms could not be studied and as such the presence of power and interdependence relationships could not be validated. The relationship between artists and record companies seems to have no influence on the allocation of revenues between them. The size of the fan/customer base of both has an influence on sales. The relationships between record companies and media platforms have a big influence on sales. There is no influence on the allocation of revenues among artists and record companies, since this is formalized in a contract between the artist and record company.
It can be concluded that the power and interdependence relationships have their influence on sales within the electronic music scene, but not on the specific allocation of revenues between artists and record companies.
Due to the high dependency on promotion of the music at the lowest cost possible, artists and record companies should combine forces and seek to build relationships with certain media platforms that could promote their music for low or no cost. The royalty rates, which divide the revenue between record company and artist, should be at a level that is as equal as possible. This ensures an equal incentive to promote the music.
This study did not include any responses from artists with experience of releasing music independently of record companies. This might be related to the fact that this not very common, or even non-existent, within the electronic (dance) music scene. Future study has to verify this. This future study should include a larger group of respondents, of which also should include certain characteristics of the artists and record companies. This larger group should also include larger companies and multiple genres. This could be a quantitative study, in which more data could be used to differentiate between company size and artists following for instance.
The perspective of media platforms is not included in this study, but future study of their perspective should increase insights on how record companies and artists could succeed in establishing relationships and finding ways to make their music stand out more. Lastly future research should be done on income streams for record companies. Contrary to the artist, record companies rely mainly on music sales and streams. With the current royalty rates, this is a very challenging situation.
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