The Music Industry: Aiming for the Singularity But Hitting Collapse Instead
The music industry managed to stem its piracy-induced hemorrhage. Nonetheless, and like the rest of industrial civilisation, it's on its way to collapse [part 1/6]
Although the world economy hasn't been booming lately this hasn't meant that the booming has been reduced to economizing, what with the boom booms having gone through such a transformation in the past decade that "streaming" – playing music on a digital device without actually storing it – has pulled the music industry out of the piracy-induced doldrums that saw its sales plunge by more than 70% since its peak in 1999. As put by Cary Sherman, chairman and CEO of the RIAA, "I'm confident that music's future is bright. The popularity of music is greater than ever. Like never before, it drives our culture and commerce." However, while the music industry is busy championing its new-found success thanks to digital nirvana, it's not exactly surprising that what it doesn't notice is that the next decade is likely to see not its resurgence but rather its collapse. I'll back up a few decades to explain.
Like any (former) suburban-boy born in the late-70s in an affluent-enough family in an affluent-enough region of southern Ontario (which for years was North America's fastest growing area), a paper route and then a decent-enough part-time job were enough to get me the disposable income needed to adorn myself with a rather decent CD collection, probably 120 or so of the things by the time I got to university.
A much-more-than-decent summer job given to me on a silver platter was then enough to get me a shiny new Apple computer for video editing, the soon-to-be-released iTunes program eventually used to transfer all my CDs to MP3s. This all happened during the time that the pirating of music was starting to do a number on the music industry, beginning with "services" such as Napster, Gnutella and Kazaa. Being a "poor" university student I of course tried them all out a few times, but it was obvious that Napster-and-company's rinky-dinky method of having to search for and then download individual song by individual song wasn't going to cut it for me. I liked listening to entire albums, not the latest top-ten, which meant I ended up using Hotline.
Never heard of Hotline? I didn't think so.
For the life of me I can't recall how I first heard of Hotline, a TCP/IP file transferring system which consisted of three programs: Hotline Server, Hotline Client, and Hotline Tracker. The Server portion was operated by somebody who had a computer with a high-speed Internet connection that could ideally be left on 24/7, to go along with a large enough hard drive for storing a significant amount of files – MP3s were what interested me, but you can imagine the kinds of things some people would store and share (I never checked).
The Client portion of Hotline was then used by somebody who wanted to connect to Servers in order to download files. You first had to locate Servers (which is what Hotline Tracker was for), and then follow the rules they individually laid down. The handful of Servers that I frequented had several hundred albums each, their rules generally along the lines of "upload one decent and relevant album for every five you download", although some requested (not demanded) donations of a few bucks to cover bandwidth costs.
While I still continued to purchase the occasional CD here and there, those purchases paled in comparison to the amount of shot-in-the-dark albums I downloaded via Hotline. This was of course rampant theft, and is indicative of why the music industry began to tank at the dawn of the 21st century.
I wasn't – and am not – a big fan of theft, but being a "poor" university student I was gifted with the required mental gymnastics to justify to myself this particular grifting by thinking that when the time came I'd in return provide to others material I'd created au gratis. (As a bit of a consolation these posts on this blog are licensed under Creative Commons [see the logo/link at the bottom of this page], which means that anybody can re-post or re-work my material, for free, so long as they give attribution to me and/or FF2F as the original source. Of course none of this excuses my previous theft of material that certainly wasn't licensed under Creative Commons, but hey.)
With about 600 albums in total (roughly 25% of which were legally purchased, the rest coming from Hotline or ripped to MP3s from friends' CDs) all of my music was now played directly off the computer, and being the time before DVD-Rs I made sure to have it all backed up onto CD-Rs (about five albums fit per CD-R). In the process I somehow managed to give myself the impression that actual albums were materialistic, and having the only really important part on my hard drive and backed up to CD-Rs I slowly proceeded to get rid of all of my purchased albums.
But like the saying goes, the road to hell is paved with good intentions. Fully immersed amongst digital doo-dahs and steadily making my way towards ever more efficient usage of zeroes and ones, you might say I was unwittingly making my way towards some kind of singularity, a state where my mind could be uploaded to the Great Cloud and I could simultaneously listen to all 600 of my albums – heck, where I could simultaneously listen to all albums in existence – and live out eternity in a state of vegetative ecstasy.
Or something like that.
Anyway, being a bit too pragmatic when it came to the techno stuff I was of course mesmerized when the first iPod appeared on the market, but since I wasn't about to shell out $600 for one of the things – and for some reason was okay with stealing music but wasn't okay with trying to steal an MP3 player – I never did get one and just stuck with my Discman and CDs. Deep down inside I was kind of happy with the restriction of no iPod, somewhat aware that the musical orgy I'd immersed myself in was getting seriously excessive, even for a "music lover" like myself.
The nag of excessiveness stuck with me (as did the uncomfortable fact that about three-quarters of my music was stolen) to the point that upon having ditched university/film school a few years later – and trashed any evidence that I'd ever made a film or video in my life – I followed that all up with another "unthinkable". Having subsequently quit the Internet (which lasted five years), I then took my black CD binder of 120 or so CD-Rs with 600 or so albums on them, walked over to the thrift shop, and dropped it all in the donation bin.
The singularity could go to hell. (Or was it hell that could go to the singularity? I don't know, one of the two.)
For about ten years I owned absolutely no music and, although I certainly overheard music in various places, not once did I ever play an album on a friend's stereo or even throw on a radio. This resulted in several "blessings in disguise", one of them related to the fact that I was a former (budding) filmmaker with a hyperactive visual sense who while unavoidably perceiving the world through a lens couldn't help but also see/envisage images whenever hearing music. But having gone through my decade-long hiatus I'm happy to have noticed that my "affliction" has been inadvertently fully cured.
Having returned from my ten-plus years in the "musical wilderness" it's no secret that things have significantly changed during my absence. When I left the music industry was in free-fall, and as I return it's finally managed to stop the bleeding that lasted for – what do you know? – just over ten years. Has the quality of music suddenly gotten that much better?
Yeah, not quite.
When I left the biggest change going on was the transformation from CD sales to (meager) download sales and (overwhelming) illegal downloads, Apple's iTunes store leading the pack when it came to the former but which was getting swamped by the latter. But with the proliferation of smartphones and other gizmos with high-speed Wi-Fi and/or cellular connections, streaming music has subsequently not only taken the industry by storm but even revitalized it. So much so that sales of digital downloads are cratering, going from a high of $3.9 billion in 2012 to a projected $600 million by 2019, many insiders even expecting the digital download to disappear within the next few years. On top of this, while 2016 saw vinyls have their strongest year of sales in a quarter century, 2016 was also the first year that spending on vinyls outstripped sales of downloads (!?). Is the singularity being defeated by Shangri-La?
Well, as one record label CEO put it,
People think millennials just stream and are just digital but actually I think we are going to see increasingly over this coming year that young people still want something tangible and real and that's where vinyl is taking on the role that the CD used to have.
That's all sideshow of course, because the writing on one of the walls is that "streaming music is the wave of the future". But check out the generally-ignored adjoining wall – this wall sponsored by the Limits to Growth – and you get the rest of the sentence: "for now."
For now the music industry is certainly doing great, 2016 also being the first year that digital revenues overtook revenues from physical sales. With 90 million people worldwide now signed up to streaming services – roughly 40 million with Spotify, 20 million with Apple, and the rest split up between Tidal, Pandora, Amazon Music, Google Plus and others – it's been stated by the former head of Universal Music's digital division that "music has never been more popular". With streaming services generally costing about $10 per month the price is so affordable and the service so convenient that for many people it's made illegal downloads not worth the time and effort. Indeed, streaming has become so prominent that Spotify's chairman/CEO and co-founder, Daniel Ek, was recently named by trade magazine Billboard as the most powerful person in the industry. Likewise, although they're not expected to reach their 1999 high of $40 billion in sales, an analysis by Macquarie Research expects sales to double from the current $15 billion to $30 billion over the next 10 years.
Not everything's perfect in the streaming industry though – and I'm not talking about the fact that although Spotify is valued at about $8 billion it hasn't ever actually made a profit, that it "made a loss of $200m" in 2015 (I'm guessing studies have shown that "made a loss of" has a less drastic effect on markets than "lost"), nor that it may never make a profit in what may very well be the ten years it's got left. But before I get to explaining the reasons for the latter, there's also the uncomfortable fact (uncomfortable for the music industry) that while Spotify and Apple lead the pack in sales of streaming services, YouTube dominates all others combined when it comes to actual streaming – which is not only a thorn in the music industry's side because YouTube's services make "stream ripping" possible, but mostly because YouTube pays out much less than its competitors (its payments come out of its ad revenues rather than on a per-song basis).
As the RIAA's Cary Sherman also put it in 2016,
Last year , 17 million vinyl albums, a legacy format enjoying a bit of a resurgence, generated more revenues than billions and billions of on-demand free streams [such as YouTube]: $416 million compared to $385 million for on-demand free streams.
But regardless of which convenience you want to go with, a caveat inherent to putting yourself at the mercy of a streaming service is that unless you only want to listen to music when you're in Wi-Fi range then you'll also need to put yourself at the mercy of a cellular plan. This can be a problem for those like me (which, granted, there aren't very many of) who while not having a phone plan for their gifted (and "obsolete") smart phone only have a "measly" $10, 1 GB per month data plan, a cap that can be eaten through relatively quickly by streaming music. That being so, some streaming services allow users to download a few tracks for offline listening.
However, if you read the fine print you'll see it stated that if you stop paying the monthly fees your downloads disappear. Even worse, if you read the even finer print you'll see it stated that if the streaming company goes bankrupt, or the centralized power grid in your area gives out once and for all, or the whole kit and caboodle backing industrial civilization in your neck of the woods finally goes bust, well, it's back to live music for you – if you're so fortunate to have not lost your access to food as your access to streaming music disappeared.
Because the fact of the matter is that with the protracted collapse of industrial civilization now upon us, more and more people are inevitably going to find themselves getting triaged from the industrial economy (under the nom de plume of "austerity" – as I've explained via Greece's situation here and here). In other words, Spotify and company are going to find their subscriber base getting pulled out from underneath them due to the economic effects of plummeting EROEI levels, most likely sometime within the next decade – the very same period when music sales are expected to (ahem) double. (Spotify will then likely get picked up by Google-cum-Alphabet or some other large conglomerate.)
Anyway, while I of course don't want to lose my access to food, if I can I also wouldn't mind holding onto the ability to listen to some recorded music for a few years or even decades (without being a totally spoiled first-worlder) as we progressively go over the far side of Hubbert's Curve. That effectively means I should perhaps impose some musical limits on myself by refraining from bowing down to a streaming service from the get go, and before the Limits to Growth – and by extension the limits to music – really start to kick in in my neck of the woods. How to position oneself for that part of the coming curve is what I'll get to in part 2.