Why Tech Is Eating the Music Industry

Tech Power! Not, Music Industry Power.

5 out of the top 6 most powerful companies in the world are ‘tech’.  Zero out of the 6 are music or media companies.  Any questions?

The most powerful companies in the world are now solidly categorized as ‘tech,’ according to a simple ranking based on market capitalization.  More importantly for the music and media industries, none the top-ranked companies are even remotely tied to the creation of content, with Amazon perhaps one fringe exception.

That disparity continues to explain a string of losses by the music industry against powerful tech interests, with major labels like Universal Music Group shockingly outgunned in Congressional, regulatory, and competitive arenas.

The breakdown, compiled by research group Statista using stats from Yahoo! Finance and Forbes, shows a glaring displacement over the past ten years.  Back in 2006, energy companies dominated a more diversified cast that also included tech, banking and other business categories.  Fast-forward to 2016, and it’s almost all tech, with ExxonMobil — one of the most profitable companies in the world — ranking a modest fifth behind tech giants Apple, Alphabet, Microsoft, and Amazon in terms of market capitalization.

All of those companies, including a sixth-ranked Facebook, are now critically important to the financial well-being of both music companies and artists alike.  Apple and Alphabet, the two highest-ranked companies, arguably exert more control over the music industry than the most powerful music industry players, including UMG, Sony/ATV, and even Live Nation.

That stunning ten-year span has also paralleled a massive decline in the revenues enjoyed by the music industry, with once-powerful categories like recorded music plunging amidst massive online devaluation.  But the rise of the tech class also helps to explain why the music industry keeps losing its battles involving Congress, regulators and consumers, with tech’s massive lobbying and public relations army difficult to defeat.  Just recently, the publishing industry was handed a stunning blow by the US Department of Justice, which refused to relax strict, government-controlled licensing restrictions viewed as favorable to tech interests.

That debate was mostly unimportant to the music fan, though other spats have become more public.  Perhaps signaling a level of desperation, massive music companies and superstars like Taylor Swift are now waging battles against dominant tech powerhouses like Apple and Alphabet, both of whom wield massive influence over the welfare of artists.  Last year, for example, Swift launched a high-profile jab against Apple for refusing to pay artists during the trial phase of Apple Music, a move that quickly caused Apple to reverse course.  But just weeks after the dust settled, leaked contracts revealed that per-stream payments on trial subscriptions would remain paltry at $0.002 a stream, with subsequent royalty statements showing even lower payouts.

Apple, with a market capitalization of $571.4 billion, is ranked the most valuable company in the world.  Apple Music, launched in 2015, has quickly become one of the most important streaming music services with more than 15 million subscribers.

 

 

Lion image by Greg Willis, licensed under Creative Commons Attribution-ShareAlike 2.0 Generic (CC BY-SA 2.0)

6 Responses

  1. Remi Swierczek

    Music boys at labels have overslept the TECH opportunities!

    Internet is ABSOLUTELY POSITIVELY the best business platform for monetization of music. The problem we have almost fatal NERDOWIMPOSA epidemic at the labels.

    Folks “negotiating deals” with YouTube, Spotify or AppleMusic on how to SHRINK $200 to $300 billion dollars in annual music goodwill to $20B of subs and ads!
    (at the moment $9B of ads and subs) STOP THE BULLSHIT!

    Unite all resources get all politically connected mega stars and get new fair use act which will lock music in virtual walls. Next day Radio, operating as a music store, will deliver $100B in music business.

    Google, the biggest poison of music ocean and proponent of everything for everyone in the open could triple revenues on music by 2025.

    Reply
  2. David

    Zero out of six were music companies in 2006. Zero out of six are music companies in 2016.

    Where is the story?

    I am confused.

    Reply
  3. Anonymous

    “none the top-ranked companies are even remotely tied to the creation of content”

    The error in this statement is astounding.

    Reply
  4. Terry Weyrauch

    “We think that after years of stalled growth, the music industry has found its growth strategy — subscription on-demand,” the analysts say. This outlook is buoyed by the fact that new launches, such as Apple Music and Tidal, have driven more consumer adoption instead of cannibalization of existing services, according to the analysts. That gives the analysts hope for the coming launch of Pandora’s on-demand service, which they are very optimistic about.

    Reply

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