A decade and a half since music industry titans like the rock group Metallica launched legal action to shut down the largest (unauthorized) distributor of recorded content, the ways that fans and audiophiles are able to access music and other cultural resources appear, once again, to be in flux. 2015 has already seen the headline grabbing launches of two new music streaming services backed by major players with deep pockets: Tidal, spearheaded by recording artist and serial entrepreneur Jay Z; and Apple Music, the revamped music service offered by the world’s most valuable company. These services are set to compete with the streaming music sector’s dominant player, Spotify, and a host of others and, in doing so, may serve as an indication of where the broader digital economy is heading as it continues to evolve.
Since the rise – and subsequent fall – of peer-to-peer music sharing service Napster, the recorded music industry has served as a canary in the coal mine for the digital economy and the disruptions stemming from emerging networked technologies. Napster provided previously unrealized access to the creative labour and cultural resources of the recording industry’s collective catalogue at a rock bottom price: nothing. The “free” nature of this service – which still required often costly Internet access and computers – threw the music industry into disarray, resulting in years of litigation as well as much-needed innovation in services offering legal distribution of music. Services, such as iTunes, and products, such as the iPod, moved into the uncharted terrain created by P2P services, redefining ways that fans can access content.
In the subsequent 15 years, record labels, music publishers, recording artists as well as other industries and actors in content distribution businesses sought to navigate the undefined digital realm in order to receive compensation for their music and creative commodities to further the creative endeavours and economic livelihood of artists, producers, and creators. However, in recent years there has been growing concern that the economic fruits of creative endeavours have been disproportionately “captured” by the technology companies that facilitate digital distribution. Artists and creators have complained that major record labels and digital distributors receive the lion’s share of compensation for the works they create.
This trend towards “economic concentration” in the hands of technology companies distributing licensed content and facilitating transactions mirrors results of my own ongoing dissertation research, which examines how intellectual property law governs, incentivizes, and structures the emerging digital economy. For example, the so-called Uberization of the digital economy simultaneously enables new forms of capital accumulation for individuals – whether they are drivers offering rides through Uber or owners renting property through Airbnb – and the companies that facilitate, track, and leverage these transactions. However, these gains are largely concentrated at the top of the ecosystem with technologists, inventors, and investors receiving much larger compensation than the individual entrepreneurs on the ground. As my research argues, informational assets, such as trademarks, patents, and copyright supporting dominant brands, which allow companies in the technology industries to track and facilitate transactions, are becoming more lucrative than the copyright protected commodities themselves. The goods and services offered by creators and service providers feed into technological ecosystems designed and engineered to concentrate the bulk of economic gains for the benefit of the host companies. Individual “entrepreneurs” in the digital economy must, therefore, increasingly act in hyper-competitive relationships with each other without the financial or social safety nets that existed in earlier times of technological and economic disruption.
In an era of relatively disappointing global economic growth that is arguably defined by increasingly higher levels of economic inequality throughout society, this economic concentration emerging within the digital economy is an area in need of attention and concern. As it was with the emergence of P2P and the distribution services following in Napster’s wake, the music industry may once again be signalling some ways forward.
In early 2015, Jay Z purchased a Swedish digital music service company (Aspiro), rebranding the streaming service as Tidal. He launched it in March with a glitzy, star-studded affair featuring other recording artists including, amongst others, his megastar wife Beyoncé, Canadian rock group Arcade Fire, and pop-luminary Madonna. These recording artists are also investors and “owners” of the service, positioning Tidal as an ostensibly artist-driven distributor seeking to challenge the dominance of the music industry’s existing economic and technological order. Tidal charges a larger monthly subscription fee (around $20 per month) than its rivals, stating that this extra money will flow more directly to the music’s creators and allow for better sound quality. The service has subsequently been criticized on a number of price-related, PR, and marketing grounds, obscuring the owners’ stated goals of giving back to the music creation community. During a “promotional freestyle” Jay Z positioned Tidal in this way, criticizing the digital incumbents and specifically naming Spotify, Google, and Apple.
Two months later on 8 June 2015 Apple responded to the launch of Tidal by announcing the release of a music streaming service named Apple Music. Drawing from the vast library already on offer in its iTunes store, Apple Music will be launched at the end of June and cost, at around $10 per month, half of Tidal’s fee but in line with Spotify’s. Apple aims to attract nearly 100 million active subscribers to its new service. However, Apple Music has already garnered criticisms and anti-trust legal investigations in at least two US states into whether or not Apple is using its dominant position in the digital economy to drive out competitors such as Spotify.
It should not be surprising that Apple is moving aggressively into the streaming music space. It was with music – via the iPod – that the company’s resurgence began. What is surprising is that it has taken so long. Following the announcement of Apple Music, Spotify released its current subscription numbers and now has 20 million paying subscribers and a total of 75 million active subscribes. As in other areas of the digital economy, a competitive position necessitates a large, active, and loyal customer base — which both Tidal and Apple Music will have to develop to compete with Spotify’s established status.
Streaming music services have come to be seen as the way forward for the music industry. These services, as well as similar sectors in the digital economy, require licensed content in order to generate consumer uptake, however, how the licensing agreements and royalties are structured determines who are (and are not) the real “winners” of the digital economy. Record labels and distributors will be increasingly induced to negotiate agreements that serve their interests, while creators and smaller, independent labels will have to compete feverishly on the “long tail” digital economy. Rights and compensation for creators, labels, publishers, and digital distributors will continue to be contested as these services evolve.
The goals of Tidal and Apple Music demonstrate how the digital economy continues to evolve and the economic imperatives drive its transformation. If you take their word for it (as licensing documents or rates have not been made public), Tidal is presenting a somewhat different future, where creators themselves are able to receive larger and more direct compensation for their endeavours. Apple Music, meanwhile, is looking to compete with Spotify by using a similar business model: by leveraging Apple’s already established user base and its relationships with major record labels, it hopes to shift users towards a regular, monthly subscription model and become the industry’s dominant player.
How users react to and adopt these services will help to determine whose IP rights are most valuable as well as how the broader digital economy will evolve in the years to come.
Joseph F. Turcotte is an IPilogue Editor and a PhD Candidate in the Communication & Culture Program (Politics & Policy) at York University.