Psychology of Music

Opinion: Music Has a Pricing Problem, the Pursuit of Growth is Slowing Down the Industry

By Polina Bondarenko

15 May, 2024

The music industry is facing a pricing problem that is hindering its growth and development. In order to understand this issue, it is important to first examine the current state of the music industry and how it has evolved over the years.

Understanding the Current State of the Music Industry

The music industry is constantly evolving, and one of the most significant changes in recent years has been the transformation of music pricing. Gone are the days of selling physical albums as the primary revenue source for artists and record labels. Instead, digital downloads and streaming services have taken center stage, revolutionizing the way music is priced and consumed.

The Evolution of Music Pricing

Traditional models of selling physical albums have given way to the convenience and accessibility of digital downloads and streaming platforms. This shift has had a profound impact on the industry as a whole, reshaping the way artists and consumers interact with music.

With the rise of streaming platforms like Spotify and Apple Music, consumers now have access to a vast library of music for a relatively low monthly fee. This all-you-can-listen model has revolutionized the way people discover and enjoy music. Gone are the days of purchasing individual albums or songs; instead, listeners can explore a wide range of genres and artists with just a few clicks.

Streaming services have democratized music consumption, bringing a world of music to the masses. Listeners can now discover artists from different countries and cultures, expanding their musical horizons in ways that were previously unimaginable. This accessibility has not only broadened the audience for artists but has also paved the way for new genres and subcultures to flourish.

The Impact of Streaming Services

While streaming services have made music more accessible than ever before, they have also created new challenges for the industry. The low cost of subscription-based models has led to a decrease in revenue for artists and record labels. This has raised concerns about how musicians can sustain their careers in an industry that heavily relies on streaming revenue.

Furthermore, the rise in popularity of streaming services has also led to a decline in physical album sales. Many consumers now prefer the convenience and affordability of streaming over purchasing CDs or vinyl records. This shift in consumer behavior has forced artists and labels to rethink their pricing strategies and find new ways to monetize their music.

Despite these challenges, streaming services have also provided opportunities for artists to reach a global audience and build a dedicated fan base. Independent artists, in particular, have benefited from the democratization of music distribution, as they can now release their music directly to streaming platforms without the need for a traditional record label. This has empowered artists to take control of their careers and connect with fans on a more personal level.

In conclusion, the current state of the music industry is characterized by the dominance of streaming services and the evolving nature of music pricing. While these changes have brought about both benefits and challenges, one thing is clear: the way we consume and value music will continue to evolve as technology advances and consumer preferences shift.

The Pricing Problem: A Closer Look

How Pricing Affects Artists and Producers

One of the major challenges of the pricing problem is its impact on artists and producers. With the decline in revenue from album sales and the lower payout rates of streaming platforms, many musicians are struggling to make a living from their craft. This has created a financial crisis for many in the industry, particularly independent artists who do not have the backing of major record labels.

Furthermore, the pricing problem has also affected producers and songwriters who rely on royalties for their work. With lower royalty rates from streaming platforms, these creative individuals are finding it increasingly difficult to earn a fair income from their musical contributions.

The Consumer Perspective on Music Pricing

From a consumer perspective, the pricing problem in the music industry has been a double-edged sword. On one hand, the affordability and accessibility of streaming services have democratized music consumption, allowing anyone with an internet connection to enjoy a vast catalog of songs. This has made music more inclusive and has empowered listeners to explore new artists and genres.

However, the low cost of streaming services has also led to an expectation of free or cheap music. Many consumers are no longer willing to pay premium prices for albums or singles, as they can simply stream them for a small monthly fee. This has devalued music in the eyes of the consumer, further exacerbating the pricing problem.

The Pursuit of Growth: A Double-Edged Sword

The Pressure for Expansion and Its Consequences

In an effort to counter the pricing problem and maintain profitability, many music companies have sought to expand their operations and diversify their revenue streams. This pursuit of growth, however, can have unintended consequences.

Some companies have resorted to aggressive marketing tactics and exclusive partnerships with streaming platforms in order to maximize their reach and revenue. While these strategies may lead to short-term gains, they can also alienate consumers and damage the industry's reputation.

A Case Study of Over-expansion in the Music Industry: Apple

A great example of music being too cheap is Apple Music's pricing in Turkey. Like all major streaming platforms, Apple argues that their prices need to reflect the realities of local economies, so Apple Music is priced at 9.99 TL / Month, or 0.37 USD / month. Apple Music is 95% less expensive in Turkey than in the United States.

On a more opinionated note, the latest iPhone Pro is 62,541 TL in Turkey, which represents 2,299 USD, while the same iPhone is $999 USD in the United States. Apple doesn't seem too worried about local prices for it's flagship phone, so why don't major platforms apply this logic to music?

Potential Solutions to the Pricing Problem

Reimagining Music Pricing Models

One possible solution to the pricing problem is to rethink traditional music pricing models. This could involve adopting a hybrid approach that combines streaming services with tiered pricing options for exclusive content or additional features.

By offering different pricing tiers, artists and labels could cater to a variety of consumer preferences and strike a balance between affordability and fair compensation for their work. This approach would encourage consumers to invest in higher-priced tiers that provide added value, while still offering a lower-cost option for those on a tighter budget.

The Role of Regulation in Music Pricing

Another potential solution to the pricing problem is regulatory intervention. Governments could implement regulations that ensure fair and transparent royalty rates for artists, producers, and songwriters. This would help address the issue of underpayment in the streaming era and create a more sustainable ecosystem for music.

Regulatory measures could also include stricter oversight of licensing agreements between streaming platforms and record labels, ensuring that artists receive a fair share of the revenue generated from their music.

The Future of the Music Industry

Predicted Trends and Changes in the Music Industry

Looking ahead, the music industry is likely to continue evolving as technology and consumer behavior change. The rise of artificial intelligence and machine learning algorithms could shape how music is created, distributed, and priced in the future.

Additionally, the increasing importance of live performances and merchandise sales as revenue streams for artists could lead to a shift in how music is valued and priced. Artists may rely less on album sales and more on concert tickets, merchandise, and exclusive experiences to generate income.

How Artists and Consumers Can Adapt to These Changes

In order to thrive in the evolving music industry, artists must embrace innovation and explore new revenue streams. They should leverage the power of social media and digital platforms to connect with fans and promote their work.

Consumers, on the other hand, should be willing to support artists by paying fair prices for their music. By valuing and investing in music, listeners can contribute to the sustainability of the industry and ensure that artists are fairly compensated for their creativity and talent.

In conclusion, the music industry's pricing problem and the pursuit of growth have created challenges and opportunities for artists, producers, and consumers alike. By understanding the current state of the industry, examining the impact of streaming services, and considering potential solutions, the industry can navigate these obstacles and thrive in the future. It is essential that the industry finds a balance between affordability for consumers and fair compensation for creators, in order to sustain a vibrant and thriving music ecosystem.

Written byPolina Bondarenko

Lina Cooper is a young up and coming pop songwriter, artist, producer, a graduate of Berklee College, a self-proclaimed Yellow Manic Pixie Dream Girl and a Ukrainian native currently residing in LA.