iTunes vs. Spotify Comparative Analysis of the Online Music Market

INTRODUCTION

Throughout the past few decades, the music industry has undergone significant change as a result of advancements in technology. The sector has been impacted by technology in both positive and bad ways. For instance, piracy has always been a concern in the music business, but it has evolved through time. As a result, several companies tried to take advantage of this opportunity to grow and compete in the digital music industry. Hence, attracting and retaining users is essential to platforms' financial success. It also serves as a motivating factor for platforms' attempts to regulate the flow of information, people, commodities, and services. Online music streaming services like Apple's iTunes were seen negatively in the war against piracy.

Many in the industry believed that giving users the choice of purchasing music for less money would encourage customers to purchase it legally rather than illegally. Nonetheless, a lot of individuals think that in recent years, streaming services like Spotify have emerged as the most prominent manifestations of music piracy. This is because Spotify has adopted strategies to provide its users free memberships, enabling them to stream music for free.

The methods for transmitting music have changed along with technical developments, but laws controlling copyright and remuneration for musicians and producers have not kept up with these developments. By critically examining two of the most well-known streaming services, Spotify and Apple Music, this blog will examine the effect that music streaming services have had on the rights of artists and the music business.

MUSIC STREAMING PLATFORMS AND ENFORCEMENT OF IPR

In addition to its essential human and cultural worth, the economic value of music is derived from the intellectual property (IP) rights connected with creative works, their performance, and transmission. National copyright laws, which are heavily influenced by international agreements, many of which are overseen by the International Intellectual Property Organization, create these rights (WIPO). Copyright law defines the rights provided to authors of original works, as well as those who perform them and help in their widespread distribution (i.e. record companies and broadcasters).

During the past ten years, as digital music consumption and revenue have progressively increased, certain types of revenue streams have risen to take a significant share of the royalties paid to artists. When music is publicly performed, sound recording performance rights, also known as "neighbouring rights," which pay the master owner of the song and the artist, have become an exponentially growing source of income for musicians. The growing number of individuals who listen to music online or via mobile devices has contributed to the popularity of streaming services. Thomes (2013) asserts in his economic analysis of streaming music services that they are the most potential revenue sources for the music business and are well-known to consumers.

Music exploitation models and consumption trends in the digital music marketplace

The four main exploitation methods now accessible in the digital music industry are downloading, streaming, podcasting, and so-called non-interactive streaming. These arrangements don't necessarily have to be mutually exclusive, and a single digital music platform can make use of several of them simultaneously. Customers of on-demand streaming services have the option of selecting the music they want to listen to and the time and place where they want to listen to it. They can do this by selecting a single track, a playlist, or by letting the digital music service make the selections for them in an enterprise playlist using information gleaned from the customer's profile or marketing campaigns. Non-interactive streaming is a blanket phrase for services where the user has just a little amount of control over when to listen to music or a music program.

Streaming services were the top revenue category in 2019 with a 56.1 percent share of total global recorded music revenues, 42 percent subscription audio streams, and 14.1 percent ad-supported streams, and even higher in 2020 with a 62.1 percent share of total global recorded music revenues, according to data available from the recording industry (IFPI, 2020, 2021). In 2021, subscription audio streams will account for 62.1% of all recorded music sales worldwide, up from today's 46% subscription audio streams and 14.1 percent ad-supported streaming. 46% of audio streams are paid for By the end of 2020, 443 million people had paid streaming subscriptions, according to the IFPI. That's a rise from 341 million at the end of 2019, which is a 29.9% annual growth.

With the exception of user-generated services, streaming services, especially subscription or paid streaming services, have already established themselves as the main sources of supply for the business. The development of music streaming appears to be a direct reflection of consumer choices as customers choose to employ models based on access and usage more frequently. This demonstrates how a number of factors or forcing functions account for the progressive alteration of the way people engage with music underlying the development of music consumption.

Artist/Performers’ royalties and intellectual property rights in the digital music marketplace

Record companies or digital distributors that grant licenses to streaming platforms often get download and interactive streaming royalties as a proportion of service revenues in exchange for delivering new releases and current catalogues to platforms on an output basis. The licensor will receive a pre-determined fee for any recordings provided to the streaming service in accordance with the license. The licensor will account for and compensate the licensor's featured performers subsequently in accordance with the terms of their artist agreement. The featured performers may get a lower royalty than the licensor, and the two rates may be computed in separate ways.

In some nations that have added a remuneration right to the exclusive right of making available to the public performances fixed in phonograms in their legislation, digital music services also pay performers' CMOs a portion of their revenues, which is distributed to both featured and non-featured performers. Only when their songs are played by digital music services in nations where this right to compensation exists are non-featured artists compensated.

As their ultimate goal is to generate revenue, music streaming services allow users to pay a flat monthly fee for an unlimited amount of music they do not own, as opposed to paying for individual tracks from providers like iTunes/Apple. This helps them build their economic business model to appeal to consumers around the world. Customers can stream more music than they could if each song had to be purchased separately, which is the draw.

However even the most well-known digital service providers in the world, like Rhapsody and Spotify, routinely put convenience over licensing by offering music to subscribers without negotiating direct licenses (with the copyright holders directly) or pursuing forced licenses (obtained without express permission from the copyright holder). One well-known instance of this was when Wixen Music Publishing Inc. sued Spotify in California for allegedly using some of its songs (including those by Tom Petty, the Doors, and Neil Young) without the appropriate license. The company asked for $1.6 billion in damages and an injunction to stop the use of the songs, among other things.

Due to this problem, well-known musicians like Taylor Swift, Adele, and others withheld their songs from digital streaming sites like Spotify out of fear that their work would be improperly valued. This has made it tough for artists, who are regularly taken advantage of, and it is now more important than ever for them to get the recognition they deserve.