The music business has been turned on its head in the internet age, and the changes are far from over. Professor Peter Tschmuck identifies trends, winners and losers.
DW: Is the Internet a curse or a blessing for the music industry?
Peter Tschmuck: You can't really generalize. The record industry as we knew it has experienced a sharp decline, but there have been positive effects for the live music sector. The same can also be said of people who deal with music rights or those who have established completely new business models.
How has music output developed thanks to this digitalization?
There's never been a time in which so much music was produced and released as today. That's because the entry barriers have become much lower.
But many critics would say a lot of it is rubbish…
That's something that was looked at in a study which statistically evaluated the opinions of several critics. It turned out that the internet and digitalization had had no negative impact at all on the quality of music produced.
No drop in quality thanks to the Internet
How has the turnover in the music industry changed?
If you just look at the purchase of traditional music formats like records, CDs and legal downloads, it's clear that sales have crashed. The growth in the digital sector can't make up for the losses experienced in the physical sales sector. But then if you define "music industry" in a broader sense to include things like music rights and concerts for example, you can see a positive effect.
Services like Spotify have managed to encourage users to pay for music streaming. Are sites like this a breakthrough for the online music industry?
For consumers it's a breakthrough, definitely. As a user you've got access to millions of songs. But another question is who benefits financially from services like this.
So what is the situation there?
Well the the major labels benefit disproportionately. Streaming services have to pay them millions to have access to their back catalogues. The figures here are rumored to be in the tens of millions. These so-called Up Front Payments only apply to labels. At the same time they are selling a stake in the company for access to the music catalogue. The musicians themselves are also involved in the per stream transaction but that is often only worth a couple of cents. They only receive as much as their contract with the label dictates. That's how it looks right now.
One particular thorn in the side for music labels is unpaid file sharing. What effect does this illegal platform have on the music industry?
File sharing polarizes, that's for sure. At the moment, most studies on the topic tend to see a negative effect. In extreme cases, it's estimated that around 30 per cent of declining sales can be blamed on file sharing. But then there are also studies that see no connection between illegal file sharing and falling profits. It depends on the music really. There's a clear advantage to file sharing for newcomers whose music isn't widely known. People very often discover something new this way and may even pay for it at a later date. But for the biggest artists, file sharing has its disadvantages.
Doesn't any contact with music eventually have a positive effect on people’s willingness to pay for it?
What you can say is that in the case of the so-called heavy users, who consume a lot of music, they are getting it from a variety of different sources. These are people who use a lot of streaming sites, share files, occasionally buy a CD and often spend a lot of money on a concert ticket. But heavy users are a tiny minority. The fact remains that the vast majority of people simply aren't prepared to spend money on music.
Interview: Stefan Mey
Professor Peter Tschmuck teaches at the Institute for Cultural Management and Economics at the University of Music and Performing Arts in Vienna. He regularly discusses the international situation in the music industry on his blog and is particularly interested in the impact of illegal file sharing and the importance of streaming services.