Music industry

Industry Snapshot

GENERAL INDUSTRY: Arts and Entertainment

CAREER CLUSTER: Arts, A/V Technology, and Communication

SUBCATEGORY INDUSTRIES: Instrument Manufacturing and Repair Industry; Integrated Record Production/ Distribution; Music Arrangers; Music Directors; Music Publishers; Musical Groups and Artists; Musical Performance Organizers and Promoters; Sound Recording Industries

RELATED INDUSTRIES:Broadcast Industry; Internet and Cyber Communications Industry; Motion Picture and Television Industry; Publishing and Information Industry; Retail Trade and Service Industry; Theater and Performing Arts Industry

ANNUAL DOMESTIC REVENUES: US$8.3 billion (Statista, 2022)

ANNUAL GLOBAL REVENUES: US$28.6 billion (Billboard, 2023)

NAICS NUMBERS: 5122, 7113, 339992, 711130, 711510, 811490

Summary

The music industry encompasses multiple and diverse for-profit and nonprofit businesses that provide live and recorded music to listeners. Although the sound recording segment makes up a large share of the industry, concerts, music publishing and licensing, artist management, and fine arts outlets such as symphony orchestras all play important roles in the field. Industry products include both tangible goods, such as compact discs (CDs) and digital video discs (DVDs), and intangible products, such as digital music files and concert performances. Increasingly, streaming and subscription music services, such as Spotify, have taken up a larger share of the market and changed the shape of the industry as a whole. Musicians also rely on products and services supplied by the musical instrument manufacturing and repair industries, while listeners obtain physical or electronic recordings through the music retail industry.

History of the Industry

Although people have written and performed music for entertainment and cultural reasons for millennia, the commercial music industry dates back only to the sheet music and concert industries of the 1700s. As in earlier eras, music listeners consumed popular music exclusively through live performances. Musicians and singers performed at public venues or were hired to appear in private homes, and amateurs relied on printed sheet music to learn and play popular songs.

By the early twentieth century, the invention of the phonograph had changed the music industry dramatically. Standardized discs called records could hold about four-and-a-half minutes of recorded sound, and the sound recording industry had already begun to emerge. The first record companies, known as record labels, issued recordings of classical and popular music. New labels thrived during World War I, but the popularization of radio, which brought music and other programming to a wider audience, had a negative impact on the early record business during the 1920s. In 1931, two early record companies combined to form EMI, beginning a long history of mergers and acquisitions within the industry.

During the 1940s, technological innovations brought the first tape recording, and the perfection of polyvinyl chloride (PVC) led to the development of the familiar vinyl album. Magnetic tape cartridges—first commercially available as eight-track tapes—proved to be a major addition to the industry, allowing many new recording studios to appear throughout the world. For the first time, serious efforts to record lesser-known music began, widely expanding the available catalog of recorded music.

Although the 1950s had begun with only five major record labels, the success of rock-and-roll music during that decade encouraged a spate of new, independent imprints dedicated to the emerging genre. Shifting consumer tastes were influenced by the increasing popularity of rock, particularly after the British Invasion of 1964. Demand for the singer-songwriter-driven sounds of previous decades declined. Instead, music became a force for social protest and change. Cassette tape recording techniques improved, and the format grew in popularity and availability throughout the 1970s. Airwaves offered new sounds such as rock and funk and, later, disco and punk to avid music listeners.

During the 1980s, the dual emergence of Sony's Walkman, a portable personal tape player, and the cable television network MTV contributed to a musical revolution. Music videos became a vital promotional tool for artists—to the extent that the premieres of videos by artists such as Michael Jackson, marketed as "world premiere video" events, became cultural touchstones. Music became mobile for the first time with the Walkman, and the cassette tape enjoyed a brief heyday as the dominant musical format stretching from the late 1970s into the next decade.

The CD emerged as the dominant music format by the beginning of the 1990s, eventually replacing the increasingly outdated vinyl album on retail shelves. (Vinyl sales, however, would see a major resurgence in the early twenty-first century, propelled by both nostalgia and their rich sound.) The 1990s also saw the rise of grunge rock and hip-hop. By the end of the century, the rise of the internet had provided listeners with a new source of recorded music: digital music. Soon, digital music formats such as MPEG-1 audio layer 3, or MP3, grew in importance and popularity, and the first online peer-to-peer (P2P) sharing service, Napster, electrified an industry concerned about music piracy.

The Industry Today

The twenty-first century music industry has seen significant change. Modern technologies, particularly the internet and mobile devices such as smartphones and tablets, have greatly altered the ways that people discover, acquire, and listen to music. By the 2010s the trend toward corporate consolidation meant that just a few major record labels held a significant share of the market. However, technology shifts and the rise of digital music contributed to steep declines in record label revenue. According to a 2007 study conducted by the think tank Institute for Policy Innovation, illegal music downloads and physical sales of pirated recordings cost the United States economy $12.5 billion annually.

Record companies and trade organizations acted vigorously to halt the flow of illegally downloaded music in the early 2000s, and within a few years, legitimately purchased downloads began to steadily increase. By 2014, digital music sales had grown to encompass nearly half (46 percent) of all global music purchases, according to statistics gathered by the International Federation of the Phonographic Industry (IFPI). This trend was even more pronounced in the United States, where digital album sales were 106.5 million in 2014 and overall album consumption (including "track equivalent albums" and "streaming equivalent albums") was 476.5 million in 2014, according to Nielsen.

Rising online music sales and competition from big-box retailers such as Walmart and Best Buy hit brick-and-mortar specialty music retailers hard, contributing to widespread store and chain closures. In 2014, sales of digital music first surpassed physical copies, continuing a major ongoing shift in the industry. Over the next few years, digital streaming in turn surpassed digital downloads to become the dominant form of music sales. However, the resurgent trend in vinyl record sales continued at the same time, helping some independent and specialized retailers flourish compared to large retail chains. These trends illustrated the resiliency and ongoing vitality of the music industry in the face of disruptive change.

At the same time that traditional retailing industries have declined, the live performance industry has remained generally strong. Although the live music market often fluctuated from year to year in the 2010s, ticket sales and sponsorship deals helped fuel modest overall growth in the five years to 2019. That year musical groups and artists had estimated revenues of $7 billion according to market research firm IBISWorld, largely driven by emphasis on live performance in light of declining earnings from record sales in the digital environment. Concert promoters, venues, and other subindustries also benefited from this trend. The following year, the COVID-19 global pandemic put a halt to almost all live performances for varying lengths of time.

Licensing and product integration remain vital to the music industry. Much as filming a successful music video could make or break an artist during the height of the MTV era, placing a song in a commercial, television program, or video game offers performers, songwriters, and record labels needed exposure and significant revenue streams.

Industry Outlook

Overview

The outlook for the music industry shows it to be growing overall. However, there is much variation in the outlooks for various subindustries. For example, while recorded music has seen a resurgence of growth thanks to online streaming services, the sale of physical copies of music recordings continues to decline sharply. According to market research firm IBISWorld, in 2022 many music subindustries or related industries were expected to see continued growth, including music production by both major and independent record labels, music publishing, musical groups and artists, concert promotion, and online ticket sales. Subindustries projected to decline included record stores and musical instrument and supplies stores.

Some trends have had mixed impacts on the music industry. For example, the advent of streaming services such as Spotify, Apple Music, and Google Play not only radically reshaped the way many people consume music, it fundamentally changed the flow of revenues in the industry. Streaming services make money through ad revenue or subscription sales and pay a portion of the revenue earned for each song streamed to the rights holders (label and artist). High-profile disputes over royalties and rights have at times flared up between artists, labels, and streaming platforms, and many musicians have criticized the entire streaming model for undervaluing artists. Yet at the same time, the rise of streaming meant that music piracy has become somewhat less of a concern. The industry is expected to continue to grapple with such issues in the future.

According to the US Bureau of Labor Statistics (BLS), employment opportunities for musicians and singers was expected to grow by 1 percent between 2022 and 2032. Anticipated growth would be linked to increases in demand for live performances. The BLS reported the median pay for musicians and singers in 2022 as $39.14 an hour. Moreover, music jobs are anticipated to remain highly competitive because many people desire them.

Employment Advantages

Despite the challenges facing the music industry as consumer consumption habits shift, the industry offers exciting opportunities for those who love music. The few performers who achieve worldwide success can earn huge sums of money in a short period of time, and the possibility—no matter how remote—of achieving fame and fortune attracts many musicians to the field. However, most musicians work part time for low pay, simply for the satisfaction of playing an instrument or singing before an appreciative audience. Full-time musicians and their support crews often spend much of their time on the road, making the lifestyle attractive to individuals who enjoy visiting new places.

The range of jobs available in the music industry is quite diverse, and many positions exist for nonperformers. Students who love music but prefer not to take on the risks or the extensive training that come with being a performer may enjoy working for a record company, publishing company, or performance venue. Such workplaces may also offer opportunities for staff members to meet well-known stars or attend publicized events.

Annual Earnings

Revenue outlooks for the overall music industry vary greatly depending on the particular market segment. Many analysts suggest that stagnant revenues for recorded music may grow once again buoyed by the rising popularity of streaming platforms as the industry further adapts to the digital environment. While declining sales have all but heralded the end of the traditional specialty music store, some independent shops have proven resilient.

In 2022, the US music industry posted annual revenues of $8.3 billion, according to market research firm Statista. In 2023, Billboard reported global industry revenues were estimated at $28.6 billion.

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