Navigating Today's Music Industry Trends and Challenges
Article

Turning Performance Into Profit: Navigating Today’s Music Industry Trends and Challenges

by Steven McMillan, Ed Eschleman
June 12, 2024

Today, there are 90 million paid music streaming subscribers in the U.S. Spotify alone is estimated to have over 11 million artists and creators. Music is big business, and it's become an increasingly complex space to navigate, particularly for artists and music industry professionals.

Here are some key trends shaping the future of entertainment, including ways to financially protect yourself as an artist and harness them to your full advantage.

Generative AI — Generating Music and Concern

It's no secret that generative AI is taking center stage in music. One recent study found that 60% of independent musicians use AI in their music projects. As the technology evolves, it's quickly becoming a prominent tool in the industry. However, while generative AI can produce entirely new content from simple prompts, it poses a risk of overshadowing human artists' work.

Unauthorized use of your voice or the potential for cannibalizing your art is just around the corner. The good news? The music industry has started to take action against unauthorized uses, with labels issuing takedown requests to protect artists' rights.

VIDEO: 2024 Music Industry Trends: Role of AI

What you can do

You deserve to be fully compensated for the use of your voice, name, image and likeness. As an artist, you can be proactive by working directly with a solid team — a music lawyer and business manager — to help protect against exploitation. While an attorney can advise in the complex arena of right of publicity, contracts and negotiations, a business manager can oversee the financial aspects, ensuring you're adequately paid for your art, whether AI-generated or otherwise.

Capitalizing on All Fans — Super or Not

Another growing trend is the superfan, an extremely enthusiastic, dedicated follower. More specifically, superfans are a subgroup within an artist's fan base that shows extreme brand loyalty and a tendency to generate a higher average revenue per user compared to regular fans.

Did you know that an estimated 20% of the U.S. population are considered superfans? These avid followers are willing to invest considerably in merchandise, concert tickets, VIP packages and fan club memberships. According to Goldman Sachs, this could be a $4.2 billion revenue opportunity for the industry.

While a lucrative proposition, it's also very complex to track. Just who are your superfans? What are they spending on you — exactly?

Another superfan challenge? Alienating your fan base. Are you at risk of losing your creative freedom by catering to the superfan niche? Superfans can be fickle, potentially changing their preferences, opinions and behaviors. Conversely, loyal fans with less-than-deep pockets, such as casual listeners, new fans or cross-genre fans, can have longer staying (and buying) power. By focusing on superfans, you could potentially net out with a loss over the long term.

VIDEO: 2024 Music Industry Trends: Impact of Superfans

What you can do

Your team, including your business manager, can track superfan numbers and revenue generation. With this data in hand, they can ensure all your merchandise sales and touring and fan club dollars are fully accounted for at all times. Equally important, they can navigate the delicate balance between economic benefit and maintaining a diverse and engaged fan base.

Spotify — Change for the Better?

In late 2023, Spotify modernized its royalty system to “drive approximately an additional $1 billion in revenue toward emerging and professional artists over the next five years.” The platform introduced new policies to deter artificial streaming, better distribute small payments that aren’t reaching artists and rein in those attempting to game the system with noise. What does this mean to artists?

Under the new requirements, a track must receive at least 1,000 listens annually to be eligible for royalties. Spotify is also taking measures to combat fraudulent streams to ensure a “more equitable distribution of payments to deserving artists.” While the intention may be good, the new structure has drawn concern from independent artists regarding future implications. If the threshold is 1,000 listens today, what could it increase to in the future?

Independent artists worry about the valuation of their art. Another concern is whether their tracks with fewer listens will be deemed unworthy of royalties. Spotify counters this by saying the changes will funnel additional dollars toward artists by curtailing payouts that would have otherwise gone to noise content distributors or remained undistributed due to the size of the payouts.

While the outcome remains to be seen, how can you ensure you get paid for your art if you don't meet new thresholds?

VIDEO: 2024 Music Industry Trends: Spotify's New Royalty Model

What you can do

An adept business management team can ensure your royalties are meticulously tracked and all songs are registered, working with royalty auditors to confirm you're not leaving money on the table. This is crucial to protect your interests and financial well-being in the face of these industry shifts.

Live Touring — A Taxing Experience

Live music is also trending — in a massive way. The live touring industry had a huge year in 2023, surpassing even pre-pandemic levels with a record-breaking year of ticket revenues.

Total grosses for the Worldwide Top 100 Tours were $9.17 billion in 2023, up 46% compared to the previous year. Live Nation events posted record attendance in 2023, up 20% to a staggering 145 million. These figures not only showed an improvement over 2022 but also a substantial increase from the pre-pandemic year of 2019, when Live Nation events saw attendance of 98 million. Future projections look equally bright, as attendance at live shows is expected to continue to grow through 2027.

Clearly, the live touring market is a vital component of the music industry, with both major and emerging artists driving growth. Yet the financial side of touring can be taxing — literally. To stay out of trouble with the IRS, you need to pay vendors, collect sales tax and pay multi-state and withholding taxes.

VIDEO: 2024 Music Industry Trends: Resurgence of Live Tours

What you can do

Make sure you have a tax-savvy business manager who knows the ins and outs of local, state, federal and international taxes, as well as sales and vendor payments. This doesn't just apply to large bands. Emerging artists who operate on tighter budgets may need a business manager even more, as every penny counts.


Turn Entertainment Trends Into Opportunities

Keeping up with the business side of music can be overwhelming. And who knows what the next trend will bring? Help secure your future with support from industry-savvy professionals who are passionate about helping artists focus on their music and thrive. Find out how our entertainment industry experts can ensure that your creative success translates into financial success.

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