How Has the Industry Worked Historically?
The Evolution of Music as Commerce
The modern music industry as we know it began in the early 20th century with the invention of recorded sound. What started as sheet music publishers and live performance venues transformed into a complex ecosystem built around the ability to capture, reproduce, and distribute musical performances.
The Golden Age of Labels (1950s-1990s)
During this period, record labels held unprecedented power. They controlled the entire value chain: discovering talent, funding recordings, manufacturing physical products, distributing to retailers, and promoting through limited channels like radio and MTV. Artists typically signed away their master recordings in exchange for upfront advances and the promise of fame. The standard deal gave artists roughly 10-15% royalties after recouping expenses—a structure that heavily favored labels.
The business model was straightforward: labels invested significant capital upfront, betting that a small percentage of releases would generate enough profit to cover the losses from unsuccessful projects. This "hits-based" model meant that superstars essentially subsidized the development of new artists.
The Digital Disruption (Late 1990s-2010s)
Napster's arrival in 1999 marked the beginning of a seismic shift. Suddenly, music could be shared instantly and freely across the internet. The industry's revenue plummeted from $14.6 billion in 1999 to $6.3 billion in 2009. Labels scrambled to adapt, initially fighting digital distribution through lawsuits before eventually embracing it through iTunes and later streaming services.
This disruption democratized distribution but also complicated monetization. Physical album sales, once the industry's primary revenue source, gave way to digital downloads and eventually streaming. The economics changed dramatically: instead of selling albums for $15, artists now earned fractions of cents per stream.
The Streaming Era (2010s-Present)
Spotify's launch in 2006 (reaching the US in 2011) ushered in the streaming age. The model shifted from ownership to access—consumers no longer bought music but rented access to vast catalogs for a monthly fee. This transition has been both revolutionary and controversial.
On one hand, streaming has restored growth to the industry, with global revenues reaching $26.2 billion in 2022. It's also lowered barriers to entry: artists can now distribute music globally without a label. On the other hand, the economics remain challenging for most artists. With streaming services paying between $0.003 and $0.005 per stream, artists need millions of plays to generate meaningful income.
The Current Landscape: Diversification and Direct-to-Fan
Today's music industry is characterized by diversification and disintermediation. Artists increasingly view recorded music as just one revenue stream among many. Live performance, merchandise, brand partnerships, sync licensing, and direct fan funding through platforms like Patreon have become essential components of a sustainable music career.
The power dynamics have shifted too. While major labels still dominate mainstream distribution and promotion, artists have more options than ever. Independent artists can build careers without traditional gatekeepers, using social media for promotion, digital aggregators for distribution, and direct-to-fan platforms for monetization.
The Financialization of Music
The latest evolution involves treating music as an investable asset class. Music catalogs are being acquired for billions of dollars, artists are selling percentages of their future earnings, and new investment vehicles are emerging that allow both institutional and retail investors to participate in music revenues. This financialization represents a fundamental reimagining of how artists generate value—not just as entertainers, but as leaders of cash-flowing enterprises.
This transformation has created opportunities for platforms like Mars Markets, where music-related cash flows can be fractionally owned and traded, democratizing access to music investments that were once available only to industry insiders and major financial institutions.
Resources
2. https://www.ifpi.org/ifpi-global-music-report-global-recorded-music-revenues-grew-9-in-2022/
