Until the 1990s, there was vinyl; then came cassette tapes with magnetic tape, at the height of pop culture, and finally CDs, which offered better sound quality and the option to skip directly to the desired track. Today, music distribution is digital: streaming gives us access to an endless catalogue of songs and allows us to listen to any track wherever we are.
Over the past year more than ever, the dynamics of the sector have been the subject of considerable debate. From Sangiovanni’s withdrawal from Sanremo to a critical post by Ghemon, who accused the music industry of being “tainted by the obsession with numbers and sold-out shows”, it has become clear how difficult it is for an artist to emerge in an era dominated by figures. Supporting this criticism, a recent study by Università Cattolica and Itsright revealed that almost 80% of musicians are unable to generate a significant income from streaming platforms.
But how did we get here, and what has changed in today’s music industry?
The music industry today: from Spotify onwards
Spotify, the undisputed leader in music streaming, was founded on 23 April 2006 as a project by Daniel Ek and Martin Lorentzon, radically transforming the market and becoming the driving force behind the global music industry.
Its success undoubtedly lies in its business model: users can listen to music free of charge, with the option to upgrade to a Premium plan for those seeking a more personalised service. It also provides a smooth, intuitive and high-quality experience.
All the other platforms for distributing digital music, such as Amazon Music, Tim Music, YouTube and Deezer, have developed along very similar lines.
We must also recognise the contribution of the most innovative social platforms, such as Reels, Twitch and TikTok (which, not coincidentally, originated from Musical.ly), which combine audio and video, as well as User Generated Content (UGC) platforms such as YouTube, Twitch, Instagram and TikTok, which allow users to use copyrighted music.
Digital music distribution: the data
Until the early 2000s, physical media were the main source of revenue for the music industry. Around 2004, however, with the advent of digital downloads and music streaming, this began to change, with these channels eventually becoming the main source of revenue.
According to the IFPI Global Music Report 2024, global music industry revenues reached $28.6 billion this year, marking the ninth consecutive year of growth. 62.1% of total recorded music revenues come from streaming, through both subscriptions and advertising, generating $13.4 billion.
The outlook was also positive in Italy; 2023 marked a milestone, with market growth of 18.8%, above the global average, bringing total revenue to €440 million. Streaming, with an increase of 16.2% compared with the previous year, was once again the main driver: it accounts for 65% of market revenue, equivalent to €287 million, and has more than 6.5 million premium subscribers across the platforms (+9%). These proved to be the most profitable, with the segment recording growth of 18.4%, generating more than €190 million in revenue.
Who earns money from music streaming, and how?
Digital music distribution is the process that allows artists to upload their tracks to streaming platforms and online music stores. The revenue generated mainly comes from royalties, paid for each stream at rates that can vary considerably depending on the platform.
These are divided between:
- artists: they receive a percentage of the royalties generated by their tracks.
- Record labels: if the artist is under contract.
- Distribution services: some of which retain a commission on royalties.
Streaming royalties fall into two categories: subscription audio streams (revenue generated by subscriptions to streaming platforms) and ad-supported streams (revenue generated by advertising on the platforms).
Digital music distribution: agreements between the parties
Each track is protected by copyright and related rights, which ensure that the various parties involved in music production are remunerated. In the streaming market, an important role is played by rights management organisations such as ASCAP, SIAE, BMI and SESAC, which are responsible for negotiating with platforms to ensure fair payments based on streams and views. In addition to collecting payments and distributing them to the relevant rights holders, these organisations must also obtain licences from music rights holders in order to operate, defining the payment terms for the use of the works.
The main issue lies precisely in the agreements, which are highly complex and often unable to cover every possible scenario. Legal disputes and claims for compensation involving platforms and users are therefore commonplace.
To address these situations, as well as to identify and manage the unauthorised use of music, platforms use recognition algorithms. However, these systems are not infallible and can also result in legitimate content being blocked without justification.
The challenge, therefore, is to strike a balance between protecting artists’ rights and preserving creators’ creative freedom.
Blockchain and DLT: heroes of the music industry
It is clear that the remuneration of rights in today’s music industry is a complex issue. Record labels, producers and copyright administrators often keep information confidential, limiting collaboration, in marked contrast to the collaborative approach promoted by the Internet of Things and Industry 4.0.
The Blockchain offers an innovative solution: through the use of smart contracts (smart contracts), transactions relating to copyright can be automated and permanently recorded. Whenever a song is played or purchased, information on rights and royalties is automatically updated. This would enable real-time payments, while removing intermediaries and reducing the risk of errors or fraud.
Blockchain also provides greater transparency, allowing all participants to verify transactions and thereby increasing trust in the system. It is therefore clear that it could play a key role, but this requires a cultural shift towards digital innovation and open collaboration among industry stakeholders.
Digital music distribution: AI also has a significant role to play
The advanced adoption of Big Data is radically transforming how record labels and platforms operate, changing both production processes and music distribution.
Through the use of machine learning algorithms and predictive analytics, record labels can identify emerging talent and predict the success of tracks. Copyright management also benefits from this approach: by analysing views and user interactions, it ensures a fairer distribution of royalties in a timely manner. In addition, data analysis supports the creation of new works that reflect listeners’ preferences.
The user experience also benefits from the use of AI, which is currently integrated into a large number of digital music distribution platforms. Personalised recommendation algorithms align suggested tracks with users’ individual tastes, while targeted communications between the platform and the user become more efficient and relevant.
AI: hearing is believing
Today’s music industry seems unable to do without new technologies, and here is the proof: 10 artificially generated tracks you need to hear.
- “Synthetic Serenade”: an electronic sound with futuristic melodies and hypnotic rhythms.
- “Neural Groove”: a mix of jazz and techno, with unconventional improvisations.
- “Quantum Echoes”: an ambient track that seems to come from another dimension.
- “Pixel Dreams”: digital circuits and glowing pixels are part of this journey.
- “Cyber Symphony”: algorithms conduct this orchestra.
- “Electric Dreamscape”: electric and full of surprises.
- “Algorithmic Beats”: the rhythm is underpinned by complex mathematical algorithms.
- “Code Composer”: a symphony created from lines of code.
- “Binary Ballad”: this love is digital, with binary notes.
- “AI Anthem”: the anthem of the artificial intelligence revolution.
