Musical Groups and Artists in the US

Lucas Lee
BCOM 214
December 13, 2020
Introduction

To increase industry related content on our website, this report is a condensed overview of the
Musical Groups and Artists in the US industry and its performance leading up to the COVID-19
pandemic. The content below can be used to evaluate the potential risks and rewards that
come with investing or entering into the industry. Specifically, this report will cover the
profitability trends, competitive landscape, and the effects of the COVID-19 pandemic
pertaining to the industry.

Industry Trends

General Profitability Trends

Over the last five years, the music industry has become a less profitable environment overall for
all artists. Across the board, artists in the industry have experienced -16% annual decreases in
industry revenue (Rodriguez, 2020). This is an alarming profitability trend considering these
numbers preceded the economic turmoil of 2020. On top of this, profit for artists has been
decreasing even faster at -25.4% on average each year (Jaura, 2020). Because revenues and
profit margin have been decreasing at an alarming rate, it is clear that artists of all size are
struggling to profit off of their recorded and live material.

Digital Revenues
With physical media being replaced by digital media, revenue in the industry has been shifting
to streaming services and other forms of digital delivery. Album sales, which used to be the
main driver of revenue for artists, have decreased an average 16% each year for the last
decade. On the other end of the spectrum, Buddy Lo reports that active users of streaming sites
like Pandora and Spotify have increased 18% likewise (Lo, 2020). Since physical album sales are
on the decline and consumers are moving to streaming sites, it is clear that digital revenues
have shifted to be a significant portion of industry revenue.

Figure 1

A r ti s t P r o fi t ab i l i t y : P h y s i c al v s D i g i t al M Ed i a
% Change Album Sales % Change Industry Revenue
% Change in Streaming Service Users
50%
40%
30%
20%
10%
0%
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
-10%
-20%
-30%
-40%

Source: Rodriguez, 2020 – NAICS 71113 & Jaura, 2020 – NAICS OD5987
This figure can be used to further understand the industry shift to digital media. A key takeaway
from this graph is the comparison of the streaming service users line to the album sales line.
While streaming services have had percentage change increases in users each year, album sales
experienced the opposite. This illustrates the correlation in the industry of consumers shifting
their preferences to digital media and streaming services. Another point worth mentioning is
the massive drop off in revenue caused by COVID-19, largely due to restrictions placed on live
shows.

To the Stages
Since the 1990s, touring and live performances have become a larger portion of the industry’s
revenue in an attempt to reverse revenue declines brought on by the digital age. An industry
report done by Gale Business Insights projected that “total gross from tours in 2018 reached a
record $2.21 billion, up $240 million from 2017's record-setting figure of $1.97 billion,” (Musical
Groups and Artists, 2019). Considering that touring revenues began to increase as album sales
began to decrease, it is clear that artists in the industry are adapting their platforms to include
more live performances.

Competitive Landscape

Employment Volatility
Although the industry has no major players that take a significant portion of the industry’s
revenue, the environment is very competitive and volatile to economic conditions. Figure 2
below depicts how industry employment reacted to the two most recent recessions in the
United States: The Great Recession and the pandemic recession today. Both recessions caused
employment to drop over 10%, which was well over the national industry average.

Figure 2

Employment Reaction to Major

Recession
0%

Source: Rodriguez, 2020 & Barnes Report, 2020

Employment Volatility (Continued)
Without social distancing restrictions, the industry has much more participation and,
predictably, performs much better. Since anyone today can release music for free and record at
almost no expense, the industry is considered to have very low barriers to entry. However, as
an example of employment volatility, estimated employment in the industry had been trending
downward before the pandemic, but it dropped a record 48.5% in 2020 (Barnes Report, 2020).
Since industry employment experienced a massive drop during the pandemic economy, it is
conclusive that competition is largely influenced by general economic conditions.

COVID-19 Implications

Six Feet from the Stage

Since COVID-19 has halted live entertainment, which is the industry’s largest revenue producer,
the future is uncertain for small and upcoming artists. The ban on live performances of any
significant size have also affected small to medium venues, of which 90% are estimated to close
permanently by the end of the social restrictions (Kennedy, 2020). Without these small venues,
small artists miss out on more than just money from shows; they lose promotions, exposure,
and the ability to capitalize on a developing fan base. Thus, without these opportunities, the
industry could see a large drop in employment due to constricting barriers of entry.

Music as a Complementor
On a broader scope, the music industry is also a major complementor for other industries such
as restaurants, vendors, and venues. A crucial case study to demonstrate this is that of Austin,
Texas, which holds the annual music festival Austin City Limits. Without the festival this year,
the city is estimated to lose an approximate $230 million in revenue, not including direct
revenues from the festival (Boesel, 2020). Although this is one case, this is a fair basis of what is
to come for the surrounding areas of mega-festivals such as Coachella and Bonnaroo. Applying
this trend to most festivals, it is conclusive that artists’ live shows are strong economic drivers.

Conclusion

Now that you have read about Musical Groups and Artists in the US industry, you should have a
better understanding of the risks and rewards of the industry. Specifically, you should have
more knowledge of the profitability trends, competitive landscape, and the effects of the
COVID-19 pandemic pertaining to the industry. If you have any questions or comments on this
report, feel free to reach out to yankeeluke1@email.arizona.edu.
 References

Barnes Reports: (NAICS 71113): Musical Groups & artists Industry. (2020). United States
Musical Groups & Artists Industry Report, 1–196.

Boesel, K. (2020, November). The Future of Live Events: Incl Impact of COVID-19. Retrieved
from Mintel Academic Online Database.

Jaura, R. (2020, August). IBISWorld Industry Report OD5987. Internet Radio Broadcasting.
Retrieved from IBISWorld database.

Kennedy, K. (2020, September). IBISWorld Industry Report 71133. Concert & Event Promotion
in the US. Retrieved from IBISWorld database.

Lo, B. (2020, November). Streaming Audio: Incl Impact of COVID-19. Retrieved from Mintel
Academic Online Database.

Musical Groups and Artists. (2019). In Gale Business Insights: Global Collection. Gale, a Cengage
Company. Retrieved from https://bigale.com.ezproxy3.library.arizona.edu/global/articl
e/GALE%7CCNFHHP966433415/6535a6117e181847004b82d63e6d2948?
u=uarizona_main

Rodriguez, A. (2020, September). IBISWorld Industry Report 71113. Musical Groups & Artists in
the US. Retrieved from IBISWorld database.