How does the music industry work?

The music industry. Show business. The biz. Whatever you call this multi-billion-dollar market, it’s all an umbrella term for a complex ecosystem that encompasses everything from live music to artist management. And we’re going to tell you everything you need to know about the music industry but were too afraid to ask.

There’s no shame in admitting you don’t know everything about how the music industry works and wanting to know more. For an artist, writer, or producer, that’s just called doing your due diligence. Read on to learn the basics of the sectors of the music industry, including the ones that aren’t your own. It is an ecosystem, after all – and like any ecosystem, each individual part of the system affects the others. So let’s explore how the different parts of the music industry fit together.

The music business structure

What is the music industry at the simplest level? It’s a market comprised of three main categories: live music, recording, and publishing. So whether you’re a guitarist or a sound engineer or a copyright lawyer, your job in the music industry will fall into one of these categories.

The live music sector

Anyone who performs live music, from the singer at your local coffee house to the big-name stars that headline three-day music festivals, is part of this sector. Revenue streams generated by the live performance sector come from ticket sales or gig fees. And it’s not just musicians who make their living with live music – this sector includes all the people who make the performances happen, like venue directors and managers.

The recording sector

Live shows are great, but most fans want to be able to relive the experience by playing back tracks on music streaming services, CD or vinyl. This sector deals with production, sound recording, promotion and music distribution, and it’s led by three industry titans: the Universal Music Group, Sony Entertainment and the Warner Music Group.

The music publishing sector

Someone has to make sure artists get paid – that’s where the music publishing sector comes in. Publishing companies find opportunities for new music, generate contracts that establish licensing terms and coordinate the collection of synchronization royalties.

The key players in the music market

So you’re starting to understand what the music industry is. But you might be asking an even bigger question: Who is the music industry? Passionate professionals make the music world go ‘round. Here are a few of the key players in the industry and why they’re so influential:

• Recording artists: We wouldn’t have music without the artists who make and perform it. This category includes composers, bands, rappers, singers, songwriters, and multi-talented singer-songwriters.
• Producers: Producers turn artists’ raw talent and passion into saleable tracks. They help musicians curate and record albums, balance a budget and collaborate with record labels and sound engineers.
• Audio engineers: You can thank sound engineers for those crisp highs and booming bass notes on a track. These tech geniuses record and mix music to perfection.
• Artist managers: Managers are the networkers of the industry. They seek out opportunities for artists, negotiate deals and direct successful music careers.
• Agents: Booking agents are responsible for getting bands on stage. They work directly with venues, negotiate gig terms and leave the fun stuff – like jamming out – to musicians.
• Fans: At the end of the day, it’s the fans who keep the business running by showing up at live shows, generating hype, paying for music, and reminding artists of the joy and beauty they bring to the world.

We won’t get into the many other influential roles, but a lot of people work together to make the music industry what it is – arrangers, tour managers, publicists, and yes, the merch guy.

How has the music industry evolved?

The music industry has grown and changed over the years. The most major recent shift was the move to digital media. Music has taken on new forms with the rise of digital streaming platforms like Spotify and Apple Music. But that’s not the only place the industry has had to adapt – it’s had to catch up on social media too. Social media platforms are now major marketing hubs and spaces where artists interact with fans. They’ve made fame more accessible, shifting the power away from major record labels and into the hands of the people who actually make the music.

FAQs

Still got questions? Here are some answers to common FAQs that may clear up your remaining doubts:

Is the music industry growing?

Yes. From 2019 to 2020, the U.S. music industry experienced a 7.5% growth rate, and the global recorded music industry was up 18.5% in 2021.

What are the latest trends in the music industry?

Artificial-intelligence-enabled music creation and smart speakers like Amazon’s Alexa are hot right now. And so is local music, especially in rural areas of Asia, Africa, and Latin America.

What do NFTs bring to the industry?

What's as hip as a fresh new track? New methods of consumption and trade. NFTs (non-fungible tokens) are a virtual currency reshaping the industry. Artists can now create virtual albums that come with unique digital swag – all governed by a system of cryptocurrency based on community and trading instead of cash.

Music industries are communities

The Beatles said it best: we get by with a little help from our friends. Everyone in the business brings their own essential talents and know-how to partnerships. Even if you’re an artist who knows how to produce your own music or understands copyright law, do yourself a favor and start leaning on the other people in your community so you can focus on what you do best – creating great music.