The value chain within today’s music ecosystem is a complex entity, with a network of labels, music artists, creatives, music publishers and technological innovators all keeping music flowing through it.
Creating value from music has been an essential element in the industry, from the past to the present day. Without these revenue streams, creatives in the form of songwriters and composers would not be fairly remunerated for their work – and likely be unable to keep writing music and soundtracks as a result.
This is where music business learning via courses such as SAE’s Music Business degree can be so important to instil this knowledge into music industry professionals. By gaining a deeper understanding of copyright, publishing, distribution, record labels, radio stations and how royalties are received, then this will equip entrepreneurs, musicians and artists with a toolkit to navigate the sector and focus on new opportunities.
Our blog will explore the various stages in the value chain, where income might become stuck and the digital transformation that the industry has experienced as well as the opportunities this creates.
Interested in pursuing a career in music business? Then contact our team to learn more.
What are the Key Stages in the Music Industry Value Chain
The music industry operates through this value chain – and it’s important for both music makers and anyone who wants to launch a career in the music industry to be able to identify where financial and cultural value comes from.
The business is unlike any other entertainment sector with large enterprises, small labels and music consumers all playing important roles within the industry. This is why music business learning is so important in mastering these different factors. Here are some of the key parts of the value chain:
Songwriting, composition and music production
What is the first stage? Of course, it all begins with a song and the creative process is a pillar of the music industry – without it, there would be no music. This means that songwriting, then recording, mixing and mastering are all key elements in bringing musical ideas to life.
Music publishing and intellectual property
Once a piece of music has been written, this then becomes a piece of intellectual property (IP) and it is in the copyright of the composition and the recording where value can be generated. Initially, this is owned by the songwriter but the rights can be assigned to a music publisher too. It is then the owner’s responsibility to see where value can be created from a piece of music via licensing deals or other forms of usage. As the rights holder, they will be responsible for managing a copyright and administering the collection of royalties from a song.
Distribution
For recorded tracks, little value will be earned unless they are heard, which is why the distribution infrastructure surrounding music is another important step. This is the process of getting music to market and either involves physical products such as CDs and vinyl records or sending music to digital stores or music streaming platforms like Apple Music and Spotify.
Distributors have a vital role to play in ensuring music is released to an audience when required and release schedules are adhered to.
Marketing and promotion
Marketing campaigns and promotional strategies help connect artists with audiences and involve different professionals. From content creators to PR, digital marketing experts and radio pluggers, there are various roles that help build artist awareness and secure placements either on streaming services, radio or with social media influencers. Digital platforms have revolutionised every area of the creative industries, including the way projects are promoted with the nature of the marketing industry now democratised by social media. User generated content can be just as useful for an artist finding an audience as more mainstream media or traditional communication channels.
Music engagement
The listeners who consume music are just as important in the value chain as its creators – and the way in which music lovers do this has evolved over the years. From vinyl to CD, downloads and music streaming, then live gigs and festivals, there are multiple and diverse modes of engagement.
With the internet, more music from different parts of the globe is accessible thanks to the streaming culture this has created. Streaming services and the vinyl revival pushed UK music consumption and recorded music retail revenues in 2024 to a new high, statistics revealed.
According to figures from the Entertainment Retailers Association, music consumption reached the equivalent of 201.4m albums a year in 2024. Streaming alone generated the equivalent of 178m albums, exceeding the record of 172m physical albums sold in 2004 at the end of the CD boom.
The UK live music scene in 2024 was a record-breaker for spending, hitting £6.7bn (a 9.5 percent rise), with a gig taking place every 137 seconds, driven by major pop acts and concerts.
Monetisation
This is the final part of the chain and one of the most vital for creators. With streaming royalties, live performance income from tickets, merchandise, licensing and sales, multiple financial sources are available.
One of the challenges for today’s artists is staying on top of these different financial areas – and some are more lucrative than others.
With streaming rates now around $0.003-$0.008, many emerging artists have had to be innovative or entrepreneurial to stay afloat.
Who are the key players in the Music business value chain?
The music industry features different stakeholders and participants who can help money flow through its ecosystem.
Artists and creators
Songwriters, composers and music producers including recording engineers are experts in the tools needed to create music. It is their sense of innovation that leads to songs being born and can now operate increasingly independently in finding a global audience thanks to the advent of powerful tech platforms. However, the challenge for many is now finding fair returns for their creations.
Record labels
Record labels, whether they be independent or majors, can help artists take their music to a wider audience. Their role is to fund, market, and distribute the work of their signed artists, with major companies holding significant power and offering artists benefits in the form of a platform to find a large audience.
Music publishers
Copyright and IP is what the music industry value chain revolves around and how music publishers are responsible for owning and administering their songs. Core functions for these professionals include registering songs with performing rights organisations (PROs), securing licenses for music to be used in films, TV, and advertisements, and collecting and distributing royalties.
Streaming services
Music streaming and subscription services such as Spotify, Apple Music, YouTube and Tidal feature libraries with hundreds of thousands of tracks available for music lovers to listen to.
Since the advent of digital music, these platforms have been important in revolutionising the industry and exposing talent to a global audience. They have also courted controversy, facing intense scrutiny over the amount of money that find its way to artists after their music has been streamed.
Technology
The music industry has always been driven forward by technology – and the sector is constantly shifting is due to the advent of new platforms, creative tools and ways for music to be heard.
Artificial Intelligence (AI) is changing how music is made and produced – and has sparked concern from creatives over its role in the writing of music. For example, The Velvet Sundown released two albums before admitting their music, images and backstory were created by AI.
Elsewhere, data analytics and blockchain are also having a huge impact on the way music is marketed and sold.
What are the current challenges for recorded music and music streaming
The value chain has significant and ongoing challenges – which is why an understanding of it can be so important through music business learning.
The disparity between platform revenue generated and creator pay outs, leading to artists earning what some have described as ‘pitiful returns’, has seen criticism levelled at music streaming platforms.
According to a UK government report into the Economy of Streaming – which began in October 2020 – the findings concluded that the streaming model needs a ‘total reset’.
The report highlighted the uneven and opaque streaming revenues. It said: “The pitiful returns from music streaming impact the entire creative ecosystem. Successful, critically acclaimed professional performers are seeing meagre returns from the dominant mode of music consumption.”
This suggests there is a need for greater transparency across the whole of the value chain to ensure fair compensation. This is why understanding the industry’s economics and cultural flow is so essential for artists, policymakers, and anyone wanting to understand the business behind the music.
Study Music Business at SAE
Studying our leading Music Business course will give you a comprehensive education in labels, publishing, management, touring, distribution, and live events.
You will have the opportunity to collaborate with an exciting student body to record your artists, film music videos and begin to plan your own career in one of the world’s most exciting industries.
