As Streaming moves into the forefront; how will artists and labels eat?

Many musical commentators would argue that we have without a doubt moved into the next online paradigm of music sales; Streaming and subscription based services. But what is it that is causing a large percentage of artists and musicians to hold discontent towards this platform of propelling their material to the masses?

First we must understand how cash is injected into the Streaming services, so as to understand how they pay out to labels, publishers and ever increasingly, to the artist directly. The majority of Streaming providers who offer free versions of their service are able to do so through advertising revenue. Free versions of programmes like Spotify, or Deezer include limits to the amount of plays a non-paying subscriber is entitled to, whilst frequent advertising in between tracks is paramount in not only creating cash flow but in creating an online radio feel, as oppose to a hub for unlimited all you can eat music, for music lovers. The version of the programme worth using, as with everything in life, incurs a monthly cost.

It is the paid subscription which really begins to offer a revolutionary level of access to the consumer. It’s essential to understand exactly what a subscription entails, for the very reason that ownership of music files becomes somewhat an illusion.

Harrison (2011, p200) provides a succinct description of “the subscription model”. Harrison  (2011, p200) also states that “Subscription services allow subscribers access to all the music they want for a monthly fee, sometimes with an option to purchase selected tracks.” She ends this point by explaining that “Once the subscription ends, the music is no longer available.” In essence, she describes an environment where the consumer pays a monthly subscription in return for unlimited access. But if a user chooses to cancel a paid subscription, regardless of how many months they have paid for, the playlists and music they have saved will no longer be there for them to have unlimited, all you can eat access to.

Popova (2010) interviews leading music industry figures for a ‘Wired Magazine’ feature in which Krissi Murrison (2010), former editor of the ‘NME’, depicts a belief that streaming will soon be at the forefront of music sales, highlighting that “The MP3 looks likely to suffer the same decline in sales as the CDs did, with streaming becoming the norm”. Murrison predicts an era of streaming, yet begs the question; “But will the meagre subscription and advertising cuts that bands and labels make be enough to sustain them?”. Murrison understands that streaming will become the primary outlet for consumers, but holds concern that bands and labels may lose out financially.

Currently Spotify operates at a 70/30 split; keeping 30% of revenues and paying 70% to rights holders. This seems fair enough in comparison to some of the laughable record deals of the past right? Wrong – The issue facing artists is that they do not receive the 70%, the 70% is split between the label, publishers and distributors as well as those unimportant artists who, according to Spotify, receive in the area between £0.006 and £0.0084 per stream. It doesn’t take a microscope to see why Krissi Murrison considers these figures “meagre”.

Whereas, Mark Mulligan (2012), a Music Industry blogger; still admits that downloads are “5 1/2 times more valuable to artists than streams.” But goes on to explain how “It is also worth noting that the artist streaming pay out rate ($0.005) is actually 45% of the rights owner pay out rate ($0.0112). So artists are earning nearly the same out of streaming as the labels and publishers.” Mulligan raises the point that the earning disparity between the parties involved is in fact reduced with streaming.

Is it optimistic to hold a view that as the industry grows into and evolves within its new environment, and with increased diplomacy from all parties involved that there are indicators that deals and agreements could be made in order to improve royalty payments to artists?

To sum up, although it appears that streaming will move ahead in terms of sales, there are several issues that will continue to provide a platform for debate; affecting not only the artists, labels and publishers but the streaming service providers, like Spotify, Beats, and Deezer. As the empires of the major labels continue to depreciate, are we witnessing the births of new giants? Could clever handling of these debates and the idea of subscribing to music ownership slowly provide the nutrition and protection the music industry has lacked since the advent of the internet?

Bibliography

  • Harrison, A. (2011) – Music, The Business. The Essential Guide to the Law and the Deals. Fifth   Edition. London, Random House.
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The future is Streaming… For now.

Why should you care about Streaming Companies?

In recent years we have seen the music industry forced into some of it’s most extreme and extensive transformations. The advent of modern technology has brought on numerous and apparently endless shifts in the ways in which we purchase, share and consume music. The invention of the MP3 download signalled the beginning of the end for the days of CD sales reaching any significant numbers. Piracy, illegal downloading and sharing of MP3’s then caused a once $40billion industry to shrink by more than half. In essence, over the last ten years or so, the Music Industry has been no stranger to having a proverbial knife held firmly at its throat.

After that brief but bleak overview of recent history it might be difficult to envisage a return to the days of an affluent, dynamic music industry. Enter Streaming – When companies like Spotify, Pandora, Last FM, Deezer and Grooveshark began to upload catalogues upon catalogues of musical material onto desktop and online applications for people to stream in real time, often free of charge, many commentators predicted the end of a dying industry, unable to show the necessary pragmatism during the volcanic eruption that still exists in the development in internet technologies.

There was uproar from the labels, the chief executives, and many artists, most notably Radiohead’s Thom Yorke, who is still unmoved, infamously labelling Spotify “the last desperate fart of a dying corpse” in just October last year, despite recent improvements and apparent signals that increases in streaming are clearly running parallel with a steady decline in piracy rates.

Spotify currently has 24 million active users, and counting, with 6 million of those paying a subscription, Deezer is currently catering to 12 million users, with 5 million paying customers, a far better subscription turnover rate than Spotify. In January this year (2014), Beats launched a service which is sure to rival the big players, a mouth watering team including Luke Wood, Ian Rogers, and Trent Reznor join chairman Jimmy Iovine and of course Dr. Dre in pioneering a service specialising in human curation.

Despite a turbulent entrance onto the scene due to issues surrounding legality, legitimacy and how on earth artists would be getting paid it seems as though Streaming is a paradigm in which some hugely influential figures in the industry see some potential in.

Convergence and bundling are major factors that are going to influence the next phases of its development, how are these applications going to develop and become more practical? It could be said that a start has been made in most providers issuing mobile applications for paying users which means they can make their playlists and catalogues available offline, eliminating the painful stops resulting from poor connection speeds. Who are these companies going to bundle with? Spotify has already teamed up with Vodafone, offering Spotify Premium as an option to customers who sign up to 4G ready contracts. Access to 24 million customers when the country is fully adaptive to 4G technologies draws an optimistic picture for that particular firm, who’s CEO Daniel EK was recently voted number 25 in the ‘2014 Billboard power 100’.

So it looks like Streaming is here to stay, for the moment at least.