Streaming: industry’s future or death of the artist?

Crispy Crust Records

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Streaming: industry’s future or death of the artist?

The debate is ongoing and never ending: will streaming become a sustainable business model or will artists and songwriters forever be ripped off. We deliberately say artists AND songwriters, because they are two different species – at least in the world of musical rights. Aloe Blacc, who is both songwriter AND performing artist, has recently voiced his concerns about a business model that is hailed as the future of the industry by its proponents.

“The abhorrently low rates songwriters are paid by streaming services – enabled by outdated federal regulations – are yet another indication our work is being devalued in today’s marketplace”, writes Blacc in an op-ed for Wired. He lists Avicii’s “Wake Me Up!” as an example, which Blacc co wrote and sings. According to the artist, this song was “the most streamed song in Spotify history and the 13th most played song on Pandora since its release in 2013, with more than 168 million streams in the US. And yet, that yielded only $12.359 in Pandora domestic royalties – which were then split among three songwriters and our publishers. In return for co-writing a major hit song, I’ve earned less than $4.000 domestically from the largest digital music service.”

A matter of perspective

That makes it hard to find an argument in favor of streaming, doesn’t it. If you ask someone at Spotify they’ll tell you, that they still needed time. The more paying customers subscribe to a streaming service, the more money is forwarded to the rights holders – artists/labels and songwriters/publishers–, that is their argument. The last official number Spotify announced in May 2014 contained 40 million active users of which ten million were paying subscribers

At this point, the whole discussion get’s really deep, because artists earn more from paid streams than from ad funded streams. But Spotify needs the ad funded tier, which is free to customers, to achieve growth. The service has been profitable in Sweden for many years. In Norway, too, streaming has become a sustainable business. But in the rest of the world the top priority for streaming services, not only Spotify, but also Deezer and Napster, seems to be growth. Though you have to grant Napster and also Wimp, that they do not have offer free, ad funded tier, which makes it really hard to compete with Spotify and Deezer in terms of reaching a mass audience who – let’s face it – doesn’t want to pay for music.

We guess, it depends on how you look at this: If you think, that ten million is still a low number, then you’ll probably also think that artists like Aloe Blacc should calm down and wait for streaming to reach a mass market. But one may also stress, that if ten million paying subscribers don’t make a sustainable business, then clearly something is wrong.

Then again, let’s not forget, that there is a lot of music available on streaming services, between 25 and 30 million songs, depending on the service. So if ten million subscribers paid ten bucks each (the standard price for a monthly subscription), the total amount of money – in this case 100 million dollars, euros, pounds or whatever – still needs to be split among hundreds of thousands of artists.

For ten quid a month, you can stream almost everything from almost everywhere (Picture: Spotify)

For ten quid a month, you can stream almost everything from almost everywhere (Picture: Spotify)

“Imagine all the people streaming for today”

So maybe streaming is still in its infancy. Imagine Spotify reaching the user numbers Pandora already claims in the US: more than 200 million registered, of whom about 80 million are active users. If each of them had a paid subscription they would generate 800 million in streaming revenue per month. The entire recorded music business in the US was worth between four and seven billion dollars last year, depending on which source you want to trust. It is not hard to see that streaming will at some point make up a huge chunk of the business. Surely artists and songwriters will have to get paid then?

A look into the crystal ball

Adele‘s manager Jonathan Dickins recently announced that streaming was the future. Adele was one of the first artists to make the headlines for not having her album 21 on Spotify. Turns out she was actually willing to release her album on the service, provided that only paying subscribers had access to it. Spotify couldn’t do it. Their technical infrastructure apparently wouldn’t allow for it. This, by the way, is the same reason, why Taylor Swift‘s current bestseller 1989 isn’t on Spotify. Swift would have liked to make it available the paying subscribers, but Spotify just doesn’t seem to be able to do it technically.

The Kobalt Label Group recently announced, streaming has become a more important source of income in Europe than iTunes. Should artists therefore just be patient? And what about the songwriters? They earn a fraction of what the performing artists get. There’s an enormous disparity between both amounts, which is the next issue about streaming that needs to be addressed. We’ll follow the developments closely.