Archive for October, 2013

Streaming and the music market

David Byrne has started quite some chattering online after his recent article at The Guardian about how artists make no money anymore because of Spotify and other streaming services. While Spotify pays 70% out to music owners, most of that money are going to the labels that actually own the copyrights of most artists today. But that’s just scratching the surface of what really is happening today in the music industry.

Argument 1: Paying $10 per month for unlimited music is too little money to ask to be able to supports artists.

Answer: $10 is actually the right price. Twenty years ago, before the Internet, most people would put aside anywhere between $50 and $100 per year for music. This is about the same price Spotify/GooglePlay/RDIO are asking consumers today to pay for music too. Nothing has changed in terms of “how much a consumer is paying for music”. If anything, $10 is a well averaged amount that a middle-income Western family can afford. You must understand that “normal” people don’t spend money on individual records when they’re balancing their spreadsheet at the end of their year. They call that expense “music”, as if it’s a single product/purchase. As such, the music industry must price that product as if one unit.

Argument 2: Yeah, but back then you’d get only 5-10 albums for that amount of money.

Answer: Indeed. But consider why terrestrial radio was so popular before the Internet. And also consider why the consumer would get a 2nd, a 3rd, or a 10th album in the same year. The answer is: variety. People wanted variety, but they couldn’t afford it. Hence, they were listening to more radio, since there was no other way out to the situation for them. Today, we don’t have the limitation of having to pay for physical media. The internet has plenty of bandwidth and connectivity. If the labels were to push people to go back to physical media, that would be like putting artificial limits on the market (since technology has found a way around the limitations and added expense of physical media). Artificial limits and their market never survive.

Argument 3: Yeah, but profits out of Spotify are minuscule.

Answer: Indeed. This is because of #2 answer above: variety. Variety that’s now available! Since the explosion of the Indie music in the last 5 years, more and more people are listening to different artists than what the major labels want them to listen to. As such, the profits are spread thin towards the “long tail”. So back in the olden days, you’d get about 300-400 pop artists get all the money (along the major labels behind them), with the small indie musician community only making money out of gigs. Now that is so easy for indies to join the same services as the major artists, the listening habits of the consumers are all over the place. As such, everyone earns pennies at the end. As for the major pop artists, most of the Spotify money are going to their labels, not to them. It’s not Spotify’s fault for having these artists signed all their rights away for a record contract! Spotify actually pays out 70% to copyright holders as I mentioned, which is an industry standard.

Argument 4: Well, I make more money when I sell via iTunes.

Answer: Yes, because you sell individual tracks/albums. But people want variety, and they want it for that “magic” amount of money they spend on music every year. Which is about $100 per year, as explained. When people are going for the iTunes model, they only afford to listen to about 10-15 artists. But when they go with unlimited streaming, they open up to many more artists and music. Their horizons are expanded, and they have the true variety they always wanted. Basically, the iTunes model creates just 500 mega stars that take most of the money, while Spotify creates no stars, but every artist gets to be listened to eventually (even if no one makes any money anymore via it). Which one is better: the rich oligarchy of the 0.1%, or democratization of music where music is made purely out of love for it (since no money is being earned anymore)? Besides, if you don’t want to have your music streamed, you have every right to remove it from all these streaming services. Oh, you don’t have that right? Well, nobody forced you to sign evil contracts with labels that take away your rights!

Argument 5: How are artists are going to live then?

Answer: With a real job. Music will only be the labor of love, rather than the labor for bread. For the few that might be so good that people want to see live, they might be able to scrap by while still in their 20s, while they’re still cool. Then, reality will kick in for them too.

Argument 6: Spotify exists just so people don’t torrent as much.

Answer: It’s one of the reasons why the major labels allowed unlimited streaming. But it’s not the only reason. Unlimited streaming for a fee is a natural progression of the music industry. Labels are blaming torrents for their demise, but in reality, it’s the Indies who destroyed them.

Argument 7: The indies? Why?

Answer: In the olden days, to make an LP, CD or cassette pressing and recording was a very expensive deal. It pushed artists to sign some very unfavorable contracts. But since 2000, and especially after 2005, there’s no need for any of that anymore. Anyone with a $300 computer and $200 equipment can create, record, and distribute music. This is revolutionary. This has made the industry explode with CD releases. There were about 5000 yearly releases in the ’80s, and we’re at 150,000 per year today. And I can assure you, that’s not because of population explosion, but rather, artist explosion — artists who found cheap ways to produce and share their work. The fast computers, the cheap apps, and the Internet, made all this possible. Labels are blaming torrents, but in reality, they simply became irrelevant. Now, there’s true choice on music.

Argument 8: And is this a good thing?

Answer: It depends on your intention. If you only care about the music industry and making a buck, then it’s bad news. If you care about music itself, then it’s the best news since classical music sprang to existence. These bedroom musicians that are everywhere today are experimenting in ways never could before. As such, they’re creating brand new types of sounds and music almost every year. “Chillwave” was the first genre that had no physical birth place for example, it was a sound that was spread and evolved via the Internet.

Argument 9: Does this mean that the music industry is toast?

Answer: Yes. It means that music is now free to experience, and not bound to major labels who create banal music and promote it as if they’re brainwashing the masses. Spotify simply becomes a centralized music service in that case, and not a means to get rich. If someone wants to make some money out of their music, then gigs is the only way to do so. Labels must be left out, since they’re redundant right now. If artists want to go pro, they should create their own music videos, take care of their social presence online, hire a PR firm, and do lots of gigs.

Argument 10: But it’s so sad to see it go away.

Answer: Nostalgia and feeling bad for having bought all these records in the past won’t change the reality of things. See it the other way: in my town, in the building where Tower Records were housed (SELLING music), now a guitar shop has opened instead (CREATING music). It’s societal evolution, and only good things can come out of more creation! Humans are creator beings!