In case you didn’t know, music fans will have another option when it comes to premium music streaming sites. A little while ago, the folks at Apple made Dr. Dre a very wealthy man (not that he wasn’t extremely wealthy already) by taking Beats off the good Doctor’s hands. It was rumored at the time but has since been confirmed that Apple will rebrand the service, releasing it without a “freemium” structure, rather, only as a $9.999 all you can stream service, losing a battle, according to Billboard, to offer the service for $7.99. Apple is expected to release the service, at least in Beta form to developers, in June.
This will be a truly interesting test of the current music industry and a real litmus test of the economics of music consumption. While many have criticized Spotify for its miniscule payouts to artists and songwriters, Spotify continues to defend its platform on the basis that they have helped reduce piracy, and are not pulling statistically relevant numbers of song/album buyers away from the current iTunes store. The ultimate barometer of what average music consumers are willing to pay for music will come when Apple devotees have the choice: Pay per download, or pay monthly for streaming access.
Whereas when Spotify first entered the market here in the US and had little to no name recognition and zero users, Apple already has 800 million subscribers. Compare that with Spotify’s 75 million total users (60 million free and 15 million premium) and it looks like we’ve got a pretty significant challenger. It’s like Spotify’s the kid who showed up to the neighborhood and challenged Apple to a race. Spotify got a huge head start (pretty much because Apple didn’t know they were even racing… and then they couldn’t find the starting line… and then they had to pay another kid for his wheels) but they’re riding a tricycle and Apple’s V8 hemi is all tuned up and ready to go. Did Spotify build a big enough lead? More importantly… is there even an attainable finish line?
My personal hope, which is more optimistic than some, and will not be music to the ears of many industry execs, is that sales revenues from the iTunes store stop falling at their current rate and plummet even harder. This is not because I hope for artists and songwriters to continue to get hit in their wallets. This is because the record industry needs to wake up and see the future. They need to realize that the days of consumers going to a store and paying $15-$20 for a CD are over, and they’re not coming back. Sure, most albums are being offered online for about $10 these days, which is an improvement over the price gouging of the 90’s & 00’s, but when you consider for that price every month you can have access to all the music you could possible need without using up digital storage space, to many, the choice is easy. Hopefully, those not currently paying to stream will see the value of a paid music subscription, and streaming services can prove themselves to be a viable revenue stream for artists.
But many in the industry have their doubts about the vitality of streaming services.
At a recent industry conference in Europe, Lohan Presencer, the CEO of Ministry of Sound, an overseas entertainment company, discussed the current state of the industry with two executives he’s already somewhat facing off with, streaming service Rdio’s Global Head of Business Development, Chris Buron, and Deezer’s (another streaming service popular in Europe) VP, Gerrit Schumann. Things got… well… heated, as Presencer spoke candidly about what he feels are many of the issues with freemium streaming services.
Presencer has several beefs with streaming services like Spotify, Deezer, and Rdio, one being that as a third party in the music industry, they have no real investment in the creative process of musician, relying on the investments of external sources to build their product line. Where as a record company spends upwards of $750,000 to bring a new artist to mass market (according to Presencer). You can see why a record company would be intent on getting that money back, plus some, and why they’d be intent on getting everything they can from streaming services like Spotify. This begs the question, though… do we really need labels to be investing $750,000 in an artist to bring them to market? Well (obviously) Presencer feels that we do.
“The bottom line,” he says, “is if not enough money is coming into the pockets of record companies such that they can invest in talent, there will be a reduced amount of music delivered to the market, and that will eventually see further decline in the market.”
If Presencer is to be believed, and record companies don’t make the kind of money they’re used to making, then we won’t be hearing as much music? Is that what he’s saying? Pretty much. In fact, while on the panel, Presencer said exactly that,
“I looked at the streaming charts in the UK – the top 75 most streamed records in the uk over the last four weeks – and less than 2% of that content was delivered by independent record labels. We are seeing a homogenisation of content creation, we are seeing a reduction in choice.”
So, even though, with my $9.99/month, I have access to literally more music than I could ever listen to in my entire life, and I use that to search and discover music that isn’t being played on the radio, or even produced and distributed by major record labels, I’m seeing a reduction in choice? Unfortunately, I don’t have statistics to show whether there is less or more music out there today than there was 20 years ago. I’m pretty sure it’s not even plausible to get that kind of statistic. But you’re telling me that I have less options on Spotify than I did at my local record store, FYE, Sam Goody, Best Buy, Target, or Wal Mart back when CDs were king? I just find it hard to believe.
By the way, I’m not the only person who is using the service to discover new music and act as my own curator.
“Nearly 60 percent of those 12-to-24-year-olds who care at all about keeping up-to-date with music will first go to some resource that requires some level of enterprise on the part of the user. The “lean back” [as in, lean back and let the new music come to you] choices are preferred by less than 40 percent. Since the group that cares about new music constitutes 60 percent of 12-to-24s, at least a third of the entire age cell is willing to expend some energy in finding it.”
I simply refuse to accept the notion that a shift to subscription services will reduce the availability of new and original music. Though, I’ll admit, I doubt the freemium structure, as it currently stands in two tiers (free and paid) can sustain the industry. And Presencer makes some solid suggestions. Perhaps, instead of two tiers, services can offer either pay as you go, or multiple tiers of prices per streams. For example, maybe you don’t spend too much time listening to music, but hey, you have a long bus trip coming up. You’d definitely pay $1 for that day, right? What if, instead of $10/month unlimited, you could get $5/month limited to a limited number of hours per day? There are several ways these streaming services could be structured.
Let’s think of streaming services like art museums for music.
I find myself resorting back to my argument that if artists and record labels are going to win any battles for fair compensation, they have to stop comparing a musician to a visual artist. Too often, I hear the argument that one can’t consume visual art for free, one must buy the painting. Is that true, though? Also, how many visual artists are making rock star money? But let’s focus on their argument. When’s the last time you’ve paid for visual art? Maybe you’re wealthy and you’ve shelled out some money for a few pieces of art in your abode. Do you know who the artist is? Maybe? Maybe not? Instead, let’s think of subscription services as museums. I don’t go to an art museum and pay every time I want to see a piece of art. I pay to see all of their art on that one day. Or maybe I’m a member, and I pay an annual membership fee to see all of their art whenever I want. Oh… and there are tiers. Not every exhibit is open to someone who buys a general admission ticket. Museums often host traveling exhibits, or specially curated sections, for which often charge an extra fee. Makes sense to me.
Well, there you have it. How many of iTunes’ 800 million users will switch over to a subscription option? Only time will tell. But pretty much everyone agrees that things can’t go on the way they are. Hell, even Spotify, with my $10/month is losing $70 million a year. I’d like to be able to keep using the service, so I’d obviously like it to, you know, be profitable. Or at least sustainable. And if you’re the kind of person who thinks $10/month for unlimited music is too much, then you’re either too young to remember, or have obviously forgotten about the days of $20 CDs and you probably preach about artists getting paid while you sit there and illegally download their music. Either way, grow up and pay for your music.