Opening the Floodgates: Music Streaming and the Music Industry
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There has been a time for every musical format: a time for vinyl records, a time for AM/FM radio, a time for cassettes, a time for CDs, and a time for iTunes digital downloads. Today, the music world finds itself in a new era, one that is dominated by music streaming. With the rise of the Internet, digital music production and distribution have easily surpassed their physical counterparts in both number and popularity. Music streaming, a direct product of this shift from physical to digital music format, is an instrumental platform for success for up-and-coming music artists. Emerging from the wreckage of Napster, an illicit peer-to-peer streaming site that made its debut in the late 1990s, music streaming has come to reach unparalleled heights in the the music world.
A popular alternative to musical data composed in digital files, music streaming is a method through which individuals receive music in “real-time” on an electronic device through a service like Spotify, SoundCloud or Pandora (Richardson). Music streaming is no passing phase; based on estimates from this year’s Music Consumer Insight Report done by the International Federation of Phonographic Industry (IFPI), “86% of consumers [ages 16–64] are listening to music through on-demand streaming” in 20 of the world’s largest music markets.
As a result of this technology, music fans today have more music at their disposal and more connections to their favorite artists than in the past. Music artists have a lot to gain from these streaming services as well; they can gain exposure, retain the rights to their music and remain free from record label limitations. Still, some critics rail against music streaming services for how little they compensate artists for their music. Outspoken artists like Taylor Swift and the Black Keys have denounced music streaming, claiming that it devalues music and fails to adequately compensate artists, reports John Seabrook, a writer for The New Yorker. Nonetheless, music streaming presents budding music artists and audiences with sizable advantages. Streaming offers artists more exposure, more control over the distribution of their music and more protection from music piracy. Despite claims that music streaming undermines the art of music and doesn’t substantially compensate music artists, one thing is clear: the advantages of music streaming largely outweigh the disadvantages.
Music Streaming Combats Music Piracy
Starting off on a strong note, music streaming rescued the floundering music industry from rampant digital piracy in the late 2000s. Before music streaming, the music industry relied primarily on revenue from physical music sales. With the advent of Napster, Sean Parker’s illicit peer-to-peer music sharing site, piracy ransacked the mainstream music industry. Consumers who might’ve doubted whether they should trade their physical music collection for a digital one “were lured in by the carrot of free content” from Napster, causing consumer interest in physical albums to decrease (Richardson). As a result, worldwide music revenues fell to catastrophic lows, dropping “from a peak of twenty-seven billion dollars, in 1999, to fifteen billion, in 2013,” discloses Seabrook. Even digital download sales were not safe from harm; a 2009 article from The Economist reported that “Apple’s popular digital iTunes store is little more than a niche service”, further claiming that “95% of downloads are illegal” (“Singing A Different Tune”). Clearly, most consumers had accepted the post-Napster ideology that “music is free”, and digital piracy swamped the previously flourishing music industry.
It was then that music streaming services, like Daniel Ek’s Spotify, became the champion of the music business. These platforms, keeping with the consumer’s immediate demand for access to any music, in any place, at any time, let users access an extensive inventory of online music either for free (with advertisements) or for a set monthly subscription price. Having found a safe, convenient, and legal alternative to pirating music, regular music listeners abandoned illegal peer-to-peer sharing sites like Napster and became enticed with streaming’s ease of use. A European Commission study asserts that there is “clear evidence” that music streaming, as exemplified by Spotify, curtails instances of music piracy, as their findings indicate that every “47 streams” results in “one fewer bootlegged track” (Aguiar and Waldfogel). Consequently, reported music piracy rates subsided by more than 50% within eight years once music streaming became a valid alternative to the illicit practice, according to figures from the IFPI. Music streaming services pay royalties to the artist based on the number of listens a track gets, while piracy offers nothing to music artists. The high rates of piracy that the music industry faced in the late 2000s would have continued to rise if it weren’t for music streaming, as streaming offered a free, legal and safe alternative to such practices.
Music Streaming Offers Exposure to New Artists
Besides providing a viable alternative to piracy, music streaming also offers more exposure to undiscovered singer-songwriters. Music streaming services are highly-trafficked platforms that put new artists and their music on display. Spotify, the “world’s most popular music streaming service” and the “largest driver of revenue to the music business today” hosts a vibrant network of 191 million users (87 million of which are paid subscribers) as of September 30th, 2018 (“For the Record”). Integrated in 78 different national markets and expanding with each month, this music streaming giant plows the way for independent artists. Features of music streaming services, like public playlists on Spotify, put up-and-coming music artists on display for a vast online audience. The Economist’s business editorial reports that “[m]aking it onto an official playlist on Spotify can help turn a singer into a superstar in the way that major radio stations once could”, on the basis that “20–30% of Spotify’s music streams come from playlists” (“Bad Rap”).
For example, Lorde, an alternative artist, became an overnight sensation on Spotify because of a well-followed playlist. According to Seabrook, Sean Parker, the founder of Napster heard one of Lorde’s tracks titled “Royals” on Spotify and then added the song to one of his Spotify playlists, which had more than fifty thousand followers. The playlist’s followers, in turn, listened to this song and added it to their own playlists, leading to the song’s rise to the second most popular spot on Spotify in just a few weeks (Seabrook). As demonstrated by Lorde’s success, this additional visibility helps undiscovered artists garner a fanbase to which they can directly sell concert tickets or merchandise. Streaming services and their features, like playlists, unearth unheard artists and make monumental moves on their behalf.
Music Streaming Offers Music Artists Freedom and Flexibility
Likewise, music streaming gives music artists more control over their music’s ownership and distribution. Before the advent of these listening platforms, artists had to rely on signing deals with a major record company, like Universal, Sony or Warner Bros., to succeed in the music business. Artists that worked with these monopolistic companies had to surrender the rights to their music and give up a significant amount of their music’s total revenue. Now, reports Ben Sisario, a well-repudiated New York Times writer on the music industry, the policies of streaming services like Spotify don’t require artists to “give up… ownership of their recordings” in order to promote their music on the service. With streaming, artists not only retain the rights to their music but gain more control over their financial situation.
As the digitization of music has made recording music easier, streaming has made distributing and marketing it more affordable, leading to the growth of the independent music artist. In support of this phenomena, researcher Shane Murphy, in his Masters thesis on independent music marketing, emphasizes that artists who use these “low cost technologies to produce professional high quality sound recordings… can access a vast global network [through streaming] that can be exploited at low cost to promote their musical product.” According to Donald Passman, an author of nine books on the music industry, artists can now promote themselves to a digital audience, avoiding the traditional record label arrangement, and “make more money by doing [so]” (72). In this manner, music streaming and similar technologies have democratized the music industry; they disrupt record label monopolies and make success in the music industry a possibility for little-known musicians.
Severing ties with music labels, music streaming better connects the artist with their audience. Streaming platforms are insightful tools for music artists, as the metrics that they produce can reveal who an artists’ true fans and potential audiences are. Spotify’s CEO Daniel Ek, as quoted by John Chapple in IQ Magazine, states that “artists on Spotify… [can] discern who are real fans versus not” given their streaming activity. Recently, Spotify released a separate mobile app for creators called “Spotify for Artists” which provides artists with their listeners’ demographics and streaming habits. Once artists identify their specific audience, they can upsell exclusive merchandise directly to this sub-group through the streaming service.
Compared to the generic, popular radio broadcasts of the past, streaming services today specifically connect artists with specific members of their fanbases. The radio business once distinguished artists as aloof and disconnected from their devotees, but music streaming services today encourage fans to draw closer to their favorite artists because of their approachable format: mobile applications. Bearing witness to consumers’ desire for a personal relationship with their favorite musicians, Sisario writes that over “half of Spotify’s new users [are] signing up through mobile devices” as a way to stay aware of the latest releases and special offers (“A Stream of Music”). Music streaming services cater to the needs and interests of their users, providing them with a personalized experience and an intimate relationship with various music artists.
Music Streaming Has Heightened the Importance of Live Music
The live music business has soared as a result of music streaming services’ popularity. Originally, artists used tours and shows to promote the sale of their physical music, as that was where artists could make the most money off of their music. Now, with the decrease in physical music sales accompanied by the rise of music streaming, tours and live performances have become where artists can generate the majority of their income. Audiences now pay extravagant sums of money to experience their favorite artists’ live performances, rather than paying for copies of their physical music. Quite remarkably, a prominent concert company called Pollstar reported that “live market’s 2018 mid-year gross is a record-setting $2.21 billion, up $240 million (12 percent) from the previous year,” and that “average ticket prices are at a record high of $96.31” (“Why Your Favorite Concerts”). That said, it is clear that today’s average music consumer is more interested in a shared musical experience, rather than a material product.
Streaming services are now at the forefront of this event-based music business. To demonstrate, Spotify has partnered with ticket selling sites like AXS and Eventbrite, allowing them to promote “their concerts and music festivals to Spotify’s audience of more than 100 million music fans” directly on the streaming service itself (“AXS and Eventbrite”). In addition, collaborators at Spotify have put some of their professionally-generated playlists on tour. Earlier this fall, notes IQ Magazine writer Richard Smirke, Spotify brought its trendy “¡Viva Latino!” playlist to the stage, which happens to feature up-and-coming “artists making a name for Latin music across the globe” such as “Daddy Yankee (of ‘Despacito’ fame), Jowell y Randy, Bad Bunny, Becky G and Natti Natasha” (Smirke). With a growing follower base of more than 9 million users, this playlist not only generates streaming revenue for artists through royalties but also has the potential to assemble massive crowds at concerts. According to Smirke, ¡Viva Latino! Live’s opening venue seated 18,500 audience members. Music streaming has changed the role of live performance from promotional tool to revenue accruer, improving upon the old industry’s model.
The Lasting Ripples of the Shift to Music Streaming
Despite music streaming’s sea of advantages, opponents of the technology still voice small streams of doubt and criticism. Critics repeatedly argue that music streaming doesn’t compensate music artists substantially enough. While mainstream artists at the top of the payroll precipitate considerable sums through streaming, artists who are stuck in the sophomoric stage of their careers have a tougher time generating enough income through the same methods. As music streaming services pay contributing artists a set royalty price per stream (or play) of a song, the payouts from such royalties are unremarkable. Amy Wang at Rolling Stone magazine details that even Spotify’s “average per-stream payouts… are between $0.006 and $0.0084,” and that the “numbers from Apple Music, YouTube Music, Deezer and other streaming services are comparable,” which is a disappointing reality for artists at present. Nonetheless, the market for music streaming has great potential; it is still relatively youthful and its platforms strive to support and grow their number of contributing artists through raising the price of these streaming royalties. However, the music world has struggled to accept streaming as the primary method of music consumption at present, leading to the stagnation of such streaming royalty revenue.
Fortunately, the number of paid music streaming subscriptions are on the rise. The RIAA (the Recording Industry Association of America) reported that in 2017, the number of paid subscriptions reached “a high of 30 million”, depicting the “growth of nearly 1 million new subscriptions per month” when compared to monthly trends in 2016 (Friedlander). More paid subscriptions mean that streaming companies can generate more revenue, eventually resulting in higher royalty compensation for music artists on these platforms. As streaming service Rdio CEO Anthony Bay reasons: “It took many years for digital downloads to become mainstream along with CDs, and in time, subscriptions will be a widely adopted third option” (“A Stream of Music”).
The prominence of our current digital climate allows music artists to supplement their income through other methods. Wang writes that artists can generate profit through crowd-sourcing, merchandise sales, and most significantly through live performance. As mentioned before, live music events are the “most lucrative space for musicians in the digital era”, and fans eagerly seek and pay for tangible experiences with their favorite musicians (Wang). Since streaming has driven vast growth within the popularity of live music, artists are still able to make an income comparable to the one they once did with physical sales.
A Loop-Track with Countless Implications
The music industry’s shift towards digital streaming technology has astounded artists and audiences alike with its speed and its magnitude. Providing new artists with the chance for discovery and granting these musicians both monetary and legal emancipation from the foils of record label contracts, music streaming is a tremendous addition to the music business. It has the power to connect audience and artist, to improve the live music business and to liberate artists from traditional record label control. In short, the advantages of music streaming clearly outweigh its disadvantages. Today, consumers and producers of music should view music streaming as a catalyst for improvement within the mainstream music industry’s current model. Budding artists should promote their music online on streaming services for its exposure and flexibility. Supportive fans should sign up for paid streaming service subscriptions, allowing streaming companies to raise streaming royalty payments. Rather than dismissing music streaming on counts that it does not compensate artists substantially, music enthusiasts worldwide should embrace music streaming for what it truly is: the developing future of the music industry. Rest assured, it’s not a complete upstream battle from here.
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