Music streaming and the music industry

Reading this debate in the Observer earlier, prompted by Thom Yorke and Nigel Godrich’s decision to remove (some of) their music from Spotify, has got me thinking about the state of the music industry and its business model. Note the word “state” and not “death”.

Streamtape

The crux of the current argument is that the revenues Spotify and other streaming services provide to artists is not comparable to the previous model. Yorke and Godrich argue this is fine for back catalogue tracks, but not for contemporary music for new artists, who are struggling to support themselves. (I’ll continue to refer to artists during this post, though it might be more accurate at times to refer to record labels)

From reading these articles and others like it over the past few years, a few things strike me:

  • The previous business model worked on a combination of broadcast royalties and individual purchases. Online streaming is usually positioned as a replacement for ownership, but really it is a combination of both, potentially depriving artists of both revenue streams
  • The past is the past, and we cannot go back to the old model. If all labels withdrew support for online streaming, there would still be YouTube, Tumblr, BitTorrent and other means of distribution
  • Mass (commercial) media has been derided as an advertising business, with content provided in exchange for being exposed to marketing messages. With media and content disintermediated, the symbiotic relationship is being cut and new revenue models are needed
  • When radio is compared to streaming; it can be shown that streaming pays more per listener. However, the reduced scale/greater efficiency (depending on your perspective) of streaming means net revenues per artist are generally lower
  • Technology has made it easier for people to both create and distribute music. With finite space in broadcast media, the long tail has become very long in the online sphere. Meaning that the proportion of artists that can thrive on their revenues is getting smaller
  • The idea of a well-remunerated artist is relatively recent. Prior to the introduction of mass distribution in the early 20th century and commercialisation in the 1950s/60s, artists generally had to rely on live performances or patronage to survive. Mozart was one of many artists to famously die penniless. Could this be something that we return to? (A sidenote that I won’t delve into is that this could be another area that the post-war “golden generation” with their big houses and final salary pensions once again trumps against other generations)
  • What is fair reward for an artist? Creative endeavours are difficult to judge in economic terms. A trader might argue he or she is worth a percentage of revenue generated. That could be true for artists, but that would indicate revenue generation is the primary goal for producing music rather than artistic expression.
  • Some people view the music itself as the “loss leader”. The product that drives awareness of an artist, that can be subsequently exploited through other channels
  • However, more revenue opportunities exist nowadays. Modern music is arguably as much about the image or lifestyle as it is the sound, and so we get artists diversifying into clothes, headphones and other accessories. Admittedly, this works better for some genres (pop, hip-hop) than others (folk, for instance).
  • Despite the recent dip in the number of festivals, live music and ticket sales are often pointed to as the primary revenue driver. But unlike online distribution, live events are finite and so revenue can only be increased by playing at venues of a larger capacity (which is finite) or raising revenues to the point of marginal utility (which would ultimately segment your live audience as either the most affluent or the most fanatical)
  • The more concerts (or media appearances) made, the less time available to write or create new songs. Could this make manufactured pop music the most viable music model? Analoguous to the marketing industry, tasks are split between the creatives (songwriters) who come up with the ideas, and production staff (performers) who execute them. Could this be the future, where songwriters and performers are salaried, with bonuses depending on how well things perform?

No-one yet seems to have the answers, if indeed answers are needed. The music industry is being disrupted, and whatever the future may look like, we have to accept that it won’t be the same as it was in the past.

sk

Disclaimers: I work at an organisation that operates radio stations, but I work in a separate division. I currently pay for a Spotify Premium account, and haven’t bought a CD or digital download for myself for several years

Image credit: http://www.flickr.com/photos/runeone/4168247363

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