Let's change the music.

Streaming music services like Pandora and Spotify are great for music fans like me. I have a SONOS system in my house that lets me play these services on others through a SONOS speaker. I have millions of songs available by clicking a button or two on the controller app on my phone. When I want a passive listening experience I play a Pandora station from the 100 I've set up or I use one of the Spotify's curated playlists. And when I want more of an active listening experience and play specific songs, albums or artists I search on Spotify. I very rarely buy music anymore, as renting it through streaming more than satisfies my needs. A Beatles' album I bought recently on iTunes is the only exception and I haven't been tempted by Adele's new album, which like the Beatles she has withheld from streaming services. I pay $9.99 a month in subscription fees for my music, all of which goes to Spotify as I use the free ad-supported service for Pandora listening. For this I can get as much music as I want. That monthly fee is roughly equivalent to what I'd spend every week on buying a new album at the record shop when I was growing up so now I guess I spend about a quarter of what I did then for an almost unlimited choice of music. For me it’s great. But not so for the artists. 100,000 plays might earn them just $5 in royalties (the amount varies by service), which is hardly enough to sustain a career. It used to be that radio play would promote record sales and live tours. Now sales have plummeted and tours make little if any money for all but the biggest stars.

So if not the artists, who is making the money from music streaming services? It’s not the streaming services either. None of them is yet to turn a profit and many industry analysts think most never will. Their best bet is to be acquired and cash in on those lofty valuations ( Spotify is currently valued at $8.5B). The real winners are the record labels. For instance, Spotify pays out 70% of their revenues to the record labels for giving them access to their catalogs of music, very little of which is passed onto the artists themselves. The labels earned $2.2B from revenues from the streaming services last year. The labels might own an equity stake in the streaming service itself which means there’s the opportunity to make more cash if they sell or do an IPO. Labels own an undisclosed share in Spotify and when Beats sold to Apple Universal Music made $400M from the deal, none of which when to artists.  

With these sort of deals in place it’s nigh on impossible for musicians, whether songwriters or performers, to make a living from their art. If making music becomes just a hobby rather than a career it will inevitably impact the creative quality of the music. I would argue that streaming services are too cheap and undervalue the product they sell. In their rush to acquire consumers and compete against one another, they have had to make terrible deals with the labels that harm the artists and ultimately music. Artists should be given a bigger share of a larger pie. Only a few artists - like Taylor Swift, Adele and The Beatles - have the clout to call the shots with the labels or the streaming services. The rest are at the mercy of these companies and can either choose to accept the terms given to them and earn almost nothing from their music or to withdraw their music altogether and try and distribute it independently, which makes it very difficult to find an audience and so earn money from it (and they can only do that if they do not have a contract with a label). To help artists create great music, the industry needs to change and move from short-term greedy thinking to a more sustainable long-term view. Limitless choice at low cost might be a boon to consumers now - but if great music is no longer being made because it cannot be supported financially, then in the end the losers will be all of us.