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What Do We Do About Streaming?

There's been quite a raging controversy over Spotify over at Hypebot as musicians across the industry chime in with their opinion on the streaming service. 

Zoe Keating, Cellist and brilliant DIY musician, talks about how independant artists are treated unfairly.

         That’s it. That’s my complaint: fairness.
If Spotify would level the playing field and make the distribution equal to all artists. I would lay off (since I am sure that my constant complaints are a total priority for them!). Now, if Spotify was to make those royalties algorithm-based, they’d have my full nerd support. For example if, thanks to their 'related' algorithm,  people listen to small-artist X after listening to large-artist Y, then I could see that a particular play, not all of them, of artist Y could be ‘heavier’. However, if people end up at artist Y by searching for them directly, the play-weight should reflect that. Data, do it with data!
But just to pay tracks from major labels more because they are major labels, that is so OLD. Where is the revolution in that?
Four indie labels have already withdrawn from the service. Sam Rosenthal of Projekt, the most recent label to pull out, issued a public statement explaining the label's decision bluntly:
For a stream on Spotfy.... NOW READ THIS CLOSELY..... on average $0.0013 is paid to Projekt's Digital Distributor. 5000 plays generates around $6.50. In comparison, 5000 track downloads at iTunes generates $3487. To be clear: I am not suggesting that every stream would have been a sale at iTunes. Believe me, I understand the reality of the music business. I am providing that as a comparison for you. Let's look at this another way: To earn the U.S. monthly minimum wage - $1160 - 892,307 plays a month are needed at Spotify. This is not a viable number for artists.  
Spotify responded to Projeckt by changing the subject:
Spotify does not sell streams, but access to music. Users pay for this access either via a subscription fee or with their ear time via the ad-supported service [just like commercial radio] - they do not pay per stream. In other words, Spotify is not a unit based business and it does not make sense to look at revenues from Spotify from a per stream or other music unit-based point of view. Instead, one must look at the overall revenues that Spotify is generating, and how these revenues grow over time.

Spotify is generating serious revenues for rights holders, labels, publishers and the artists that they represent.  We have paid over $100m to rights holders since our launch, and the overwhelming majority of our label partners are thrilled with the revenues we're returning to them. Spotify is now the second single largest source of digital music revenue for labels in Europe, according to IFPI.
But is this current royalty structure sustainable? According to Spotify's filings in the UK, it lost $42 million on licensing fees in 2010 alone despite a five-fold increase in revenues from the previous year. 

What does all of this mean to an independant artist? Is streaming worth the loss in income so more fans can listen to your music? Can you ever break even on streaming? Is it better to just ignore the whole deal?

Here's how I see things playing out:

1) Streaming services are similar to radio in that both benefit major labels with more money and muscle than independant bands. 

When it comes down to corporation-level negotiations, a DIY artist will always be at a disadvantage. Self-sufficent bands don't have legal departments, lobbyists, consultants, piles of cash, or a fanbase ranging into the millions that can be used in negotiations. If Spotify can't sign a DIY singer-songerwriter it's no big deal, but if Spotify doesn't have access to the entire Universal Music catalog, the streaming service will be severely crippled. The streaming service has to make that deal.

As such, these large entities leverage their influence and power to ensure that they maximize their benefit from negotiations. Organizations not at the table miss out.

It sucks, but I don't see a solution to this problem without either a PRO stepping into negotiations or a coalition of DIY artists forming their own right's group.

2) There's no turning back, the cloud is here to stay.

For better or worse, streaming services figured out how to monetize piracy. Judging by the success of Rdio and Spotify, businesses have made their services more appealing than piracy. Unless there is a game-changing method of piracy to replace BitTorrent, the ease of use of the cloud will continue to draw in customers. (Piracy in Sweden is down 25% since the Spotify's introduction.)

Businesses won't give up this revenue stream without a fight.

3) Streaming is marginally better for indie musicians than radio.
Radio was a passive music experience, with a song selection heavily influenced by who had the most cash for promotion.

Streaming/cloud services/piracy enable an active music experience by allowing curious fans to give new bands a try. It won't pay much, if anything, but it does benefit smaller and niche bands that wouldn't get much airplay on traditional radio.

A minor win.

4) Streaming an album is a moral dilemma.
As a fan, it was absolutely awesome to hear the new Mastodon the day it came out for free on Spotify. Now I've got no qualms about throwing dollars at Mastodon, I've bought every studio album because they're that gravy. But. having spun the album a few times, there wasn't any reason for me to buy the actual album anymore.

This is a mammoth moral dilemma.

Instead of Mastodon seeing my entire $10 for a digital download (minus iTunes' cut), the money is instead spent on a subscription to an intermediate who only offers the band a fraction of the $10. The middleman (streaming) scoops most of the profit off of album before it ever hits the band.


How do we cope with this?

5) Delaying and limiting releases to streaming is an effective compromise.

By delaying release of new material to streaming services, we ensure that super-fans who are willing to pay for a "brand-new" album actually pay for the album, while not excluding casual listeners who may convert to a sale later down the line. This is the same method of price discrimination that movie companies use; movies don't come out on DVD/Netflix until months after they've left the theaters. This ensures that movie-buffs willing to pay a price premium to see a movie in theaters actually pay.

For the same reason, any b-sides, rarities or limited-edition material shouldn't be released to streaming services as this would discourage willing fans from paying at the cost of providing the material to casual fans, who really won't care about "extra" material.

What are your thoughts on streaming?


  1. Here's my stance on streaming for what it's worth, I am a now 35 yr old singer/songwriter, been in the business for 15yrs now,
    I watched this car crash in slow motion, 10 years ago I voiced my concern to Warner Chappell music publishing to which I was signed to then. I was told, "Ollie, your way ahead of yourself, no need to worry about that yet!"
    Well I didn't worry and I watched record deal opertunities roll of to now being an unwise business choice. But whatever, adapt or get whacked right?
    Trouble is , we independent artists are adapting and were stil getting whacked.
    The concept of streaming is great ( in principle ) as it will get you exposure based on popularity and money can't really help you jump the line.
    But the concept wasn't just to help artists, infect the initially motivation from these concepts came from businessman like Sean parker and Daniel ek, spotify CEO. They are profiting huge amounts from the artists material, when all they are doin are allowing you to listen to there copy, this is an unnessercary middle man and an unfair intervention.
    Let's say I had a big house, which is unlikely thanks to the greedy aforementioned!
    And I had a copy of cold plays latest Album and played it in my house, and every time I saw somebody go across to the record shop across the way I shouted across to them and said, there is no need for you to buy coldplay, I have it here and you can come and listen to it when ever you want, just let yourself in, but you can't take the album away with you. Is that really fair?
    Would these guys be comfortable in saying that in front of the record shop owner?, to he'll they would, it would be long before the conflict became physical.
    But do it behind a massive hard drive and a fiber optic connection, well, that's ok, is it ok, what's the difference? From a moral point of view?.
    It's plain and simple, these new streaming models are profitiing from other people's hard work by simply intervening this is unfair and all they are going to achieve in the long run is a society that don't pay for music because no one else is, that I am sympathetic with, especially in these hard economic times, why would you pay if your uncertain whether that is going to be the longterm protocol.
    I wish that it could be up to the artist whether there music is available to such an extent that it needn't be paid for.
    I'm all for evolution a revolution, but distruction of a model leaving only the artist to lose out, well spotify, well done for finding a host to leech from but were not going down without a fight.

  2. Streaming is great as long as you can make the deal or you use a system where the deal is made with a level playing field, right from the outset.
    The only company that offers that is Google. They pay the same rate (according to the ad served) to everyone. Now Google have launched their own music service, it would be very interesting to see how they do this.

    I do think indies are wasting their time with mainstream radio and mainstream Spotify etc.
    They need their own system.

    In the UK when mainstream radio did not play any dance music, creators and lovers of dance music started their own, illegal pirate radio first of all and then legal stations when the govt was forced to deregulate. The result was a flood of dance music in the UK charts and guess what happened? Radio One relented and soon became dominated by it.

    This is what needs to happen now. Instead of trying to get on mainstream radio, START YOUR OWN. This would mean a coalition of indies who play a selection of chart music AND new indie releases only therefore getting good exposure and giving the public what they want.

    If this is too prohibitive for an FM station then try a digital or even an internet radio station. It is also possible to start your own TV show plugging your music which could have a similar effect.

  3. Exactly! Great example about Radio One, the same thing happened a few decades back when priate station Radio Caroline forced the UK to add rock to their stations.

    I've been passively monitoring as that seems like it might be a viable model for an indie-only distribution channel you're talking about. The real key to success here would be having these indie stations do a great job of selecting high quality material, so the consumer would go to this indie channel as their go-to new music source.