Will music streaming ever turn a profit?
The future is here, and the future is digital. According to the IFPI, a not-for-profit business that represents 1,300 record labels, the global music industry is now worth $14.97 billion, and “subscription services are now at the heart of the business.” There were 118 billion streams last year with digital revenues of $6.85 billion. Streaming makes up 23 percent of that figure — an 18 percent jump in a year — with YouTube one of the largest players.
But hold off on celebrating the music industry’s recovery. YouTube’s dominance of the market comes with its own intrinsic issues. The Streaming Effect report found that “34 percent of music streamers won’t pay for music because they get all they need for free from YouTube… It quite simply sucks too much of the oxygen out of the competitive marketplace for premium services to compete effectively.”
And into this saturated market comes a new player, the new Apple and Beats platform that went live in June. iTunes has been folded into Beats Electronics creating a huge music database that you can either stream or listen to offline in addition to your existing library. Free for the first three months, and then $10 (or $15 for a family of six), the service will attempt to curate your “music experience,” offering personalised and intuitive playlists, and there’s also a global 24-hour radio station, Beats 1. All of which will be fully integrated into Apple’s devices from the start of July and Android devices from September.
And let’s not forget Jay Z’s recent attempt to muscle in on the market. He bought a Swedish streaming company for $56 million, and re-launched it as Tidal alongside an array of A-list musicians, including Daft Punk, Madonna and Jack White (pictured above). Part of his USP is simple: the option to subscribe to 25 million tracks at lossless high fidelity quality but at double the market price, which proved to be a sticking point. The glitzy launch got panned for being duplicitous (rich artists getting richer hardly resonates with the public), while the nominated spokeswoman Alicia Keys made Tidal sound more like a cure for cancer than a music platform. “We’re gathered… with one voice in unity in the hopes that today will be another one of those moments in time, a moment that will forever change the course of history.” Okay, then.
Taylor Swift spoke out recently stating “Music should not be free.” Fair?
Meanwhile, Neil Young is launching a Kickstater-funded Pono service to counteract the poor quality of online music via his high resolution service and media player.
The concept of higher quality digital music is laudable — music is ever more disposable and the lower the bit rate the quicker you can stream, meaning music quality suffers. But as Nirvana’s last record producer Steve Albini pointed out in a recent interview, “You listen on a streaming platform because it’s convenient,” and not because of the sound quality. Will the youth of today streaming music on their phone while mall trawling really care whether it’s lossless or not?
Despite the increased competition and the difficulty in competing with free options, there’s no shortage of investment. And yet, no one claims they’re making money. Spotify has just been valued at $4.9 billion, but despite more than a billion dollars in revenue in 2013, the company lost $80 million. And don’t get artists started on the pay scale. As a burgeoning music producer,
I have my music on most platforms, including Spotify where I get a whopping Dhs0.0009 per play. Little wonder, then, that Radiohead’s Thom Yorke described streaming — and Spotify — as “the last desperate fart of a dying corpse.” He’s not alone in his sentiments. Taylor Swift famously pulled her back catalogue from Spotify — as did AC/DC, The Beatles and The Black Keys, who refuse to get involved, claiming that “Music is art, and art is important and rare. Important, rare things are valuable.”
”There were 118 billion streams last year with digital revenues of $6.85 billion”
As Yorke also points out, streaming isn’t a viable business model — as platforms get bigger, so do their expenses (music licensing, territory costs, royalties, equity to labels). Spotify has turned a profit in the UK and notably in Sweden, where their early adoption means streaming is now the single biggest source of revenue for record labels. But they’re the outlier: until streaming services get many millions of paid-for subscribers, the business model won’t work.
But still it grows in popularity. Global digitisation has brought licensed services to some 200 countries. Neither Tidal nor Spotify are available in our region, but we are serviced by Anghami. According to Alan J Roberts from Groove-Master, the region’s only b2b music licensing company, Anghami is a solid start. “It’s the first streaming service in the region and has a lot of Arabic and international content that caters to the local market with a very interactive platform,” he tells Esquire.
But this concept is still a work in progress. For starters there are no collections societies in this region to govern the money going back to the artist. And content also needs to be filtered to prevent offensive music.
All of which makes for an uncertain time for music’s great new hope. The future is undeniably digital. But streaming will only be the final destination if music fans pay for it, or ditch their torrents. To quote Taylor Swift, “music should not be free”. And for streaming to succeed, she needs to persuade the rest of the internet.
by Andy Buchan