Is streaming the savior of the music industry?

(via wsj.com)

Mohamad El Chamaa
Staff Writer

It’s hard to believe in this age that there was ever a time when there wasn’t music so readily available on-the-go. At the peak of the .com bubble, the music industry was still reluctant to go digital. This shortcoming paved way for illegal downloads from sites such as Limewire and The PirateBay. The idea of free music began to emerge.

Apple slowed down the narrow and bleak future in which the music industry was headed. Although iTunes never slayed the piracy dragon, it made the online purchase of music much easier than it had been before. Apple made it possible for us to buy whatever song we wanted without having to pay for the entire album. What was also groundbreaking was that iTunes began calling the shots on pricing; 99 cents per song became a trademark. Music labels were no longer the intermediary between musicians and listeners. However, though this innovation made music cheaper than ever, it was still beyond the financial grasp of many, so piracy prevailed.

As well, though it is now cheaper to produce and distribute, music is generating less revenue, which had peaked at the turn of the millennium at $13.4 billion but has since plummeted to nearly half of that. Today, with bigger bandwidth and faster internet, 95 percent of all music downloaded is through an illegal medium. The demand for music is still high, but the prevailing problem, given that there are so many free sources, is that people aren’t willing to pay the same amount of money as they once did. So how are music streaming services a saving grace for the faltering industry?

The idea of streaming music was popularized with the arrival of on-demand radio, where listeners could request a song instead of being served one at random. This was back when the cellphone was only for talking to people and access to the internet was only available through a desktop computer. YouTube played a crucial role in popularizing music streaming. Lyric videos would be uploaded to the site for everyone to hear; these clips contributed to the idea that music should not have to be paid for. With the emergence of mobile applications, on-demand radio found its way into our pockets, apps such as Spotify and Anghami emerged.

What apps like these did is borrow the basic money-making idea that television shows had been using for so long: ad-generated revenue. Every few songs, a sponsored ad pops up on the user’s screen. The other innovation in streaming music is that in exchange for a small subscription fee you can listen to an unlimited amount of music offline and can store it on your device (iPhone, Android) as opposed to buying the songs. To put it in layman’s terms, streamers let consumers rent the music from them instead of buying it.

Though it’s a for-profit service, streaming has been a mixed blessing for the music industry. On one hand, it has served as a rehab of sorts for people who were accustomed to downloading stolen music. It has set them in the right legal path.

On the other hand, streaming has taken away the already loyal CD-buying/iTunes-downloading customers because the option is much cheaper. This fact prompted Taylor Swift to remove her entire catalog from Spotify, citing “unfair compensation.” The move had been anticipated for months; in an op-ed piece for the “Wall Street Journal,” Swift wrote that “streaming has shrunk the numbers of paid album sales drastically, and every artist has handled this blow differently.” Though it was Swift’s God-given right to remove her music from the service, the rules of capitalism go against her logic: Why pay $13.99 for her latest album when I get use my subscription to get it for almost free?

So are musicians being unfairly compensated? Spotify has stated that it pays the singers’ labels $0.0084 for each song streamed, whether through a subscribed user or a free user; 82 streams equal one song sale on iTunes. Therefore it all comes down to the musician’s popularity, because logically the more popular you are the more likely your music is going to be played. Taylor Swift really shouldn’t have any reason to worry. That may come as a relief, but there are other less popular musicians who should in fact be angry or at least worried. So reports Rosanne Cash, country music star and daughter of Johnny Cash, who revealed that she only earned $114 for a whopping 600,000 streams.

It is also worth noting that the streaming sites aren’t making any money either. The numbers are ugly: seventy percent of all of Spotify’s revenue has been going to the music labels, nine percent of the app’s revenues come from its 28 million free users, and 91 percent come from its eight million subscribed users. The figures are much grimmer for the streaming industry as a whole, where paying customers account for only five percent of total users. This, along with hefty royalty payments, will not help the music streaming services generate profits.

Though this new medium of listening to music is still in its infancy, streaming is here to stay. It revived the concept that music is worth money and it is the best known alternative for torrent addicts. Additionally, it has managed to surpass CD sales in revenues. Furthermore, in countries like Sweden and Norway, streaming accounts for 90 percent of all music-listening.

There must be a symbiosis between satisfying the artists and labels involved in making the music and delivering a cheap product to customers; this will insure the trend’s survival. Recently, Apple announced that it will release its very own, non-free, streaming service; though it is a bit late in the game, Apple does have a huge financial edge over its competitors. Like iTunes, Apple’s move could innovate the music industry once again.

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