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Streaming Services Will Never Become Profitable, Study Finds…

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If the future of music is streaming, then it’s a disastrously unprofitable one.  That’s according to a blunt financial finding from Generator Research, which concludes that streaming services as currently structured have no hope of achieving profitability.  That is, barring a radical overhaul in the way royalties are structured, or a miraculous shift in the way music fans are monetized.

“Music subscription services are all losing money, and that is going to remain the case until they find a way to monetize a worldwide user base,” the report states.

Generator projects massive increases in streaming usage and paid subscription, but no recognizable way to profit from it.  According to the report, the number of streaming users will balloon to 1.7 billion by 2017, up from 767 million in 2013.  Paid subscribers will leap to 125 million, up from 36 million currently.

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Sounds incredible, except for the part where today’s services starve financially.  Generator largely blames major recording labels for that bleak future: instead of fostering long-term growth, labels are squeezing roughly 70% of royalties from streaming services, not to mention massive upfront millions and generous ownership shares.  That unsustainable structure could spell the near-term collapse and consolidation of an overcrowded streaming sector, according to the report.

But unprecedented levels of free access are also setting a dangerous, and potentially irreversible expectation among music fans.  “Free music is a very dangerous thing, and we would not like our next generation growing up believing music is for free,” Neeraj Kalyan of label T-Series told TechCrunch, shortly before pulling the plug on Dhingana.

“The streaming business has to slowly move from a free economy to a paid economy as the sustainability of an ad-supported revenue model is a big question mark.”

The grim financial outlook comes as rumors intensify over plans by Spotify to go public.  But just like Pandora, Spotify’s financials remain ugly and are unlikely to improve. “Pandora has never made a profit and we think that the company will never make a profit, unless there is a major change in strategy,” Generator concluded.

Image: Eve Fouché, licensed under Attribution 2.0 Generic (CC BY 2.0). 

 

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Comments (67)
  1. Hmmmm

    They are already monetizing a worldwide user base. Spotify for example is adding more countries every year and they will be wildly profitable in 2015.

    Netflix has a very similar business model, which has made them a huge amount of money at a very large market cap ($26 billion).


    Reply
    1. yeah right

      “they will be wildly profitable in 2015. ”

      lol


      Reply
    2. DoesntMatter

      Netflix’ business model is not comparable to streaming music services. Netflix licenses content for an up front fee, with no per-stream rates, and no ad supported option.


      Reply
    3. Jabsco

      Daniel Ek, is that you?


      Reply
    4. steveh

      “they will be wildly profitable in 2015.”

      You cannot be serious, liar-boy!


      Reply
  2. Blahblahblah

    This seems like a no-brainer to me. How about, don’t offer a free option and people will pay for it? Especially Spotify, being it already has a ton of free subscribers. Actually, they may be the only one with a free option. I guess if they take that away some people will stay and pay and others will go to a similarly priced service that is actually better, like Rdio. Still, I think they’d be better off eliminating the free option and working on making improvements.


    Reply
    1. Me

      Rdio just went free to compete with Spotify.


      Reply
    2. Casey

      That is what Rhapsody thought. Hasn’t worked.


      Reply
    3. Albert

      Music has become like water in the following sense: Free adv supported is somehow equivalent to tap water that you feel like free, if you want water bottled, safe and guaranteed,… you pay for it, like a subscription.
      Besides, in physical not everybody bought the same amount of CD’s and spent the same amount in music, a fact is lot of people never bought music, and many may have bought 1 or 2 CD’s a year. In the same way, as the streaming market evolves, there will be tiers of service to fit different needs.


      Reply
      1. jeremy

        except for the fast that, “I” at least, have to pay a monthly utility bill if i don’t want the water turned off… so unless you only drink water or bath at public bathrooms, it’s not free…


        Reply
        1. Paul

          Ditto here. With American Illinois Water, I have the privilege of paying a standard $45 bill before even using 1 fluid once of water.


          Reply
  3. Casey

    Pandora finally made a profit last quarter and is expected to turn a profit for fiscal 2014.


    Reply
    1. cjhoffmn

      Indeed they did. I took a look at their latest filing – during the fourth quarter, they made about an operating profit of $9mm profit on $200mm of revenues. Interestingly enough – their costs seemed to have improved dramatically during the quarter as a % of revenue. Subs Revenue grew to about $38mm, but importantly, on a quarter to quarter view, it looks like it plateaued. The real revenue growth came on the advertiser side which grew pretty well qtr to qtr.

      It also may include a minor distortion because they switched their fiscal year end to 12/31/13, which can sometimes create strange results depending on the timing of costs, but I didn’t get that deep.

      This is the first time Pandora has shown a decent positive result (turns out each 4th qter, they’ve made a very small profit once adjusted to 12/31), and is very interesting to see. However, I agree with this article – in their current form – the streaming services can’t survive.

      Nice historical financial chart:


      Reply
        1. Me

          This is a download link.


          Reply
  4. TuneHunter

    1.7B subs is only realistic if you enter India, China or Kazakhstan at $1 a month.

    Current avg. subscription revenue hoovers around $5.

    This pipe dream reality, with add-on to your wireless account, we will give us at the best $30/year/human.
    1.7B folks would generate just 50B.

    First, 1.7B will never happen, second, it would be tragic event considering that 1999 is worth 56B today.


    Reply
    1. TuneHunter

      Paul, sorry for not reading thru your short article.
      Still your 125M paid subs is 4x bleaker than my 500M @ $5 making with ads 35B industry in 2025.

      Total mockery, considering that it will be just 50% of inflation adjusted 1999 revenue.


      Reply
  5. Kharukat

    The problem definitely lies in the expectation of free or nearly free service. As a paid subscriber (and admitted addict and dependent) of Spotify, I do not fathom how $10 per month gains me access to thousands of albums which I rotate heavily. A music collection like this would have cost me thousands of dollars to maintain in decades past. It wasn’t a race to the bottom with streaming, it was just a bottom-out. Tim Westergen was a musician, not a businessman. In the spirit of genre exploration for all, he missed a moment in music history by not realizing that consumers weeks have gladly paid $50-$100 per month for a service like his, the equivalent of what they would have to invest to actually purchase such a new variety of albums each month. Pandora set a dangerous and now irreversible precedent. Like a typical musician– Westergen simply didn’t ask to get paid a fair rate, so he didn’t. Now no one will. Sounds a lot like why the entire industry is screwed in general these days.


    Reply
    1. Clinton.com

      Your absolutely correct! For a streaming service to work it would have to charge at least $50 per month and no one’s going to pay that! You know when I listen to Spotify?, when I don’t want to buy the record. It’s unsustainable. As their popularity gains so does their royalty obligation leaving them upside down in their business besides the fact it directly kills record sales. Spotify is a nuclear holocaust to any music entity trying to make a living. In the end companies such as Spotify will kill any notion of being able to make on creating music rendering music creation as a part time hobby. You think music sucks now. I don’t wanna live in that world.


      Reply
    2. Casey

      Pandora isn’t on demand. People would not have paid anywhere close to that as his service is radio. There have been countless free radio competitors since before Pandora was actually made available. Launchcast beat Pandora to release with both free and ($3-4) paid services. Launchcast was a major competitor at the time.


      Reply
  6. R.P.

    yawn.


    Reply
  7. Eric Neumann

    Pandora has had several profitable quarters – net income is not a good measure of cash generation. P is a profitable company as measured the same way that terrestrial radio and nearly every US company measures its ability to generate positive cash flow – EBITDA. Earnings before Interest, Taxes, Depreciation and Amortization. Keep in mind that D &A are non-cash just like stock comp which is in Net Income but removed from EBITDA – typically. When Westegren and the others cash in their stock options in a public company, the money comes from the market, not the Company. In fact, the Company, because it is public picks up cash on stock option exercise. Read P’s Statement of Cash Flows – it is laid out there clearly and any accountant can corroborate what I am saying. P claims to be “unprofitable” but that is just a tactic to get lower royalties in the upcoming arbitration – they know that journalists don’t know how to read their financials and use Net Income as the profit proxy. The other companies, in particular the on-demand streamers, are most certainly unprofitable by any measure. They should be charging more than $10 per month and they should not give a way so much free content. The content providers will not make it any cheaper and it is simply math to understand that P is the best at monetizing ad revenue in this space at ~$.04 per listener hour and that generates positive EBITDA, but look at the volumes of hours they deliver – it measures in the Billions – no one else can touch that number of ears delivered. Spotify, Rdio and the others need to raise their rates and stop cheapening music – it is art – art need not be free unless the artist chooses to give it away. Bottom Line: P is profitable (substantial positive cash generation) the others aren’t and they cannot replicate the P model anytime soon, therefore, Spotify et al must begin to behave like the premium service they are and charge more for it.


    Reply
    1. cjhoffmn

      They have had profitable quarters on an income from ops perspective (see my link above) and on cash flow from ops, but all relatively small. This is the first quarter that’s of any size. But bear in mind that they’ve had $675mm of cash invested in them. For them to be a reasonable cash flowing business on that they should probably need to make a cash flow profit of somewhere north of $67mm or so per year, if investors go light on their risk adjusted return expectations. They made $675 thousand cash flow from ops in 2013, so its still a wayssssssss off.

      A thumbnail:
      They made $675K of cash flow from ops on $637mm of Revenues after $675mm of investment. Assuming a 10% return expectation (very low for an investment like this) they need to make $67.5mm if they don’t take any more capital. That’s about 100x the cash flow they made last year.

      You are right – on a NON-GAAP cash flow basis, they’ve been cash flowing from ops, even over the last few years during the quarters. They provided a reconciliation in the financials that show that they made $12mm in cash flow if they ignore that they owe employees $42mm and if they ignore the money they owe back to their subscribers if they cancel. This is the type of reporting that lots of growing tech companies have had real troubles with later, when it turns out that they did actually have a loss in value for the liabilities.

      So net net, stopping the bleeding is a good thing. In the last three years, q4 was profitable, however, in each year, revenues grew, as did the total year loss although the growth of the loss slowed down this year, which is good.

      So far, this hasn’t been a formula for success, but it is showing signs that it might be improving.

      They have lost about $167 million, but have $245 million of cash left to keep going. Certainly slowing the loss is great, but they are a far cry from making enough for this to be a great business. I think the conclusion that’s a little strange is the conclusion that its an expense problem. I view this as more of a revenue problem – I fundamentally think they aren’t making enough revenue for the business to live in this form.


      Reply
  8. Chris

    “labels are squeezing roughly 70% of royalties from streaming services”

    Or put another way – in order to access labels entire catalogues for pennies streaming services have the cheek to ask for 30% of the royalties


    Reply
  9. tf

    While I suspect that all is not completely rosy over at Netflix, they seem to have managed to escape the pall of doom that streaming music sites – or any music based business – have.

    Are movie studios that much more forgiving than labels in royalty percentages and dot com ownership?

    To the uninformed observer, providing other peoples’ media content online for a monthly subscription, whether it’s music or film, seems like the same business proposition…


    Reply
    1. Anonymous

      Netflix’s licensing strategy is a bit different. Netflix pays a portion of the production costs of a movie or TV show in return for unlimited perpetual, royalty-free streaming of it.


      Reply
      1. Anonymous

        The music industry seems to work entirely on royalties, but that doesn’t have to be the case. I can imagine Spotify inking such royalty-free deals in the future. Maybe even exclusive deals (Netflix has a few).


        Reply
        1. Me

          I’m really curious to see what kind of deals they made to get Metallica, Led Zeppelin, and Pink Floyd.


          Reply
  10. KS2 Problema

    Right now the overwhelming majority of streaming music is non-premium — ie, ‘free’ — typically advertising-supported (or augmented, anyhow). 65% of streaming is over Pandora and YouTube!

    THAT is NO way to hear music.

    But you’ll never be able to convince people to pay for streams as long as they think that the crummy sound coming over Pandora and other ad-supported services is how it has to be.

    After a while the allure of ‘free music’ from ad-driven services like Pandora free and Spotify free seems high at first, those who want to actually hear the music will likely either try a premium service or go back to more conventional media. Which is kinda too bad, because virtually all the music you want to hear when you want to hear it in any order you want to hear it, where you want to hear it for ten bucks a month is a pretty alluring proposition.

    People said an 8 dollar a month Netflix subscription could never break even for the company, that no one would pay it, blah blah, but the proof of THAT pudding is a desert well-eaten.

    This business model is still finding itself.


    Reply
    1. Paul Resnikoff

      Netflix comparisons are frequently made, but the differences between the types of media are rarely examined. For starters, music files are far smaller, and Napster was about music, not video (though of course, BitTorrent came later).

      Fast-forward to the current environment, there isn’t an equivalent to YouTube to the TV industry and Hollywood — it sounds ironic since YouTube IS video, but a large majority of music videos are watched (or, rather, listened to) on YouTube, and that more than anything is dragging subscription potential for services like Spotify.


      Reply
      1. Me

        Not to mention Netflix pays studios an flat licensing fee, and not based on the number of times a movie/show is streamed.


        Reply
      2. cjhoffmn

        Yes – and the enjoyment of movies is totally different experience than music is, especially now. I agree that its a good comparison to compare netflix to music streaming sites.


        Reply
      3. hippydog

        the biggest difference is that the movie industry already had a built in “windowing” effect with different price points.. It also has better laws and tech to protect it.. (HDMI, DVD format, both built and widely accepted with copywrite protection)


        Reply
  11. David

    The authors of the report seem to think music is too expensive, so I can’t help noticing that a PDF copy of their own report costs about £400 ($600), or more if you want the full database as well. Maybe someone should get a copy and put it on The Pirate Bay for everyone to ‘share’?? After all, information wants to be free.


    Reply
    1. Me

      Yeah, who’s going to buy a .pdf file for that much money? You could probably find it for free on Pirate Bay.


      Reply
  12. Lynch

    Honest question: Are there any viable alternatives? Everybody was quick to bash streaming from the start, but I rarely see anybody offer up alternate ideas that don’t consist of “sue everybody into the ground until they pay for my music!”. The average consumer wants convenience and affordability, and will not gravitate back towards digital downloads except for an artist they are truly passionate about. Even then it’s a long shot. While $9.99 for an album certainly seems fair, you can bet I won’t be spending that on the 10 new releases I am interested in each week. People can’t afford that. And if they don’t gravitate towards the Spotify / Rdio model, you can bet they will just head over to Youtube and rip that shit for free. There are too many dinosaurs in these threads who truly don’t realize that the peers of my generation ARE NOT, and WILL NOT be interested in shelling out $10 per album as the years progress.

    I’m not saying the streaming model will work, I have no idea. Why is everybody so quick to force its failure, with no good suggestions to replace it.


    Reply
    1. Anonymous

      Yep. People don’t want to “download” music, they want to listen to music. Whatever makes it easiest to listen to music quickly, reliably, and inexpensively is going to win.


      Reply
    2. YouPrick

      The peers of your generation WILL, one day, have to realize that just because you can steal something doesn’t mean it should be free.


      Reply
      1. Lynch

        Wishful thinking. I agree with you completely, it SHOULDN’T be free (I very rarely download something off of Pirate Bay). But good luck convincing future generations that when you fail to provide alternative options. Anonymous hit the nail on the head right above this: people don’t want to “download” music at unaffordable price points, they want to listen to it quickly & reliably. And they WILL pay if its affordable, it’s not all black & white you know.


        Reply
        1. Danwriter

          “[Music] SHOULDN’T be free (I very rarely download something off of Pirate Bay)”

          The irony here should be self-evident.


          Reply
    3. GGG

      I’ve asked this question countless times on here and the response is always one of the Anonymous ones saying “people will pay whatever for music if they like it.” Which, while true to an extent, is not true by any means on the whole.


      Reply
      1. Lynch

        Yupp, it’s true to an extent. I’ll purchase music from all my favourite successful artists, as well as all the local talent in my city. However, its completely unrealistic to spend $10 on a new record every couple days, most people don’t have that type of money to spend. So as an alternative to downloading free music, I subscribe to Rdio for ten bucks a month. I admit, I don’t have ideas for better solutions, but because I support the only feasible model that works for myself, I’m quickly labeled a “thief” and “anti-artist”. The irony makes me laugh.


        Reply
        1. Vlad

          I think that we have some sort of a solution. We re-thought the music album format, made it visual, narrated, connected and packaged it all as an app. If prepared with passion, the 3plet carries over hundred of images, illustrating music, lyrics and stories from the band, socially connected, etc. We believe, that quality proposition will always find its way. We at 3plet believe that streaming is good for discovery, while 3plets are good for making money and fans. Bands and their fans love what we offer them, so I hope that speaking in terms of afficionado fans, we found some idea how to make it creative, valuable and recording for both musicians and fans. I’m not sure if I can post a link here not to be considered advertising but in case i can, here’s the presentation: http://www.strikingly.com/3plet I’ll be happy to answer your further questions, its a startup, to be clear.


          Reply
          1. Vlad

            Pardon, instead of recording it should be “rewarding” to fans and musicians, and “narrative” in the first sentence ,-)


            Reply
    4. hippydog

      With out wholesale changes to how content is used, there really isnt a good alternative to streaming..

      http://en.wikipedia.org/wiki/Analog_hole

      Because anything with DRM can be compromised (especially with audio), there are not a lot of options..

      The only idea I have heard of that could work (but would require a HUGE shift in content distribution and usage)

      is to have the entertainment industry to come out with a standard media player (software and hardware) that is patented but allowed to be used for free by all vendor types (from microsoft to apple to android to hardware manufactureres, etc etc).. The “media player” would have to be usable by almost everyone and would have to allow unrestricted usage (within reason),
      most importantly it would have to automatically insert a watermark or DRM into imported media..
      yada yada, etc etc..
      its not going to happen, as it would require co-operation between EVERYONE.


      Reply
      1. wallow-T

        “most importantly it would have to automatically insert a watermark or DRM into imported media.. yada yada, etc etc..
        its not going to happen, as it would require co-operation between EVERYONE.”

        SDMI, baby! The Strategic Digital Music Initiative!! Been there, done that!! Set the Wayback Machine for 2000!!! :-)

        (Yeah, an all-industry attempt was made, and it crashed and burned 15 years ago.)


        Reply
        1. hippydog

          quote “SDMI, baby! The Strategic Digital Music Initiative!! Been there, done that!! Set the Wayback Machine for 2000!!! (Yeah, an all-industry attempt was made, and it crashed and burned 15 years ago.)”

          This was mentioned before (maybe from you?) (if it was you, it means TWICE NOW, you never bothered to actually read my entire post, or you actually never read all the details on the SDMI)

          Reread my post ..
          The SDMI never met the following
          Quote “is to have the entertainment industry to come out with a standard media player (software and hardware) that is patented but allowed to be used for free by all vendor types (from microsoft to apple to android to hardware manufactureres, etc etc).. The “media player” would have to be usable by almost everyone and would have to allow unrestricted usage (within reason),
          most importantly it would have to automatically insert a watermark or DRM into imported media..”

          I looked into it.. That “initiative” never met the requirements needed for a true “buy in” from the public..

          BUT IT COULD HAVE!!! thats the really sad part
          http://ride.chiariglione.org/opening_content_protection/opening_content_protection.htm
          What the SDMI needed was;
          1.) usable everywhere on Software and hardware (the SDMI tried to create a walled garden, and not allow other content to play.. which obviously is stupid)
          2.) patented.. A codec would have to be created and patented, but given away for free (allowing all vendors to use it, but if anyone “broke the DRM via reverse engineering it” the patent process would protect usage..
          3.) the SDMI never assumed online access.. (which i think was its major failure) .. The “watermark” would have to be user specific, and could be “added too” any music/content the user already has..
          4.) 15 years ago, the music industry didnt seem to actually believe that the MP3 was a threat.. (remember this “attempt” happened the same time as napster being destroyed)
          I think if this was “attempted” again, you would see a lot more willingness on the side of the music industry, (but probably a lot less “buy in” by the tech industry )


          Reply
  13. FarePlay

    The real tragedy in all of this is that Spotify was able to negotiate the original all access deal, after two years of discussion, by offering equity in their company. Equity that compromised the value of music at the expense of the very artists they represent.

    Their pending IPO, date TBD, will in turn deliver 100s of millions to each of their partners with no payout to artists. In other words they leveraged their talent to get a future payoff. At this point, after negotiating yet another bridge loan for $250 million, at a cost of more equity in the company. The impending rush to an IPO will give them a much needed infusion of cash, enough to keep them in business for quite some time.

    Ultimately, if these streaming services are not viable businesses, as some of us believe, what has been done is catastrophic damage, ending the careers of tens of thousand artists.

    At the end of the day, we have a handful of individuals that have influenced the financial stability of an entire industry to make a few, quite a few, bucks.


    Reply
  14. Nikke

    This study is merely looking at the figures of streaming services as we know them now. Not only that the data we have is insufficient to evaluate the situation especially we lack the experience cross different markets. The biggest problem is that the study expects that the business model of streaming services will not evolve at all.


    Reply
    1. TuneHunter

      You are absolutely correct, streaming is the best, it just has to evolve ASAP to Discovery Moment Monetization.
      17 billion to 100 billion by 2020!


      Reply
  15. Clinton.com

    Good! RIP you thieves. The argument that Spotify is an alternative to piracy is without merit. At least with piracy one can hold the pirate accountable should one chose to do so. Spotify’s (and all streaming services) royalty payouts are so low (fractions of a penny) that it’s basically legalized piracy. Streaming services should be made illegal ASAP and instead shift the focus on ISP’s and companies such as Google to stop piracy, which they can do today. Spotify is a ‘flip’. They’re gonna build it up, go public then sell it just before it tanks just like MySpace did. I pity the fool who buys a single stock in this criminal enterprise.


    Reply
    1. GGG

      It’s not without merit at all. I have tons of personal anecdotes and there was a giant thread started on Reddit with thousands of up votes and replies stating Spotify (or other services) basically stopped their piracy habit. Reddit is a hive of piracy, so if that idea gets front-paged there, you know it’s legitimately happening.

      The thing people who don’t understand the piracy culture don’t get, is that in the beginning, yes, it WAS about not wanting to pay for this or that record. Over time though, as the internet music culture grew and more and more music was released/talked about/hyped up/shared, etc, it became about keeping up with whatever scene you’re a part of, and consuming loads of music. This is a key factor people need to understand when they argue “just convince people to pay for music again!” The truth is plenty of people DO pay for their favorite bands. It’s the 100 other new bands a year they steal from. No amount of moral integrity is going to put that much money to buy that much music in their pocket. A world free of streaming in NO WAY means all these shit bands are going to sell 20K records. They’ll disappear even faster, actually.

      So the reason I support streaming (albeit with better pay structure), is because it is stupid to push back against this mentality. I’m not saying it’s impossible to just convince everyone to pay for music again, but it’s a long shot. So we need a viable solution that basically beats pirates at their own game. Subscription and/or higher paying free models are that solution. The energy should be figuring out how to make that work, not railing against the very idea of streaming.


      Reply
      1. Anonymous

        This is SOOOOO “F-ing” on-point, it’s beautiful:

        GGG –
        The truth is plenty of people DO pay for their favorite bands. It’s the 100 other new bands a year they steal from. No amount of moral integrity is going to put that much money to buy that much music in their pocket.”

        Does everyone get that?

        In the pre-Napster world, when folks who wanted music HAD to pay what the sellers demanded for it, the average music outlay was less than $50 per year. And that was for the relatively few people that bought music, AT ALL. Any analysis, any set of metrics, any argument that assumes that the music-buying public is going to spend more than that is fatally flawed, from the outset.

        “A world free of streaming in NO WAY means all these shit bands are going to sell 20K records. They’ll disappear even faster, actually.”

        BINGO!

        “The energy should be figuring out how to make [streaming] work, not railing against the very idea of streaming.”


        Reply
        1. wallow-T

          ” the average music outlay was less than $50 per year” That number was for the population as a whole. Most music fanatics would figure out how to spend at least that much each month, about a CD per week. In the UK, the marketing concept was “the fifty-quid bloke,” the moderately-well-paid guy (always male :-) ) who would spend 50 pounds / 75 dollars on 3-4 CDs and a book or two, on payday.

          (For a lot of people — certainly me — that level of luxury spending on music took a huge hit in the 2008 crash and there is no sign that those good times are ever coming back.)

          A per-CD price allows for a certain level of market segmentation based on a consumer’s passion for music. But the Internet tends to level market segmentation, I think.


          Reply
      2. wallow-T

        GGG: “The truth is plenty of people DO pay for their favorite bands. It’s the 100 other new bands a year they steal from. No amount of moral integrity is going to put that much money to buy that much music in their pocket.”

        Or, as I prefer to put it:

        “Remember, kids! You’re better off if you listen to Less Music!!”


        Reply
    2. short E parsecs

      artists hold the key. when music was mostly live, the stage was the platform n you paid to see the show. when records were the platform, you bought players n record companies dealt with the royalties n physical recording. when it was the radio, the stations paid royalties. now that music is digital, the isp n device manufactures are the platform. if a site hosts the content, they are a platform. if an apple device holds the content, it’s the platform (didnt apple borrow their name from the apple record company). it just doesnt fit what’s going on, so it wont work. the isp is the new record company. the whole thing will evolve, especially since it’s so messed up. labels arent needed anymore. even tv isnt needed anymore. what part of an mp3 do you affix a label? if the quality isnt any good, it’s the way it is now. it represents the society at the time. hi-fi was a statement of society, like the violin quartet was 100 years ago. we keep getting told what to listen to on tv n radio by tv n radio. there’s a entire subculture that doesnt care n gets better everyday. there are millions of new digital recordings to discover now. each song carries it’s own meaning to each person. it’s up to the artist to make it available to the public. the sooner we forget about bands n records n little round things, the sooner we can get on with discovering new ideas. the volume of material captured in the 60’s 70’s 80’s, although a large volume of material, is still very finite. a kid in his room with garageband can completely dissolve any aspect of music ever present before now. all the engineers, studios, synthesizer/instruments are buried in the sands of time as time continues forward. musician’s are very intelligent for the most part. why would NOT computers n technology enhance their efforts or NOT take away from them. group mentality pales to an artist. music wont go away. the megaliths of the past will mummify. all you got to do is look at now n tomorrow. it’s like watching a bug in a jar.


      Reply
  16. grahamway

    My sense of it is that Generator Research is “Spotify” on. I wrote a blog on my music industry blogsite on just this subject about three years ago, in which I questioned the viability of streaming services like Spotify. I followed this up recently with another, bemoaning the pittance in streaming revenues these services are generating for artists. Spot-iffy is more like it.


    Reply
  17. bdubb

    As a user, I love Spotify. As an artist manager, I’m concerned about both their payouts to content holders, as well as the potentially dangerous distractions of the stock / options shenanigans being played out for personal and banksters benefit.

    But as a child of the digital evolution and a music lover, having been blown away by Napster and file sharing, I’m bored of the super low quality sound of most of what I hear on youtube and others streaming services. Spotify’s search and artist pics / bio has also got a lot of room for improvement.

    It’ll be really interesting to see how Pono sounds and feels. If they have got this right, it is possible that a new generation will really get tuned in to what recorded music should really sound and feel like.

    Technology has been an enormous driver in the evolution of the communication of music, since the first known flutes were invented 37,000 years ago to streaming today. Just like a better flute was made, so streaming will improve in both quality and viability.

    Bring on Pono. I’ll be listening to Neil Young at SXSW.


    Reply
  18. Albert

    Physical Music News!
    Has been predicting the catastrophe of the digital music market since day one. Let’s go back to buy overpriced CD’s, or much better, let’s go all to buy vinyl!
    I could write about the change from a market in a scarcity environment to a market in abundance (internet), and how streaming is the natural shape to access music instead of purchase. Also about the need to find mass market prices for streaming services in every country according to the purchase power, but it will just happen at some point anyway, because otherwise that means the internet will have been blocked and we go back to obscurity.


    Reply
  19. DJ

    Hey! How about Streaming services start selling each music track as a single or collection of singles (an album).
    Maybe single could be sold between say .60p to £1.00 per download or full stream access and an Album maybe between £6.25 and £10.00!?!?

    Crazy idea, I know, but I’m sure this would generate enough revenue for all stakeholders including the Musicians and Artists, I’m certain of it.


    Reply
  20. M'Ike

    I’m thinking the only way that music artists can succeed in the future is for the major labels to die completely. Because when they do that’s when music artists become both the employer AND the customer of streaming music outlets. Streaming services will need to make nice with artists and subscribers in order to be successful. The supply and the demand equation will be balanced (assuming that streaming is indeed the dominant mode we’re evolving toward).

    Right now, the labels are essentially pimps, holding people hostage, extorting other middle men and ripping off their stable. Get rid of the pimps and the prostitutes (musicians) can then fully manage their own affairs, deciding what to sell to whom in whatever manner they choose. A gross analogy, but I think it fits.

    As I see it, the problem is that musicians are relying too much on pimps and middle men. When those people are left out of the equation and there’s as little interference between the artist and the listener as possible, only then can the dream of a democratized digital music economy be realized.

    But then again I’m probably just dreaming….

    Did anyone 10 years ago accurately predict that this is the place where the music business would be?


    Reply
  21. Dub Gabriel

    Streaming services are meant to profit the player, not the music. The model that Beats is doing with paring up with a phone provider will be what will happen in the market place Spotify, I-Tunes, Pandora and others. It will just be a added luxury item on your sell phone bill. Buy our $400 earphones to hear 128kbs streaming on your phone, pay us $15 a month for membership and use up your data plan at the same time.

    Consumers think they are getting a deal when they are actually paying more money in the long run. Sucker Society!


    Reply
    1. FarePlay

      Dub, I agree with this scenario. These streaming services will become part of your monthly and provide added value to the Mobil providers to compete with one another. Another example of how artists and their work are leveraged by corporations to drive profitability, not to most artists, but rather to the corporate coffers.

      Further sacrificing the intrinsic audio of quality of the art form. This all pays into the devaluation of the medium in the same, perhaps to a lesser extent with e-books. In both cases eliminating the tactile relationship that some of us value, as evidenced by the resurgence of vinyl.


      Reply
  22. Imran

    The insight you provided regarding the unprofitability now and in the future for music streaming in light of Spotify’s upcoming IPO, whenever it may be, makes a great deal of sense. However, I believe the way music streaming is being approached at in a business sense may need to be tweaked. The fact of the matter is that ad-based or pay-to-stream services for music may be saving more than hurting the industry. Sure, it may not be the most ideal situation but I may be a little more optimistic than most that a revenue stream is available at all. The rise of digital music, primarily in 2003 has resulted in this domino effect of finding digital music through illegal means. Illegal music downloads have taken over the industry and now less than 40 percent of music is acquired legally. Music sharers have become more and more sophisticated with servers in other countries, more untraceable torrents, etc. How I see the emergence of Spotify and other streaming services is that people are now growing in their social conscience and are using these platforms to legally listen to music and in turn give back even a little compensation.

    Yes that compensation is not enough but this is why I propose we look at Spotify and others as loss leaders rather than a possible multi-million dollar industry. Because users share their music experiences on Spotify through sharing what they are currently listening to, their playlists and can follow each other, streaming music on Spotify is inherently a social media experience. With social music comes great power; users are now able to discover music more easily leading to stories such as the Lorde phenomena as a chart-topping artist essentially exploded as an artist on Spotify. As a loss leader, Spotify can help artists be discovered while at the same time can act as a promotional tool to get fans to make other purchases. For example, if a Spotify user listens to an artist, that artist and their label may make just a fraction of a cent on the one song play but there is little doubt it my mind that the fan will be more inclined to make further purchases such as concert tickets, merchandise, etc. Because a loss leader is an ancient marketing idea, there may be doubt if it can be effectively used in media consumption. It would be foolish to claim that Spotify can follow the Netflix model but loss leader is working currently for another media product, the Kindle Fire, which sells at a significant loss compared to the cost to make a Kindle Fire. Though it sells at a loss, Amazon’s hopes that users will purchase media to fill up the tablet. With the loss in revenue and jobs in the music industry, due to illegal downloads, major labels and other players will eventually have no choice but to come to terms that music streaming may never be profitable but is a necessary loss to keep around in order to keep the industry thriving.


    Reply
  23. Cedric

    I stumbled upon this article doing some research on the streaming business.

    http://www.PeerTracks.com intends to reshape the music industry completely. The base product is a basic retail store for your songs, albums and merch, only it’s plugged into a blockchain.
    This technology does a couple things.
    First, you no longer have to pay the 30 cent credit card fee since blockchains charge a tiny TINY fraction of that.
    Second, it will allow the artist to fund his career by issuing out his own Artistcoin.
    An artistcoin’s value is tied to the sales of an artist’s music.
    It is something a fan will buy if he thinks a song will generate sales.
    The fan is incentivized to share your music through legitimate channels since each sale done can increase the value of this newly acquired asset (artistcoin)

    Now going back to the subject of streaming.
    My question to this community is this:
    If had access to a public ledger that tracked how many times each song was played and purchased, and how much money was raised then we added to our platform streaming capabilities with a monthly subscription of say 10$/m.
    We would take that 10$ and divide it by the number of plays that person has on his record for the month and distribute the micro-payments to the concerned artists.

    So say Jeff listened to 1000 songs this month. That means his 10$/1000 plays means 0.01 USD per play.
    Is Bob listened to 100 songs this month that means 10 cents per play.
    Our system can track each sale and each play. It goes directly to the artist’s wallet.

    Does this seem like something of interest from your guys’ point of view?


    Reply

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