Streaming Services Have 99 Problems. And They Are…

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(1) Artists make little-to-nothing off of streaming services.

(2) Streaming services claim that artists are making money off of streaming, which has generated massive distrust and anger among artists.

(3) As a result of (1) and (2), artists often get pissed off at streaming services, and sometimes publish their abysmal royalties on sites like Digital Music News.

(4) As a result of (3), streaming services counter that the leaked royalties are miscalculated and inaccurate, which makes artists even more pissed off.

(5) Streaming services like Spotify claim that someday in the near future, artists will make money off of streaming services.  In fact, Spotify CEO Daniel Ek says that artists will be making a decent, living wage off of streaming in just a few years.

(6) There is very little evidence to suggest that (5) will ever happen for artists.


(7) Streaming services pay the labels, who typically pay nothing to the artists.

(8) Still, streaming services like Spotify claim that labels pay their artists, which everyone knows is… well…

(9) Major label artists contracts typically ensure that streaming royalties will never, ever be paid to artists.

(10) Major label licensing partners now demand large percentages in the streaming services they license, like Beats Music.  But artists are virtually guaranteed to make nothing off of these massive equity payouts when an IPO or sale occurs.

(11) Arguably worse is SoundCloud, one of the largest audio streaming services on the planet that hasn’t been paying artists a dime.

(12) And when SoundCloud finally agreed to make licensing deals in July, they focused only on the biggest artists and major labels.  Which means, most artists still won’t be getting paid by SoundCloud.


(13) Streaming services suck at proper accounting and payouts.

(14) Artists suffer: according to data compiled by Audiam, streaming services have failed to pay $100 million to artists over the past 12 years.

(15) Labels suffer from incomplete or incorrect play data, which would make things complicated if they decided to pay their artists.

(16) Songs are often written by multiple authors that aren’t all registered properly, which compounds the difficulty of this problem.

(17) Funds for smaller artists and writers that aren’t counted properly are ultimately paid out to the wrong party, typically a larger rights owner like a major label.


(18) Streaming services are actively hostile towards artists and their financial well-being.

(19) This hostility is evident in lots of lying:

“You cannot devalue music.  It’s impossible.”

Tim Quirk, Google Play

“Artists Will Make a Decent Living Off Streaming In Just a Few Years”

Daniel Ek, Spotify CEO

“Not one artist can tell us that streaming music is actually detrimental to the overall bottom line for the artist.”

Spotify Account Manager of Label Relations Katie Schlosser


(20) Streaming services lack transparency.

(21) Artists generally have no idea what they should be getting paid by services like Spotify.

(22) Compounding the problem, services like Spotify refuse to open their books to artists and rights owners that demand it.  This is essentially the opposite of transparency.


(23) Not enough people want to pay for streaming music services.

(24) And the biggest reason for this is that virtually any song on the planet can be accessed for free, especially on YouTube.

(25) And YouTube has basically everything: remixes, mash-ups, live versions, and derivative works that are generally not available on services like Spotify.  Which means, most fans end up on YouTube at some point or another.

(26) Another reason why people don’t pay is that the average consumer just isn’t that into music, at least not to the extent that streaming music services imagined.

(27) All of which leaves advertising, which pays a tiny fraction of subscription and doesn’t support any streaming business models.


(28) There are too many streaming services competing for too few dollars.

That includes Spotify, Deezer, Rdio, Rhapsody, Beats Music, Grooveshark, VEVO, YouTube, Google Play Music All Access, and a bunch of other ones you’ve never heard of.

(29) Which means your ‘secure’ collection in the cloud could get wiped out overnight.

(30) It also leads to predatory licensing by major labels, which almost ensures failure and limited competition.


(31) Very few streaming services (subscription or otherwise) actually make money.


(32) It’s entirely unclear if streaming services will ever make money, especially sustainable profits over a longer period of time.

(33) Part of the reason for this is licensing costs, which remain expensive and unpredictable.  Which means the more money Spotify makes, the more they will have to pay labels and publishers.

(34) And if the major labels don’t like your streaming service, they’ll sue the crap out of it.

(35) Which means that Spotify’s stakeholders are mostly focused on things that don’t involve actual profitability, including (a) a Wall Street initial public offering (IPO); (b) an acquisition, and (c) really nice salaries.

(36) Which is ironically part of the reason why Spotify is viewed so poorly on Wall Street.


(37) The streaming music micro-industry is probably a bubble.

(38) Many of the most successful services (Pandora, Spotify, and Deezer) are actively delaying profitability in the name of hyper-growth.  Which is an extremely speculative gamble.

(39) Both Deezer and Spotify have hundreds of millions in investment, and neither has displayed anything close to profitability.

(40) The broader economy could be an even bigger bubble, which means that giant bubble over there could kill the streaming bubble overnight.

(41) All of which brings up a growing problem for the music industry: some of the hottest companies – which include streaming services – are oftentimes short-term flips designed to get investors rich in the shortest amount of time possible.  Not longer-term plays that will benefit artists, fans, or (non-major label) rights owners very much.


(42) Streaming kills downloads, which make more money for artists.

(43) Spotify claims that streaming doesn’t hurt download sales and can actually increase them, though research now shows that this is untrue.

(44) Spotify also claims that artists will make more money over time from streaming than downloads, which has largely been disproven by math.

(45) And so do sales: in 2013, download single sales declined for the first time ever, and have never recovered since.


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(46) For this reason, major artists like Adele, Taylor Swift, Black Keys, and Coldplay window their releases and make Spotify and other streaming services wait.

(47) But windowing doesn’t affect pirate platforms like BitTorrent, which typically gets leaked copies.

(48) In fact, recent research now suggests that streaming is causing the marked declines in piracy once thought.

(49) It also doesn’t affect YouTube, which typically receives unauthorized uploads that the copyright owner must then police.

(50) Adding to the resistance, streaming platforms like Spotify do not allow artists to selectively license their music to premium, paying subscribers (thereby enjoying a better per-stream rate).


(51) Given the myriad of problems associated with streaming services, superstar artists are signing massive, mega-million exclusives to major corporations (U2+Apple, Jay-Z+Samsung).  Which means if you’re not on iCloud, Samsung, or whatever else it happens to be, you’re not getting access to it.


(52) Artists and copyright owners typically have little-to-no control over their content on YouTube, easily the largest streaming music platform.

(53) Which means that labels, publishers, and artists must devote endless resources to ripping down their music, instead of making great music.

(54) Or, accepting extremely low payments from their claimed channels.

(55) In the case of an unclaimed channel, the rights owner receives nothing and can’t be paid retroactively.  Even if there were ads and revenues being earned by YouTube.

(56) Which sucks because, a lot of legacy artists previously had no idea that their music was being played millions of times on YouTube, and therefore never claimed their channels.

(57) And, it’s up to the rights owner to police their content and set up channels, not YouTube (which of course works out great for YouTube).

(58) But even with channels properly set up, rights owners typically have no idea what they should be getting paid.

(59) And the reason?  YouTube is completely non-transparent and deliberately confusing!


(60) All of which translates into extremely low payouts from YouTube, little explanation into why these payouts are so low, and little-to-no control by rights owners over whether their music appears on the platform.


(61) Don’t like that?  Then start issuing hundreds, thousands, or tens of thousands of DMCA notices to Google and YouTube.  It’s a great way to use your creative energies!


(62) Streaming services don’t contribute anything back to artists or the artist community.

(63) That doesn’t mean an artist like Lorde can’t break on platforms like Spotify, but it does mean they won’t be getting any support to make that happen.

(64) It also means that there’s far less money overall to develop artists, which means far fewer artists will have a chance at making it.


(65) User abandonment on streaming services is extremely high.

In a recent study, researcher Mark Mulligan found that more than 70 percent of registered user accounts on services like Spotify are completely abandoned.  Others like Deezer have incredibly similar problems.


(66) Grooveshark.


(67) Internet radio pays almost nothing to artists, and little to publishers.

(68) The biggest streaming radio service, Pandora, is currently at war with both artists and content owners.

(69) That opens all sorts of tricky situations ahead, including increases in rates or flat-out refusals to license to Pandora (on the recording or publishing sides, or both).

(70) It also threatens to dismantle long-running relationships between publishers (like Sony/ATV) and performance rights organizations (like ASCAP), which is currently the only way publishers can effectively strike direct, market-negotiated deals with Pandora and other streaming radio services.

(71) Meanwhile, labels and recording owners are unfairly receiving far greater royalties per internet radio stream, based on out-of-date statutory rate structures and government restrictions on publishers.

(72) In all of this, some of the largest songwriters in the world are receiving pennies for millions of plays.

(73) Pandora, despite these wretchedly-low payouts, argues that its publishing payouts are too high.  And, they’re suing performance rights organization ASCAP to lower the rate.

(74) Throughout all this, Pandora founder Tim Westergren has been misleading artists into thinking that lower rates will benefit them more.  Because it will grow Pandora, which means more exposure and opportunity for artists to make money (or something like that).

(75) Pandora pays artists extremely little, but Westergren and other top Pandora executives are often cashing out millions in Pandora shares — a month.

(76) Which of course raises questions as to whether Pandora executives believe in their own company.  Or, even internet radio itself as a sustainable business model.

(77) And, whether anyone besides about 10 people will be making any substantive earnings off of Pandora.  Which means, artists are essentially subsidizing the insanely wealthy, secure lifestyles of executives like Tim Westergren, not to mention an obsessive focus on hyper-growth over profitability.  All while being told they’re getting paid too much in royalties.


(78) SoundExchange is an inept company that routinely screws up artist royalties, screws up payouts, and hordes tons of unpaid royalties.

(79) Pandora pays recording royalties to SoundExchange, which distributes the money equally among label and artist.  The only problem is that SoundExchange does a poor job of distributing the money received, which means it’s generally holding on to hundreds of millions in unpaid royalties.

(80) Which means that capital that is sorely needed by services like Pandora is locked up in unpaid accounts, upon which SoundExchange (not Pandora) draws interest.

(81) In that environment, companies like Apple have negotiated direct licenses with major rights owners for radio products.  But this invites a number of new problems, including potentially lower per-stream payouts for content.

(82) Apple’s direct payment system also re-aggravates age-old issues with major labels.  The first of these problems is that major labels rarely pay their artists.  And when they do, it’s often suspect and incorrect.

(83) Which means that despite all of its accounting problems and massive unpaid royalties, SoundExchange is actually better for major label artists than a direct, Apple-negotiated deal.

(84) On top of all that, Apple’s direct negotiations with major labels also includes healthy advances.  Which, of course, are rarely distributed back to the content owners (ie artists, publishers, etc.) themselves.

(85) And when it comes to indies, Apple has shown little willingness to negotiate.  Instead, independent labels received pre-determined, non-negotiable, and markedly inferior terms to the major labels.

(86) Furthermore, indies have not been offered major label perks like healthy advances and shares of advertising revenue.

(87) Merlin, the organization charged with negotiating for the indie labels and fighting on their behalf, wasn’t even at the negotiation table for iTunes Radio.  Which means, Apple has been able to essentially negotiate whatever they want.


(88) When it comes to streaming services, indie labels generally get screwed.

(89) The latest example comes from YouTube, which recently forced a non-negotiable, highly-unfavorable contract upon independent labels for their upcoming, paid streaming service.

(90) If indies didn’t sign this contract, their content would removed from all parts of YouTube (paid and unpaid).

(91) But this sort of behavior isn’t unusual: when it comes to major streaming releases, companies typically arrange everything with the major labels and publishers first, then force unfavorable terms upon the hapless indies.


(92) The DMCA is a ineffective loophole that greatly benefits companies like YouTube and Grooveshark, but absolutely screws artists and rights owners.

(93) In most cases, rights owners do not have the resources to issue takedown notices, and sites like YouTube refuse to block repeat offenders.

(94) Which leaves one practical choice for rights owners: permit the use of your content without your consent, accept the meager payouts from those uses (if available), and try to make money somewhere else.  The only problem with this?


(95) Streaming platforms can generate artist revenues in other areas, though it is unclear how much and how often.

(96) The early consensus is that artists popular on streaming platforms sometimes see elevated live concert audiences, though a large number of artists simply can’t make a living on the road.

(97) And, streaming doesn’t usually lead to more t-shirt sales.


(98) Most of the music on streaming platforms are never listened to.

A recent study showed that 4 million songs on Spotify had never been listened to… once.  


(99) This is part of a much larger problem that accompanies massive musical selections and choice overload on streaming platforms.  According to a recent study recently conducted by the Echo Nest, nearly half of all songs are skipped before they are finished.