Can Streaming Really Save The Music Industry?

156635555The following is a guest post.

Streaming services like Spotify have largely circumvented the problem of music piracy, however, big-name artists like Thom Yorke and, more recently, Taylor Swift, have removed portions, if not the entirety, of their catalogues from the service, prompting others to do the same. What’s their problem?

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Back in 1999, Napster introduced large-scale music piracy into the public consciousness, reaching 80 million registered users at it peak. When it was shut down two years later, it was survived by a motley crew of file-sharing sites and programs. CD sales were hit. The music industry was in crisis.

As well as Spotify, Pandora and the second-coming of Napster now offer subscription services to their customers, with artists making royalties from each play. But these services have to be cheap enough to not drive users back to piracy. Consequently, they can only pay so much.

With people consuming more music on the go than ever, ten dollars a month buys you an almost unlimited amount of music. Spotify pays out $0.007 every time a song is played. Inevitably, not all of that makes its way to the artist.

Russ Crupnick, an entertainment analyst, says that Piracy is no longer the problem but rather “that you can’t create scarcity.”

Indeed, streaming tips the scales overwhelmingly to the consumer’s advantage. The previous model was a short-lived bubble in the 40,000-year history of music, that filled the pockets of label execs and a tiny circle of artists. For most, things haven’t changed that much. Being paid for copies of their art supplements what they make from performances. Prior to the gramophone, they had only the latter.

The model that we’re leaving behind was arguably a racket. Consumers were made to pay for songs they didn’t want in order to hear those they did. That the move towards non-physical downloads of albums shaved just a margin off the price demonstrates just how little the industry was willing to compromise with the listening public.

Consumers aren’t stupid. The proof is in their shift away from both media that is no longer economically viable for them and piracy. As well as the risks and sound quality issues that come with downloading illegal files, they know that their favorite artists need to be able to make money from their music in order to keep making it.

Pirate keyMaybe people did appreciate music more when they had to pay more for it and had less access to it as a result. But consumers won’t settle back into listening to the same few albums over and over again. Changes certainly need to be made to make the music industry more sustainable, but moving too close back to the old model will quite simply rip people off!

Spotify’s model might be fairer on consumers, but it’s not concrete. It’s not unlikely that we may see changes in the service designed to benefit artists and labels, such as a platinum option that involves paying a higher rate for access to new releases or exclusive bonus tracks. Users may also be willing to pay more as a sort of patronage to selected artists.

Most of the company’s competitors already pay more. With Apple set to reestablish itself in the changing market with Beats Music, and services already as cheap as they are, fairer pay schemes may actually prove to be a solid marketing ploy for smaller companies as they face increasingly stiff competition. With artist’s support, they may even acquire a wider range of songs to offer as well.

As the Billboard 200 begins to absorb singles’ streams into its album charts, it’s clear that streaming is the future. Or at least the foreseeable one. Frequently charting artists have been hit hardest by it, but on the plus-side they’ve weathered the storm of piracy. The new distribution channels may have to do more in order to make the format a viable source of revenue for artists, even for their own sakes, but streaming isn’t going away anytime soon.

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Nick Rojas is a business consultant and writer who lives in Los Angeles and Chicago. He has consulted small and medium-sized enterprises for over twenty years. He has contributed articles to Visual.ly, Entrepreneur, and TechCrunch. He manages the blogging efforts at National Debt Relief. You can follow him on Twitter @NickARojas, or you can reach him at NickAndrewRojas@gmail.com.