As technology develops, the music industry develops with it. We started out listening to scratchy vinyl, downsized to CDs, downloaded songs track by track through iTunes, and now we’re using online streaming as the primary method for listening to our favourite songs.
Edgar Berger, Chairman and CEO International of Sony Music Entertainment says that as a society, we are shifting from an ‘ownership model to an access model’. And in 2015, while online streaming grew by 82%, the purchase of CDs dropped 3.9% from the previous year, illustrating this shift.
49% of people listen to music on their computer or tablet, so it is no surprise that online streaming services have risen in popularity. Through these streaming services, managing your music is made more immediate by not waiting for a download or CD to arrive, and cheaper due to the monthly subscription fee –instead of separate payments.
Streaming is the way forward
Streaming offers users a convenient and cheaper alternative to traditional methods of music consumption. Providing nearly limitless tracks through a monthly subscription service that averages out at £9.99 a month (depending on your provider), people of all ages are flocking to this accessible model.
There are many streaming options out there: Spotify, Pandora and the recently released Apple Music are all big players. Whilst these might be the most popular listening methods for the public, the music industry itself is suffering.
It is reported that Spotify awards artists between $0.006 and $0.0084 (USD) in royalties per stream. This is nothing compared to the royalties received through CDs and downloads, so it is understandable that many artists, such as Taylor Swift, Prince and Pete Townshend, have all refused to let their work to be distributed on streaming sites.
Jay Z rocked the boat last year by re-launching his subscription-based music service, Tidal. The streaming service also delivers exclusive curated editorial content to its members, and claims to pay the highest percentage of royalties to music artists and songwriters within the music streaming market.
However, what’s good for the musicians isn’t always good for its users. The premium service is £19.99 a month, £10 more than Spotify’s equivalent service. Therefore, it is unsurprising that Tidal has only a tenth of the paid subscribers Spotify has, despite its exclusive content.
Streaming sites aren’t profitable
It is very hard to make a profit through a streaming service, making it an unstable business and music solution. These sites have customers ranging in to the millions, but make very little through them in comparison to charging for individual downloads.
In 2014, Spotify earnt $1.3 billion (USD),whilst this is a big number, it was still making a huge loss of just under $200 million. This is due to the fact that 90% of their revenue comes from 25% of their customers – the ones who pay for the service.
“It’s safe to say that streaming music isn’t going anywhere fast, but something is going to have to change in order for many of these companies to survive” says Hugh McIntyre, Forbes.
What this change may be, we’re not sure, but we do know that streaming services as they are now cannot support the music industry. Something’s got to give, and we’re pretty sure it won’t be the customer.