May 21, 2015

Why Streaming Is the Future of the Music Industry

When Taylor Swift made the decision not to release her latest album 1989 on Spotify’s streaming service and pulled her other albums from the site in November 2014, it re-sparked the debate about the future of the music industry and how musicians should be compensated for their work. Swift pulled her music from the site after the company refused to restrict her albums to the paid subscription tiers. Other artists followed including country singer Jason Aldean, while groups like The Black Keys kept some of their music on the site but limited it to a few songs and vocally protested the low royalty fees streaming sites pay. Though Spotify might be an easy villain in the eyes of musicians, it’s also part of the digital streaming world that’s keeping the music industry moving forward. In its defense, the company reported it paid out $1 billion in 2014 alone, and said that 70% of all revenue generated by the company goes back to labels and artists. Spotify doesn’t like to put a per-stream value on its royalties (it says it’s a “highly flawed” way of looking at royalty payments), but estimates that each listen earns a payout revenue between $0.006 and $0.0084. It might not sound like much, but in the case of Beyonce’s “Drunk in Love” with more than 134 million streams, that equals between $804,000 and $1.3 million for that song alone. It’s acceptable for artists to take issue with even that level of payment, since only part of that payout goes directly to them. But nonetheless, the growing popularity of streaming services is also giving artists a platform they’ve never had before, at the fingertips of millions of potential fans. The International Federation of the Phonographic Industry (IFPI) released a report in April 2015 that details the global status of the music industry. Across the world, music revenues in 2014 dropped 0.4% from the year before to $14.97 billion, continuing a decline in revenues that has been ongoing for more than a decade. According to Music Business Worldwide, revenues in 1999 totaled $26.6 billion, representing a drop of 43% in revenues over the past 15 years. The downward trend can be viewed as alarming, and certainly should be cause for concern for record labels, artists, and others working in the industry. But for the past five years, the losses have been much less dramatic, dropping just over 5% since 2010. Part of that could be a leveling out following the recession as spending increased. Another important component, which the report points to, is that digital streaming is increasing significantly.

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