"IF SPOTIFY IS FORCED TO INCREASE THE PRICE OF ITS PREMIUM PLAN, IT WOULD MOST LIKELY HAVE TO PASS THIS COST ON TO ITS CUSTOMERS. PRICE INFLATIONS SUCH AS THIS MAY MEAN THAT FAIR PAY FOR ARTISTS REMAINS A LOW PRIORITY."
- MIKE MCNEILIS, AUDIO PRODUCTION LECTURER AT SAE LIVERPOOL
New statistics from the British Phonographic Industry (BPI) show that subscription streaming platforms operated by Spotify, Amazon and Apple made revenues of £468 million in the UK last year, over half of the £865.5 million total income for the recorded music industry. The industry saw 3.1% growth in 2018, figures that were boosted by a continued streaming surge, the ongoing appeal of vinyl and growth of sync.
The figures, published in the BPI’s All About the Music 2019 report, show that revenues from streaming are now more than double the revenues generated by physical formats.
Subscription replaces ownership across the creative media industries
As the BBC noted in an article published at the beginning of March, a cultural shift is clearly occurring, with consumers shifting away from ownership to ‘rental’ or subscription-based models of consumption.
As internet and cellular data speeds have increased, online music streaming services have taken off. The rising popularity of streaming in the music industry is mirrored in other creative media industries. Last month Google announced their new games streaming platform, Stadia, and the TV and Film streaming service, Netflix, was the subject of heated debates about its place in this year's TV, film and cinema award ceremonies. There’s even talk of a Netflix for podcasts. With the news that broke recently of Apple’s new streaming service, Apple TV+, it seems that more and more frequently consumers are demanding content that they can access through the internet as opposed to having a tangible box set, DVD or CD that they need additional hardware to access.
A total of 91 billion songs were played on Spotify, Apple Music and their competitors last year - that’s the equivalent of 1,300 songs per person in the UK - and streaming now accounts for nearly two thirds (63.6%) of all music consumption in the UK. For some, this reflects a decline in the quality of music, with listeners prioritising convenience and quantity over the sound quality.
The benefits of the streaming surge
However, there are many positives that accompany the surge in music streaming, the most important being the correlation between the rise of streaming and the decrease in the levels of music piracy, implying the economic worth of music has been revalued by consumers.
In theory, this means that musicians should be getting paid more for their work. As this article will discuss, this is not necessarily the case, but one thing the shift from a sales model to an access model does mean is that an artist doesn’t just get a one-off fee when someone buys their record; they will get paid - theoretically - forever, as long as somebody somewhere is listening to their music.
Another benefit of streaming is that listeners are exposed to a wider range of music, with artist or genre radios using algorithms to suggest other tracks a consumer may enjoy. This means artists have potentially a wider reach than ever before.
Music fans are also getting longer albums out of the streaming phenomenon. Some genres, such as indie rock, have continued to produce 10 or 12 track albums, as their listener demographic are still buying vinyl, CDs and MP3s on sites like Bandcamp. But other artists have started to produce longer albums. Last year, The Rolling Stone revealed that on Spotify, the duration of the top five streamed albums has risen almost 10 minutes over the past five years, to an average of 60 minutes. Why? Well, one reason is that longer albums that generate more streams can lead to No. 1 chart debuts and gold and platinum plaques.
The downsides to the streaming surge
A recurrent criticism of the key streaming services is that they don’t necessarily pay artists as much as they should do.
"I FEEL A BIT AGNOSTIC ABOUT STREAMING PLATFORMS."
- NATHAN LOUGHRAN, CAMPUS DIRECTOR AT SAE LONDON AND FRONTMAN OF THE REVERSE
“I feel a bit agnostic about streaming platforms. We have a digital distributor who ensures our music is hosted on as many streaming services as they can. In terms of royalties though, there is no doubt that we are paid very little. I was quite excited when our last single reached over 6500 plays on Spotify after it was included in a couple of playlists, yet in terms of royalties we have only made just over £10 across all streaming services for that track, so all those thousands of plays equate to the same in revenue terms as selling one t-shirt or one record! Spotify does have a very user-friendly app for artists to track their plays. Apple Music has something similar but our distributors have sight of it, not us. I have no idea how we do on platforms like Deezer or Tidal though I know our music is on there.”
Nathan’s comments suggest that there is more that these streaming platforms can do to improve the user experience for artists, in terms of increasing transparency about track plays and artist royalties rates.
When Spotify launched their streaming service in 2008, they expressed the intention of defeating music piracy and ensuring that artists get paid for their work. But it soon became clear that what they were willing to pay artists was only a couple of thousandths of a penny for each stream of their tracks.
Spotify users can use the service for free, which means they have to put up with adverts to listen to playlists on Shuffle. They can’t actively choose songs they want to play and they can only skip a finite number of tracks in a row. Alternatively, consumers can pay a monthly subscription fee for Spotify Premium to be able to download songs to listen to offline, remove the adverts and have the freedom to play and skip whichever songs they like.
The free option draws a broad customer base into using the service, and then once use of the platform becomes habitual, customers are encouraged by in-app advertising and a ‘Free Trial’ period to pay the monthly fee to get rid of the adverts and have more freedom to listen to what they please. But Spotify has been operating at a loss since its launch; only once enough people sign up for its subscription tier will the company be able to offset the royalties payouts it makes to music rights-holders and start to be profitable.
Spotify has to strike a difficult balance between making their Premium plan affordable to consumers, more appealing than their competitors’ offerings, and at the same time expensive enough that they can afford to pay artists a fair rate for their music.
Battle of the brands
Spotify has clashed with Apple recently about the 30% fee Apple charges them after consumers subscribe to Spotify Premium, having downloaded the Spotify application onto an Apple device.
Spotify’s CEO Daniel Ek outlined his frustrations in a blog post, suggesting the 30% fee seems designed to harm streaming services that compete with Apple Music. He says that if Spotify pays this cut it has to “artificially inflate” its prices “well above the price of Apple Music.” But if it doesn’t pay, Apple applies “a series of technical and experience-limiting restrictions” that make Spotify an inferior experience.
Apple responded to Ek’s claims in a statement of their own:
“After using the App Store for years to dramatically grow their business, Spotify seeks to keep all the benefits of the App Store ecosystem - including the substantial revenue that they draw from the App Store’s customers - without making any contributions to that marketplace. At the same time, they distribute the music you love while making ever-smaller contributions to the artists, musicians and songwriters who create it - even going so far as to take these creators to court.”
In the wake of Apple’s statement, many articles have been published suggesting that Spotify are ‘suing’ music creators after a ruling from the US Copyright Royalty Board (CRB) required them to increase their royalty payments to content-creators. But this is misleading; suing requires initiating a legal proceeding against someone or something and the CRB’s review and resulting decision wasn’t initiated by anyone.
The CRB is an administrative court with judges that are required by law to meet and review royalty rates every few years. Now that it has reached a decision, and the motion for rehearing was denied, Spotify and other streaming services are appealing in the Court of Appeals, which is the only available next step in the process. All that’s really happening is streaming services are asking new judges to take a look at adjustments they have requested be made to the CRB ruling.
However, even though Spotify aren’t ‘suing’ songwriters, this doesn’t mean they aren’t underpaying content creators.
Mike McNeilis, Audio Production lecturer at SAE Liverpool, observes:
“Ever since Apple Music was released in 2015 as a direct competitor to Spotify Premium, troubles between Apple and Spotify have intensified. In March, Spotify labelled Apple’s policy of taking a 30% cut of all Apple app store purchases or subscriptions as an unfair tax. If Spotify is forced to increase the price of its Premium plan, it would most likely have to pass this cost on to its customers. Price inflations such as this may mean that fair pay for artists remains a low priority.”
With subscriptions to streaming services priced around £10 a month, with further fee discounts available for students, it seems a price many customers seem willing to pay at the moment. Some customers even pay for multiple streaming platforms, in order to have access to their favourite artists’ exclusive music, or make use of the different features of these platforms.
"ULTIMATELY, HOWEVER CONVENIENT THESE STREAMING PLATFORMS ARE, THEY DON'T COMPARE TO THE FEELING OF PUTTING A VINYL RECORD ON, POURING OVER THE ARTWORK AND LYRICS AND ENJOYING SOME ACTIVE LISTENING!"
- NATHAN LOUGHRAN, CAMPUS DIRECTOR AT SAE LONDON AND FRONTMAN OF THE REVERSE
Nathan Loughran said:
“As a consumer I have signed up to both Spotify and Apple Music, so I pay about £9.99 a month for each which means I am definitely giving these platforms more money than I am making from them! I sometimes feel like I am being ripped off having both, but as an artist it’s useful and it’s still a lot less than I used to spend on CDs a month. As an artist Apple Music is great as it syncs with your iTunes library. This means rough demos that I record at home or rough mixes of our new album can be played in Apple Music and listened to on the move. Similarly rare releases or self-released albums by obscure artists, in fact anything that is not available on streaming sites, can be integrated into Apple Music. Spotify doesn’t enable this, therefore you are dependent on their own library, which although has most mainstream releases, is far from exhaustive. I do, however, like the playlist function on Spotify more than Apple Music as you can make and share playlists easier. Ultimately, however convenient these streaming platforms are, they don’t compare to the feeling of putting a vinyl record on, pouring over the artwork and lyrics and enjoying some active listening!”
As Nathan, a musician and user of both streaming services explains, both Spotify and Apple Music have their own selling points for music fans and music producers respectively. But until they stop bickering with each other and pay artists reasonable royalty rates, it sounds like the best way that music fans can support their favourite acts is by going to their gigs, buying a t-shirt and dusting off the record player to give their new album a spin.
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