Music Industry Is Keeping Streaming Services Unprofitable

Lucas123 writes "Music streaming services, forced to give from 60% to 70% of their revenue to the record industry, will never be profitable in their current state, a new report shows. Unless the services can monetize their user base by entering new product and service categories, or they can sell themselves to a larger company that can sustain them, they're doomed to fail. One method that subscription services might be able to use to achieve profitability is to up sell mobile deals or bundles to subscribers. For example, a select package of mobile services would be sold through the music service provider, the report from Generator Research suggested. 'Services like iTunes Match and Google and Amazon are already heading in this direction,' the report states. Another possibility would be for a larger company to purchase the music service or for the service to begin offering sanitized user behavioral data to advertisers, who could then better target a customer base."

Comments

Morons One And all

[MightyMartian]

And exactly how profitable are torrents to the music industry?

Re:Morons One And all

[ackthpt]

And exactly how profitable are torrents to the music industry?

Without driving people to torrents and claiming the world is rife with piracy the record labels have no bogey man to haul out and parade back and forth for more corporate welfare laws. I think Princess Leia said it best: "The more you tighten your grip, Tarkin, the more star systems will slip through your fingers." A pretty good analogy.

Re:Morons One And all

[icebike]

Without driving people to torrents and claiming the world is rife with piracy the record labels have no bogey man to haul out

Oh its much worse than that.

Here Itunes, Google, Pandora, and World Plus Dog have demonstrated to the music industry EXACTLY how they can reshape their business, both for
streaming and for buying. They have handed them an entirely new business plan, and proven that it works.

Yet still they seem content to press CDs, and let someone else manage the on line sales without lifting a finger, yet all the while moaning about piracy,
and raping the artists.

As soon as the artists decide to go direct to Google and iTunes the Labels are done, and good riddance to them.

Re:Morons One And all

[Charliemopps]

The problem is there is absolutely no need for a record company anymore. The record companies are trying their damnedest to keep that a secret for as long as possible.

Re:Morons One And all

[jhol13]

Yes there is. The record company has "producers".
The producers ensure that the music does not annoy anyone[1], is de-s'd, autotuned, limited, compressed, and what not to sound exactly same as everybody else.

Imagine what music would be without aforementioned professionals! It might sound interesting, for god's sake!

[1] The worst that can happen to a radio station is listeners to change the station. Sounding annoying or being (too) different is sure way to do it.

Cut Out The Middle Men

[rtb61]

Music streaming services simply need to form an association so they can publish direct and basically cut out the publishers who do nothing but bring junk music to the scene. So direct from artist to music streaming services and skip those shit head, money sucking, politically corrupting, parasites. There is plenty of money there once the middle men parasites are pushed out of the system.

The Problem

[brit74]

I don't think the problem is that the Music Industry is claiming so much of the profit from music-streaming services. I think the problem is that there isn't much money going around when it's all based on ad-revenue. I mean, if you can make $10/month in music sales from people buying music (via CDs, iTunes, etc), or you can make $1/month from people who stream their music (via ads), and then we complain that music companies are taking 60% or 70% of that $1/month, is the real problem the fact that the music industry is taking 60% or 70% from music-streaming services, or is the real problem the fact that ad-supported music results in low revenue?

I know that "music companies are being stupid and greedy" is implied by the piece, but I'm not sure it's the fault of the music industry that ad-supported music is just a crappy source of revenue.

Re:Cut Out The Middle Men

[jd659]

Music streaming services simply need to form an association so they can publish direct

This is very true. Recording and editing the music with the decent quality used to be very expensive. The analog consoles used to be hundreds of thousands of dollars producing similar quality what a thousand dollar computer with a decent audio card can do today. The studios nonetheless demand copyright ownership for offering studios (cheap now) and distribution service (also became cheap).

Similar state existed in photography where the equipment had astronomical cost and companies could offer equipment, hire photographers "for hire" and keep the copyright. Nowadays, is is nearly impossible to see contracts where the photographer does not retain the copyright on his/her images. Still, plenty of services are available that remove all the "negotiation" part when selling and advertising the images. The photographer is free to offer images for sale with multiple brokers and some have agreements where if an images available for sale on one service will be offered for sale on the other too. There's no reason the music industry cannot follow the same model. The musician will be in charge of the recordings.

What really is killing the development of this market is the fact that one can sell "the ownership" under the current copyright laws. Once the labels buy the "ownership" of the recording they haven't produced, they can also buy the laws that benefit them and no so much help the musicians or the music industry in general. Kill the labels and let the artists to be the deciders of where the music to be played and it will increase the competition among services too -- bringing the new and innovative distribution channels.

quite the news flash...

[RevEngr]

I was the CEO of a company that sold ringtones and MP3s a la carte for mobile devices. When you added up (1) the licenses paid to record labels, (2) the fees paid to mobile operators for payment processing, and (3) publishing royalties, it was something like 120% of the retail price for the content. So, umm, not a really scalable business model[1].

We eventually built out an ad-supported streaming model, under the compulsory licensing model for "internet radio" (a la Pandora), and I actually believed there was a viable business there, even without premium (ad-free) subscriptions. But I'm not so sure now. The music industry, which for so long made money by controlling marketing and distribution, is now too accustomed to making money through venture capital. Not directly, of course -- they extract it via a never-ending stream of venture-backed music startups, who either pay licenses in advance that they'll never be able to recoup with sales, or pay with legal settlements when they try to do something innovative that doesn't fit into the existing (untenable) licensing models.

I do believe that ultimately we will get to more of a free market that escapes the cartel of the legacy music industry, but it's certainly taking longer than I had expected. There are a lot of powerful entrenched interests.

Well, duh.

[mbone]

"Music streaming services, forced to give from 60% to 70% of their revenue to the record industry, will never be profitable in their current state, a new report shows."

That has been obvious to anyone associated with this business since about 2002.

I think this is a feature, not a bug, from the point of view of the record labels.