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That Digital Music Service You Love Is a Terrible Business (fortune.com)
An anonymous Slashdot reader quotes an article from Fortune:
Rdio goes bankrupt, Pandora hangs out a 'For Sale' sign and then gets rid of its CEO, artists and labels ramp up their criticism of YouTube. Now we have Tidal in acquisition talks with Apple, while Spotify complains about Apple treating it unfairly... the digital music business is becoming an industry in which only a truly massive company with huge scale and deep pockets can hope to compete... Rdio went bankrupt last year in large part because it couldn't afford to make the licensing payments the record industry requires of streaming services. Deezer, a European service, postponed a planned initial public offering partly because its business is financially shaky for the same reason... [Rhapsody] is still racking up massive losses... Spotify has found it almost impossible to make money, primarily because of onerous licensing payments...
[A]ll the available evidence seems to show that the digital-music business, at least the way it is currently structured, simply isn't economic. The only way for anyone to even come close to making it work is to make it part of a much larger company, like Apple or Amazon or Google. That way they can absorb the losses, they have the heft to negotiate with the record industry, and they can find synergies with their other businesses. In other words, music as a standalone business appears to be dead, or at least on life support.
The article links to an essay by a former eMusic CEO arguing high royalty rates make it impossible to have a profitable business, and the music industry "buried more than 150 startups -- now they are left to dance with the giants."
[A]ll the available evidence seems to show that the digital-music business, at least the way it is currently structured, simply isn't economic. The only way for anyone to even come close to making it work is to make it part of a much larger company, like Apple or Amazon or Google. That way they can absorb the losses, they have the heft to negotiate with the record industry, and they can find synergies with their other businesses. In other words, music as a standalone business appears to be dead, or at least on life support.
The article links to an essay by a former eMusic CEO arguing high royalty rates make it impossible to have a profitable business, and the music industry "buried more than 150 startups -- now they are left to dance with the giants."
So it seems like there's 2 problems here :
1. These "services" all offer an awful lot of service for free, but have to pay per song played. This is a guaranteed trip to the poorhouse.
2. Those payments per song? They don't go down with scale or time. Google and other internet companies, their cost of delivering service goes down with technology advances and sheer size. It costs google a lot less to deliver gmail service or web searches than when they started.
The only way this can work is if the record labels - who own everything and do not have to pay themselves - offer a service. Kind of how all of the free porn sites who also own most of the porn producers are owned by the same company.
So what? Most dot-com businesses are losing tons of money these days. Most e-commerce is losing money hand over fist. It seems that investors are fine throwing money at unprofitable businesses for some reason.
I don't respond to AC's.
Instead of working closely with the smaller companies to create a diverse and competitive market, their predatory (legal) and greedy (bad business) tactics caused the shutdown of many music startups, angering music lovers, and ultimately, they are shooting themselves in the foot because when only have Apple and Amazon to deal with, they will:
1. Negotiate terms that leave the music industry with lower profits
2. Eventually launch their own music labels, mimicking what Netflix did with Movies & TV series, to create further leverage
All those moments will be lost in time, like tears in rain... time... to... die...
Easy to pirate, easy to store. No excuse for people to not already have a large personal music collection.
Seriously...pay for music?
Why would I do that?
John McAfee 'It was like that time I hired that Bangkok prostitute; to do my taxes, while I fucked my accountant'
That business where Pandora lets people stream music for free isn't making much money? Holy crap!
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What's so terrible about Bandcamp (which is the digital music service I love)?
They seem to be doing pretty good, they're growing as well as being profitable.
Best part (IMO) is that they also have lots of artists saying they appreciate Bandcamp. Here are some comments from that blog post:
Bandcamp is the greatest platform for independent artists. I am glad to be a part of it, without it getting new fans would be difficult.
We release small independent music compilations since three years here on BC. We worked together with more than 200 artists in these years. The most of them publish their music on BC too. I can confirm: More people buy the music on BC. That is what the musicians say in talks. And even our pay what you want releases have a really good perfomance.
I've bought a lot of really great music on Bandcamp, the artists like it. So yeah, what's so terrible again?
Stop buying music from companies that charge rediculous licensing fees. Taylor Swift has no more talent than the talented girl next door. Go fund indie music. It's more free, you're supporting the little guy/gal, and the talent is just as good even if the production quality isn't.
There are more unsigned artists than there are artists signed to record labels. A great many, probably most, artists stream their stuff for free. MySpace is no longer a general social networking site, it's a million bands giving away their"music free or almost free.
Since most music is not made by record labels, why do people seek out the music produced by labels? Apparently there is something of value there, Maroon 5, Justin Bieber etc have many more fans than Leannasaurus Rex. Why do people want the music produced by labels? What's the extra value vs independent artists and small labels?
Labels do three things that I can think of:
1) They filter, they "discover" good artists. On Myspace you can find plenty of bad indepedents before you find a good one.
2) They hire the top engineers and producers and build multi-million dollar studios to produce the sound that people like to listen to. Independent artists may not even know what a compander IS.
3) They promote the professionally produced recordings featuring the selected artists. In other words, they let you know "hey here's another good country/hip hop/pop singer you might like".
Most people don't choose any of the hundreds of thousands of independent artists. Instead they prefer to choose among the dozen or so that the labels are offering that week.
Personally I don't choose either for my own listening. I listen to informative recordings. Sometimes I DJ weddingsband other parties. When I do, I choose music from record labels because of #3 - people at partiew want to hear the same music they've heard before, the music promoted by labels.
When examining whether a business is, or can become, profitable - you can't just look at expenses. You have to look at the income side too.
The submitter, and the linked articles, signally fail to do so.
and they industry has always been awful except for a few people at the very, very top. This is new how? Outside of socialism and basic income I don't see a way around this. It's like anything where you've got people who do it because they love it. You can pay them a lot less than their actually generating.
Hi! I make Firefox Plug-ins. Check 'em out @ https://addons.mozilla.org/en-US/firefox/addon/youtube-mp3-podcaster/
Subscribed for years, they died a few months ago. Odd thing was, my favorite channels were the old radio dramas from the 30s and 40s, and the attempts to revive the form in recent years.
Had a couple prog rock channels I'd listen to as well, but the old time radio seemed to be my go to thing.
Rusty Hodge has been running SomaFM.com for years just on donations. Someone should interview him - he seems to have it figured out. If you haven't given SomaFM a try you should - and donate a couple of bucks if you do.
No, IMO, the problem is that there are too many middlemen. The Internet service takes its cut, followed the the performing rights organization (e.g. ASCAP, BMI, or SESAC), the publisher takes at least half of what is left (and probably more), and the tiny crumbs that remain get divided between all the composers and lyricists. The artist probably gets nothing unless he/she is a singer-songwriter or there's some other specific arrangement with the publisher. Either way, the more middlemen you have leeching off your music, the less you'll make from it.
Check out my sci-fi/humor trilogy at PatriotsBooks.
Posting to undo a mis-clicked mod.
Oliver.
The content belongs to the artists and the publishers. Let them decide whom to deal with and on what terms. If they don't like startups, probably they are not okay with smaller cuts. They have full freedom to decide who to deal with and who to avoid.
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Support freemusicarchive.
Introducing the EvilViper Streaming Music Service.
Front-end looks just like Pandora/iHeartRadio/etc. But on the back-end, it searches all the MP3s on your device to see if you already locally have the song it was going to play. If so, file is played locally, not streamed. No bandwidth is used, and no royalties need to be paid. Customers appreciate the superior sound quality, less cellular data usage, and fewer pauses between songs.
In addition, when you like/thumbs-up a song, in the background it is PURCHASED as an MP3 from Amazon or similar. You don't notice the purchase, but you now own the song. Repeated plays cost nothing. If your device is reset, or you use the music service on a different device, the songs you purchased are first downloaded from Amazon and playback resumes.
The EvilViper Streaming Music Service will also make deals with smaller and independent artists and labels. Those who offer the cheapest terms will see their songs featured more prominently, and repeated more often (until/unless customers vote not to hear them again), at the expense of a little less big-name music, for a big savings.
Slashdot gets worse every day... Pipedot: News for nerds, without the corporate slant
... and still run by the founder. Magnatune ... I love it and have gigabytes of their music, much of which is regularly played..
now we need to go OSS in diesel cars
...and a lot of that music was distributed for free.
Free distribution of media has pretty much existed since the beginning of time for the sake of this discussion. Commercial supported content began about a week after the first radio station went on the air.
There are bands that I have enjoyed for years without pirating or paying one red cent. That's because "free music" is in fact nothing new. The only reason that Pandora is having a hard time is that the music industry decided to be leeches this time rather than paying to promote artists.
This whole getting paid versus paying makes a big difference.
A Pirate and a Puritan look the same on a balance sheet.
I wonder if you have an idea why approximately nobody (well under 1% of listeners) prefer that great music recorded with nothing but a tape recorder, with no post-production work? Virtually everyone inside buys or unlawfully aquires the heavily produced studio work.
Anyway, your comment reminded me of "Million Dollar Quartet". Itcs a raw recording from the famous Sun studios with no production work. The artists are Elvis Presley, Jerry Lee Lewis, Carl Perkins, and Johnny Cash . If you like raw recordings, that's definitely one to check out.
I've said this all along.
Say Spotify gets $10 a month from you, they take $5 for themselves and their expenses then they just divide the other $5 up evenly between whatever artists you listened to weighted by number of songs and time. Don't "pay per play" instead "pay what's available". If you only listened to one artist in that month, that artist would get all $5, even if you listened to only one song.
Then Spotify is simply guaranteed $5 a month, and royalty fees take care of themselves.
As an older guy with hundreds of records and CDs who wants to keep building my own library of digital music but doesn't have to pay for songs I don't like to get the ones I want (figure it out), I'd be interested in a service where I pay a minor subscription fee ($10-25/year) for the right to stream an album or two at a time, so I can check out new music that interests me. Then pay maybe 99 cents per song for a decent DRM-free MP3 download for the songs I like and want to keep. A FLAC download for the snobs could cost a bit more per song.
I don't want to pay the larger monthly fees for today's streaming services because most of the time I listen to the thousands of songs I already have. I just want to be able to evaluate new music in a convenient and affordable fashion, and pay a reasonable price for what I want to keep.
Why stream albums instead of mixes like what we have now from Spotify and the like? Because that's how I evaluate music. Again, older guy. No reason the service couldn't do both, but I want the chance to hear everything from artists I'm interested in, not just the hit(s).
This makes sense for those of us who already have a music library, who were conditioned to the idea by the need to buy stuff if you didn't want to be at the mercy of local radio programmers. We've always been a minority, but we're the minority that invests time and money into the industry, so we would seem to be worth catering to. Does it make sense for the potential market of younger collectors with different habits shaped by torrents and streaming services instead of radio and record stores? I think so, but doubt the industry will ever get it together enough to let us find out.
Since most music is not made by record labels, why do people seek out the music produced by labels? Apparently there is something of value there,
Time largely. I don't have all day to research out music that I would like to hear. So for years, we trusted that the major labels would sift through the dross and bring to us good music.
But this is no longer true. Modern Pop music is pretty people who may or may not be able to sing. Dancing is more important to pop music today than music. Coupled with ADHD hooks and psychotic lyrics, it's obvious that the trust is broken. And this trend of marketing to 12 year olds, either in age or intellect, has gone on much longer than trends in music usually do.
The shepherds did so well protecting the flock that the sheep no longer believed that wolves existed.
This whole problem could be boiled down to the fact that Corporations are allowed to own the "rights" to Copyright. It is fabulously profitable. They lobby for it. Artists want to keep it, because they can get a big payday. Corporations transfer rights to other corporations...
This would all be solved by either caps on the term of copyright to something reasonable, say 10 or 20 years, or by simply not allowing a corporation to hold rights to copyright. If they want to sell your song, they pay a human to do so, etc... Rights are non-transferable. i.e. they die with you. Though hopefully that doesn't spawn a whole bunch of artist assassins...
You right though, copyright currently is doing exact the opposite of its intended purpose. The purpose is to provide some control over work to artists to make money to encourage them to make more art. Now, why bother, hit your payday and retire for the next 150 years or so.
Pandora pays royalties to the PROs, so no, the order isn't wrong. That's the order in which the payments occur. It was not intended to be ordered by amount of dollars kept, but rather to show the flow of money downhill, starting from the company that takes the money (e.g. Pandora) and ending at the people who actually did the work to create the music.
Check out my sci-fi/humor trilogy at PatriotsBooks.
Do you actually believe a large number of performers write their own music?
The number of singer-songwriters is large enough to be notable. Otherwise, the Wikipedia article about them would probably have been deleted by now.
If the music industry wants to increase the profitability of online services, then they need to increase their user base. That's probably going to mean producing music or other sounds that people want to listen to, which is something they haven't done for a generation now.
Birds are not dinosaur descendants;birds are dinosaurs, for all useful meanings of "birds", "are" and "dinosaurs"
You're an idiot.
Are agnostics skeptical of unicorns too?
Creative Commons.
It is pitch black. You are likely to be eaten by a grue.
Fred's assertion, as I understand it, is that the advertiser base underlying the no-charge tier of Pandora and Spotify isn't "robust".
Certainly don't love it . Most of us just want play - often for free.
Get up!