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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.
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.
Because you want more to be created.
"I like to lick butts!" by MobileTatsu-NJG (#32700246) (Score:5, Informative)
Seriously...pay for music?
Why would I do that?
I have a Google Play Music family account. This gives me, my partner, our siblings and one parent access to service for AUD$18 per month. It also gives all of us ad-free YouTube Red as part of the package.
I work in a fairly relaxed office environment in which I'm allowed to listen to music over headphones. I also have a pretty eclectic taste in music, so I like to switch beats depending on my mood or what I'm working on. It also lets me discover new artists.
So all in all, I think it's a fantastic service that's worth every cent.
So you realy dont know many musicians do ya? They are going to do their thing regardless.
No sir I dont like it.
Mozart had to take on private students to pay his bills, so can Justin Bieber, if he can find any paying students.
Musicians getting rich was a historical aberration caused by the technology of the day. They can all get day jobs and cover their beer with tips when playing at night for all I care.
John McAfee 'It was like that time I hired that Bangkok prostitute; to do my taxes, while I fucked my accountant'
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?
Well, they'll try. But 'doing your thing' around the constraints of a day job and 'doing your thing' as a professional artist will yield two very different results.
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.
Yeah about that: I've worked at companies with millions of indie tracks. No one listened to them. Our top tracks mirrored the top 100, and all the cool indie stuff? Not even a blip.
I think the finance managers at the streaming services should re-think their strategies. Putting aside free, ad-supported playback for the moment, they seemed to think that $10 or $12 per month was a "sweet spot" - the point at which consumers were happy to pay, without frightening them off to a cheaper service. It seems obvious that wasn't enough to cope with the licencing/royalties set by the CRB.
I was a Live365 subscriber, listening to stations that *weren't* full of material by well-known artists - I like exploring music that I haven't heard before. When they emailed me late last year to say they were closing down (mainly because of a royalty rate rise that small stations couldn't afford), I told them I'd be happy to pay more. They mustn't have thought it was a viable option to survey their subscribers about raising subscription rates, because they proceeded to shut down.
Yes, $10/month *sounds* nice, but it's not very much for such a lot of choice, and now those artists who were getting *some* income from Live365 stations are getting *no* income from those stations. I was paying even less - about about USD$70/year - I was happy to pay double that to continue listening to music that I enjoyed, but noooooo, we couldn't possibly consider charging more.
They sentenced me to twenty years of boredom
You don't understand. If they start charging their subscribers more, the media companies will also increase their license fees and the company will have the same issue but with less profit for itself (fewer subscribers) and more profit for the media companies (their only expense is negotiating the contract). I don't understand why they want all streaming companies to die, but they are purposely killing them. Considering this drives more people to pirating, I'm even more confused. Maybe they make more money letting everyone pirate their IP and then getting money from copyright infringement settlement letters than they do 'selling' the same content.
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.
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 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 don't understand why they want all streaming companies to die, but they are purposely killing them
There are a number of reasons why this is the case. To touch on but a few briefly...
There are many other reasons, of course, but these are the ones that come readily off the top of my head. Usually it's a mixture of greed, stupid, and fear - and the first two of those creates a situation wherein they have a lot to be afraid of.
Because if you download a song (or torrent an album, or copy a friend's CD, whatever) to keep it and listen to it more than once, you have conceded that it has value to you.
What's left is negotiation about the amount.
Unless you think that artists *owe* you their efforts?
They sentenced me to twenty years of boredom
Who are those 9-to-5 day job indy artists you like so much?
Slashdot social media options: AIM, ICQ, Yahoo, Jabber and Mobile Text. Why no MySpace?
By calling them dot-coms and using the phrase e-commerce, you sounds like a throwback to the 90s! On the other hand, it fits really well. So... yeah.
SJW n. One who posts facts.
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.