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."

Comments

Uhh...

[ShooterNeo]

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.

Re:Uhh...

[Anonymous Coward]

The better way this can work is reset copyright back to its original length of time - 14 years, and also set maximum royalties that they can charge for the privilege of their copyright. The industry might suffer a bit (boo hoo), but the artists will come out ahead since self publishing is much easier now. Their royalties would climb dramatically without the industry skimming so much.

Of course the best way is to abolish copyright altogether, and artists get paid for performing their work like the rest of us. Getting paid when a machine plays a recording is ludicrous!

Re:Uhh...

[CohibaVancouver]

Of course the best way is to abolish copyright altogether, and artists get paid for performing their work like the rest of us. Getting paid when a machine plays a recording is ludicrous!

Hey Anonymous Coward, quick question. My brother is an author. How does he get paid for 'performing' his work?

Re:Uhh...

[MightyYar]

The topic was music, but maybe he can sell hats.

Re: Uhh...

[Anonymous Coward]

Although copyright is not required to sustain a living, it helps. A lot.

However, copyright as it is - effectively indefinite - is basically stealing. From the public.

The entire reasoning for the "limited monopoly," as specified in at least the United States Constitution, is to encourage the development of works for the public benefit. It is by definition for a limited time, because copyright, at its core, is an INFRINGEMENT on the rights of the general population. It is a TOLERATED violation of basic principles laid out there.

As-is, copyright is an abomination, and people who want to suck on it for the rest of their lives and assert dominion over whatever they wrote or sang or belched have made it both dangerous and far more trouble than it was ever worth. Back it down to a duration that will be WELL within the lifetime of most of those who see the work in the first place, and not "maybe my grandchildren if Disney doesn't pay for another extension," and it will contribute to society again. As-is, it's just an impediment to just about everything it was designed to help with, from storytelling to software development to innovation of all kinds. And it is this kind of encroachment that is being used to justify forbidding fixing your tractor, reselling your car, and a host of other ridiculous things. These new stipulations on copyright, however, say nothing of the far more vast damage that it does to other intellectual works. Society is built upon that which came before, and it does it without rental fees. Giving a cut to the person who advanced it is fair. Giving them control in effective perpetuity is anything but.

As a final note, this is usually replied to with, "you wouldn't work for free, would you?" As a matter of fact, I would, if I had the skill. And fortunately for all of us, hundreds of thousands of people do, as is evidenced by this web site, which wouldn't even exist if it weren't for projects like Linux and Apache, which are but a relatively small portion of the wealth of open source software available. And if you look around the Internet, there is plenty more talent to contribute that in fact does it out of love, only it doesn't have the corporate backing to dump it in everyone's face, nor the corporate lawyers to ruin the lives of anyone who even looks at them funny.

Re:Uhh...

[mwvdlee]

Yeah, nobody actually WRITES music, it's just people on stage singing whatever and playing random notes.

RIAA and MPAA shoot own foot

[skaag]

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

Re: RIAA and MPAA shoot own foot

[skaag]

I saw an interview very recently with one of the popular bands. The band's leader said they used to make no money at all from touring. Touring was done mostly to promote your music (and get in touch with your fan base, sleep with groupies, etc), and money was made primarily from record sales. Now, he says, they make most of their money from ticket sales during tours.

Re: RIAA and MPAA shoot own foot

[jedidiah]

There are many reasons to have zero sympathy for the music industry. You don't have to be a kid to appreciate that the labels are ultimately reaping what they've sown.

They really are the real thieves here.

Re:Pay for music?

[silas_moeckel]

So you realy dont know many musicians do ya? They are going to do their thing regardless.

Re:Pay for music?

[HornWumpus]

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.

What's so terrible about Bandcamp?

[Lord Crc]

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?

There's two terms to the equation

[DerekLyons]

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.

Re:The real solution

[Anonymous Coward]

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.

Re:blind spot

[dgatwood]

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.

Re:blind spot

[jedidiah]

...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.

Re:The real solution

[Anonymous Coward]

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...

• Lack of understanding - companies in this industry Do Not Get the Internet. And frankly they don't want to. Many are too old, many are too wed to their old profit-making ways, and a few visionaries see it as a way to amplify their profits, regardless of the toll it takes on the consumer.
• Control - major content providers of all types are built on control of a work. Accordingly they want to increase control to the maximum extent, and continue to do so. This is why there is DRM in everything and why they're bent on turning the DMCA into even more of an abomination than it already is, as well as try to smash SOPA and its ilk down our throats. This extends to major manufacturers of other things, such as car companies who want to prevent resale of cars due to "license agreements" regarding the software in the car's main computer.
• The Sinking Ship - I think this is most prevalent in academia in particular. Academic journals are usually handled by providers that handle large amounts them and charge ridiculous rates for access. It's even more ridiculous if you're not independently wealthy - most people can't afford to buy a paper for $25 to get 24 hours access. This has made them utterly hated by EVERYONE involved in the production of the work, from the academics to the students to the universities. Seeing the writing on the wall, they're trying to screw every last cent they can out of everyone they can before they lose all control over the situation. They hope that they can also somehow use this to usher in a new era of ridiculously draconian control and pricing to match, but they also realize this is unlikely and as such are attempting to get while the getting's good.

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.