The Bright, Profitable Future of Streaming Platforms

According to a 2016 report from The Music Business Association titled “Music & Millennials,” young Americans in the 15-19 age range are utilizing streaming services for 51% of their overall music consumption. Unlike their parents, AM/FM radio comprises only 12% of their listening. In the very near future, as these trends continue, streaming is expected to universally become the dominant form of music consumption. For this reason, the music industry is changing dramatically, requiring new legislation and resources for musicians and songwriters to be appropriately compensated for their work. Due to the tenacious efforts of the movers and shakers of the music industry, the future of streaming is bright and will prove to be a superior business model for the modern digital age.

In the past, artists and songwriters have raised countless concerns with streaming platforms. The most famous example was in 2015, when Taylor Swift wrote an open letter to Apple Music after the platform did not pay artists, songwriters, or producers during listeners three-month free trail. The mega-star wrote: “I’m sure you are aware that Apple Music will be offering a free 3-month trial to anyone who signs up for the service. I’m not sure you know that Apple Music will not be paying writers, producers, or artists for those three months. I find it to be shocking, disappointing, and completely unlike this historically progressive and generous company.” Swift previously raised concerns about Spotify when she pulled her entire catalogue from the service, explaining that she considered the company an “experiment” that she was not interested in participating in (BBC). The underlying issue that Swift and many other musicians have had with streaming services is the nebulous, unstructured methods used to keep track of music streamed and make sure the artists get paid appropriately.

Traditionally, in the “hits model” of the music industry, providing compensation for artists and songwriters was simple. Artists worked with their labels, who worked with distribution services, to get their albums in record stores, then everyone involved got a percent of the profits. However, with streaming, there is no uniform method to ensure that everyone is getting paid. Streaming services have been unable to obtain mechanical-publishing licenses for all the songs in their catalogue because the meta-data to retrieve all the necessary information about who contributed to a specific song does not exist. Because of this, many songwriters make little to no money for their work. Michelle Lewis, an up-and-coming songwriter who penned the song “Wings” for Little Mix, told The New Yorker: “We were emerging from this bubble, and I realized, ‘I have this hit. This is going to be good! Nearly three million streams on Spotify!’ And then my check came, and it was for seventeen dollars and seventy-two cents. That’s when I was, like, ‘What the fuck?’” Lewis’s sentiments have been shared by countless other songwriters who are not being appropriately compensated for their work, simply because Spotify does not know who to write the check to.

Another factor that contributes to unfair compensation for songwriters is ad-supported plans, such as regular (non-premium) Spotify and Pandora. These platforms do not make enough profit from ad-revenue to pay artists and songwriters fairly from free spins, so this business model is seen by many people in the music industry as highly problematic. Additionally, it perpetuates the belief amongst consumers that music is an invaluable commodity. Spotify and Pandora listeners should instead be highly encouraged to utilize paid subscriptions, so they begin to understand that work goes into music production. Music should be purchased as any other commodity (even indirectly through a subscription).

Fortunately, many steps are being taken to improve the nature of music streaming and ensure financial growth in the future of the music industry. An extremely important part of making that happen is the introduction of the Music Modernization Act, a bill that will literally usher the music industry into the digital age. According to David Israelite, the president of the National Music Publishers’ Association, “The MMA is the best hope for songwriters to achieve fair royalties and payments in the digital age” (Billboard). The Music Modernization Act will create a new agency to administer blanket mechanical licenses for streaming services. This will allow artists to be paid individually on a much more timely and equitable basis. Additionally, the bill calls for a database of all published music that will document each individual that worked on the track to ensure everyone gets paid for their contributions.  If the Music Modernization Act is passed, it will prove to be an important step in legitimizing streaming services as key players in the music business. It would allow songwriters and artists to be paid fairly, which would in turn encourage them to support streaming platforms.

Additionally, more consumers are paying for premium streaming services. According to Forbes, in 2017, revenue from recorded music grew to $8.72 billion, which is a $1.2 billion increase from 2016. By 2018, growth is expected to increase by 20%. Also, as the 18-25 demographic of Americans using streaming services gets older and enters the job market, they are more likely to pay for streaming verses non-subscription options. Students correctly have the option of paying half-price for ad-free music from Spotify and Apple Music, and this business model is hoped to create more full-price customers in the future once the student discount expires. These results are already being realized; 2017 saw a $1.7 billion increase in streaming revenue from 2017, and two-thirds of all revenue from recorded music is now made through streaming services (Forbes). This younger demographic proves that the demand for recorded music remains high, but it must be met in digital, modern streaming platforms.

The American consumer has proved that streaming is here to stay, but if the music industry remains innovative and flexible, there is no need to fear poor consequences. Streaming should be embraced for the potential and growth it has already shown and will continue to show in the years to come. With the implementation of the Music Modernization Act and the continued rise in numbers of paying subscribers, streaming will be a fruitful source of revenue for a new, fresh music industry.

 

Sources:

“Apple Music Changes Policy after Taylor Swift Stand” 

“Music and Millennials” 

“Will Streaming Music Kill Songwriting?”

“Senate Moves Forward on Music Modernization Act”