As many of you who normally read my blog post know, I do not support the music-streaming model that is currently being used. I believe that streaming in the current business model is not sustainable revenue for the music industry. To date there hasn’t been any music streaming service that has yet made a profit. It’s easy math here, the record labels and artists spend big time dollars to produce, market, and distribute music. In turn they receive pennies to the dollar, this seems like a no brainer. No wonder why music-streaming services have not made a dollar. I believe that music streaming can make a profit with the right business model, along with limitations and not this free for all model. Streaming in the current business model devalues music and sways the consumer’s buying habits from a buyer to a streamer. Why buy music when you can stay on the freemium membership of one of the 500 music-streaming services? You’re probably saying piracy is what killed the music industry. We have the power to ban and block all kinds of content online. I think we could end music piracy if we really wanted to. Maybe even toughen up on the laws, just like the UK. The UK’s current maximum sentence for online copyright infringement is 10 years. The UK government takes copyright infringement seriously. It hurts the music business both online and offline. By toughening up stricter consequences it leaves a clear message to copyright infringers.
Streaming isn’t a new battle for me; I knew streaming wouldn’t save the music industry. Streaming has yet to offset the loss of music sales, but has led to decreasing sales. Streaming devalues music, because the freemium model consumes consumers. In a world where big box retailers sell CD’s for $9.99 and where streaming services pay three fourths of a penny per stream. It’s no wonder why consumers do not see the value of music and the streaming services. The numbers don’t lie. According to Nielsen SoundScan, in 2013 digital track sales fell 5.7% from 1.34 billion units to 1.26 billion units and digital albums sales fell 0.1% to 117.6 million units from the previous year’s total of 117.7 million. 2013 also brought us 223 billion global streams, which was a 140% increase in streaming activity from 2012. Streaming is at an all time high and keeps on rising. Streaming is definitely killing the download.
The U.S. market is not the only market suffering the effects of streaming. Norway and Germany have had similar issues regarding music streaming. In 2013 Norway witnessed a streaming surge that caused a 17% gain in music sales. According to IFPI’s data music streaming has highjacked the sales of the other formats. Norway’s music downloads were down a drastic 21% over the same point in just over a year in 2013. Physical sales at that time (2013) had dipped to 29%. In 2014 Norway’s music streaming accounted for 75% of total revenue. Right now music streaming counts for 80% of total revenue. While in other formats sales continue to be destroyed.
Warner’s CEO, Stephen Cooper, was anti-streaming and didn’t believe in sustainability within the streaming business model. After the Berklee report Cooper has changed his whole outlook on streaming and the freemium model. He seems to be a supporter, saying that in the 2015’s Q2 Warner’s revenue grew 33% from streaming companies like Spotify. Overall digital revenue grew 7%, which means that platforms like iTunes decreased around the same time. Before becoming a turncoat Cooper said, “We continue to believe that the long-term sustainability of the freemium model is predicted on high levels of conversion from ad-supported free to paid subscription, but in order to achieve those levels, the benefits of paid subscriptions must be clearly differentiated from the ad-supported offerings.” Warner stated that streaming music sales outperformed physical and digital sales as well, which seems like common sense, when you undervalue music in one format and place no limits on the consumption of another. The music industry is bleeding itself for pennies on the dollar and sending their children, the songs, in for slaughtering. It’s very unclear why Cooper abruptly changed his views on streaming. Maybe it’s because in the report it showed streaming as the second largest revenue or maybe Cooper is just playing the good old boys game. Either way, it’s insulting and offensive to other music industry professionals.
Berklee’s report shouldn’t be a surprise that the music industry needs transparency and fair pay. Since the beginning of the digital age contracting deals have not seen transparency and very little pay. All deals and pay seem to be masked to lowball the unfortunate and the ignorant at heart. Berklee’s report went on to say that we put less money into marketing, PR, and A&R due to smaller budgets. This all seems common sense to me and I’ve talked about it in the past. Smaller profits equals a smaller budget for marketing, PR, and A&R. If we market less in the industry, people know less of what we have to offer. When PR is decreased, people will know less about what’s happening in our companies and organizations. If we don’t have an A&R budget, we can’t cultivate new talent, which makes the music industry thrive. The report states that they need a standardized database for music that would make it easier for labels and collection organizations to identify who owes what. 20-50% of royalties never reach the artists; again this comes as no surprise. The music industry has been talking about this very problem since the beginning of digital music and streaming.
Berklee’s report has many problems. It talks about fair pay, transparency, and traditional music players, such as labels, publishers, and PRO’s, but it fails to mention anything of digital services. The biggest problem with the report and Rethink Music is that Rethink Music was started by The Berkman Center, for those that do not know, the Berkman Center is an academic institution that has close ties to Google. The Google venture company, The Berkman Center, funded the Berklee/ Rethink Music report. For this reason I believe that the report holds no validity. It’s an impressive piece of propaganda that distracts artists and other music professionals from the true problems, unfair pay and accountability. It leaves digital services, like YouTube, unaccountable for their business practices.
I’d like to thank Bruce Houghton of Hypebot and Digital Music News for their aid in this post.