My thinking about the future of the music industry and music streaming services is that the best-placed criticism of the music services is that they offer too much “free”, ad-sponsored music instead of successfully enticing customers to upgrade to paid subscriptions in the range of about $9/month and that even $9/month is leaving money on the table for the industry where cable-cutting customers used to paying a lot more for conventional cable and younger customers who have never paid for any kind of media would dig deeper into their wallets for a better music experience once they are hooked on music streaming. In short, the streaming services have to walk the fine line between driving their customers away and driving them to upgrade.
In an effort to get as many subscribers as possible, whether to dominate in terms of market share or to provide an early exit-strategy for insiders, the streaming music services have been gambling with their own sustainability as well as the industry’s because without enough revenue the industry will continue to collapse. They are seen as a legal alternative to rampant piracy along the lines of “better to get control of the distribution channels and collect what we can” rather than letting massive numbers of people share unlicensed free torrents and get nothing.
People have flocked to the music streaming services over the last couple of years largely because they are free – or initially free. Like torrent sites they offer access to millions of tracks, which can become so confusing and overwhelming that it becomes unsatisfying (that is why hits are hits – most people like what they already know or what is placed in front of them like the next bright shiny object). The value of streaming services is that they can offer a curated experience for listening to music. They also can offer the promise of a better experience in the sense that “free” can be incredibly annoying with disabled features and too many audible ads and can give people the feeling of being shut out of a party if the party is only partially revealed.
In terms of free, YouTube is the outlier right now. It is the destination of choice for the majority of listeners who get their music for free. It pays mysteriously-calculated and ridiculously low royalty rates for streams based on the ads that are served beside the stream while seeming to ignore that most people listen to YouTube music on mobile devices through apps where visual ads are irrelevant. This is a glass-half-full at the moment because at least some revenue is better than no revenue but what we have to do is make sure that fully ad-served services like YouTube stay out of the curating game and that upgradable streaming services make their paid offerings distinctly better than free by having them well-curated – in a playful, innovative, informative matter. For the industry to survive, “free” and “curated” music streaming experiences should be like oil and water – not to mix.
Myself, after playing around with music streaming services like Spotify and Deezer for free and comparing them to SiriusXM where I have an inexpensive account I have seen that streaming sites can be immersive and addictive – and if they can annoy and entice enough people who have become hooked on them for free, those people will upgrade from free to paid subscriptions and in the process the industry can become sustainable in the sense that performing artists, composers, labels and publishers can achieve a sufficient amount of revenue to adequately reward their efforts and in doing so perpetuate the creation and distribution of new and satisfying music. This is not just about one site like Spotify being a dominant force. There can be an ecosystem of paid subscription sites. There is room in the market for diversity – for there to be multiple top streaming sites as long as they all have access to full music catalogues.
There is so much misinformation and half-told truth on the topic of music streaming at the moment I decided to write a paper to shed some light on the area – at least, from a legal perspective – 9 Key Points About Music Streaming. It was published last week at the Ontario Bar Association’s half-day continuing legal education program in Toronto where I moderated a panel discussion on music streaming – with Geoff Kulawick, executive director of Canada’s Independent Digital Licensing Agency (Merlin) and Greg Stephens, in-house legal counsel at Street Quality Entertainment in Los Angeles.