Streaming services changing the tide in the music industry

Taylor Swift – you love her, or you love her. Already having won over millions of fans, Swift’s recent media moves have her turning her peers into “Swiftes” too.

In an open letter posted on her Tumblr page, Swift took aim and victor at Apple. Apple’s new and anticipated music app, Apple Music – which includes a subscription streaming service, a free internet radio station, and a media platform on which artists can upload songs and videos – planned to entice users with a three month free trial. However, during those three months, Apple also planned to not pay artists. As such, Taylor planned to withhold her 1989 album from the service.

Claiming to be the voice of, and for, new and established artists, songwriters, and producers in the industry, Swift said the proposal to be, “shocking, disappointing, and completely unlike this historically progressive and generous company.”

“Three months is a long time to go unpaid, and it is unfair to ask anyone to work for nothing,” said Swift. “… We don’t ask you for free iPhones. Please don’t ask us to provide you with our music for no compensation.”

Less than 24 hours after her posting, Eddy Cue announced that Apple will pay artists, labels, and publishers (on a per-play basis) during Apple Music’s three-month free trial.

This isn’t the first time Swift has taken on music services. In another public battle, Swift withdrew, and has withheld, her music from the online streaming service Spotify. The issue? The minimal royalties the payout stream offers artists while consumers get to listen to millions of tracks for free on the ad-supported tier.

If you haven’t noticed already, it’s all about the money. And it’s no wonder that artists are demanding fair share in royalties when album sales continue to decline. It seems that streaming services are an easy target for pinning the responsibility of such decline, however, while Swift has been busy condemning streaming platforms, she has failed to appreciate that “streaming services contributed 27 percent of total industry revenues in the first half of 2014 – up seven percent from last year”.

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Furthermore, the report by RIAA also notes that streaming made up almost the same percent of sales as physical album purchases, and that “streaming and vinyl records are the only portion of the music industry that has seen financial growth in the past five years”.

“Album sales are the story of this moment, just as Taylor Swift is, but streaming is the story of the future of music, for us and for Taylor Swift,” says Kelsey McKinney in her article discussing the Swift v. streaming relationship.

Spotify, a leader in music streaming, has 75 million active/paying users. With numbers like that, it’s easy to see how the service can garner an impressive exposure reach. It’s also not hard to see how that kind of exposure can mean serious business, not just for artist, but for advertisers as well.

Screen-Shot-2015-03-02-at-11.03.07During their 1st 2015-quarter, ad revenue increased by 53% (year-over-year comparison) and mobile ad revenue has grown by 380%. Even though ad income is less than that of paid subscribers ($100 million out of $1 billion), advertiser’s continued switch to digital ads gives hope that more revenue is possible.

Spotify seems to be betting on this as it now offers more options for audience segments – including target divisions based on demographics, musical taste, and listening habits. The company also announced in May that they were adding video content capability to the platform in hopes to keep listeners better entertained. Or, as CNET puts it, “better ensure that people are actually watching the commercials, rather than simply hearing them as the service plays in the background.”

The launch of Apple Music is highly anticipated because if it is as successful as Apple predicts, and Spotify continues to grow (in both ad-supported and subscription tiers), the source of revenue for the music industry will change drastically. The only question is what streaming model will prevail?

What do you think? Will you pay for Apple Music or Spotify Premium to avoid the ads? Or will you stick with “free” radio? What factors influence your decision?

-Savannah Valade & Caroline Robinson

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