Music streaming services may not be bad for the music industry, but simply another inevitable change to the way we consume music.
The debate over music streaming services and how they pay artists reached a peak earlier this year when Taylor Swift pulled her music from Spotify, she was concerned they were underpaying the artists they played on their service.
The bigger concern was that streaming services were killing the music industry because people weren’t buying music anymore.
So at what rate are streaming services displacing sales?
Jon McComb spoke with Andrew Flowers, an editor with the news site fivethirtyeight.com.
The net zero effect
Flowers wrote an article titled “Maybe Spotify Isn’t Killing The Music Industry After All“.
It’s based on a study published by two economists who conclude that music streaming is having no real effect on music sales.
“I profiled some new research by two economists who estimated that Spotify has essentially had a revenue neutral impact on the music industry. While it has depressed some music sales of physical CDs and digital downloads, it’s also been paying out a lot of royalties to musicians and that basically nets out to zero.”
*The study has not been peer-reviewed.
He says part of the issue the industry has with streaming is the profound disruption effects it’s had on the business of music distribution. That disruption has contributed to it costing hardly anything for artists to get their music out into the world. But that’s just part of it, according to Flowers.
“…There’s another aspect to the Spotify that’s it’s actual model of business is moving away from ownership. You don’t really own the music that you listen to through Spotify; you’re renting it essentially, it’s like Netflix and DVDs. So that transformation is also profound.”
Less than one cent per stream
Because the ownership is declining and customers are renting the music, Flowers says a lot depends on how much the streaming company is paying in royalties per music stream.
“So the economists I profiled, they estimated for every 137 more streams from Spotify…one less digital track sale…that’s the part where Taylor Swift is right, where Spotify is depressing sales.”
As well as that, says Flowers, Spotify pays an artist less than one cent per stream. Which seems tiny, but adds up to $2 billion dollars in royalties to artists over the last five years.
“So you really need to have a lot of streaming to make up for that lost sale.”
Creating losers and winners
“Artists that have big hits may be winning from Spotify’s emergence…They’re getting listeners who wouldn’t buy the album anyway. So when they have one or two big single hits and people are streaming their hit, they’re getting paid from those streams.”
“What about bands that are album oriented? They have a devoted following of die-hard fans, and their revenue in the past came from album sales. Well, now their fans can get it through Spotify at a much cheaper rate. Those are the losers in the Spotify emergence.”