Do Music Streaming Services Cannibalise Al-La-Carte Download Sales?
It’s been the 64 tonne gorilla in the room for a while now, however the debate has come to the fore thanks to Thom Yorke stating that he has withdrawn his music from Spotify. Lets be clear though, Yorke is not the first global artist to withdraw their music from streaming services and nor will he be the last. Countless others have either completely withdrawn their music from such services or now employ a new tactic known as ‘windowing’, whereby they only allow their music to be consumed via streaming services 3 months after the release of their new music.
The list of massive globally recognised artists shunning streaming services is getting larger as each month goes by and currently includes; The Black Keys, Taylor Swift, Adele and Pink Floyd just to name a few. The question needs to be asked why would such established artists prevent their music being made available to consumers via music streaming services unless it was affecting there wallet? If it were actually making them money clearly we would not see this trend of shunning music streaming.
A prime case study is the fact that Taylor Swift’s label made her music available on streaming services for her previous album and by employing this strategy she only sold 2 million albums globally. Yet with her latest album Swift’s label decided not to allow her music to be available via streaming services and as a result sold more than 6 million albums globally. Numbers speak louder than words folks, and from the Taylor Swift case study alone it is hard to argue against her label’s rational to prevent her latest album being available across all music streaming services.
Reinforcing the above is a conversation I had recently with the head of a large Telco who offer both al-la-carte and streaming music propositions to their customers. This Telco executive stated they have seen a “clear as day” correlation between decreasing al-la-carte sales since the launch of their in-house streaming music service. Real numbers speak louder than words folks, no matter what the music streaming fraternity might say in its defense.
Whilst Spotify protests stating it has paid out over $500 million in royalties to rights holders to date and in this next year alone will pay out close to $1 billion dollars in royalties. What about the artists who also protest in terms of there actual pay packets? $3800 USD paid out for 1 million streaming plays works out as $0.0038 USD per play on Spotify. Drilling down further, it would only take 5,429 al-la-carte sales on iTunes for a rights holder to make $3,800.30 USD based on iTunes standard 70/30 split between rights holders and Apple.
So it takes around 263.15 plays on a service such as Spotify to make a measly $0.70 USD for a rights holder. Once again the numbers say it all. The fact Thom Yorke has faced some criticism from producers whilst valid may also be a little bit hollow. Yes Radiohead enabled there fans to pay what they wanted on an album release, however it actually earned them more than what they would have earned had they released it through a major label. Prince using a different tactic in the UK and around the world sold the rights to giving away his album for free to newspapers, yet still made more from those deals than he would have from a traditional major label deal says it all folks.
So whilst music streaming makes sense for both labels and rights societies who possess immense catalogues and subsequently scale it clearly does not do so for artists small or globally recognised.
What is the solution? In my view it is to increase the split that artists get from labels in respect of music streaming payments. Whilst not perfect this will help to quell artists feeling that they are getting the short straw in respect of equitable pay. Going further labels should be legally bound to distribute the extortionate advances they demand to licence their music to these streaming services.
The fact Spotify had to payout over $50 million USD to what were 4 major labels at the time just so Spotify could launch its service in America and not be legally obliged to distribute through those payments as royalties to there roster of signed artists is the greatest scandal of the 21st Century.
Going further the fact these labels also own close to 19% of Spotify illustrates a clear conflict of interest that needs to be resolved as a matter of urgency. Until artists get a fairer deal streaming services will continue to have gaps in their music catalogue. Interestingly these gaps are all the more massive because they are artists that consumers of streaming music want to listen to…
Ironically this post was written whilst listening to Queens Of The Stone Age’s new album on music streaming service Deezer.