The economics of music streaming

I recently read a fascinating article by Liam Boluk titled “Less Money, Mo’ Music & Lots of Problems: A Look at the Music Biz“. It’s about recent trends in the music business, and whether music streaming is to blame for falling music revenues.

It’s a really long read, but well worth it. It answers lots of questions about music streaming in particular that I had, the biggest one being “is music streaming bad for artists”?

A few points I took away from it:

  • While music revenues have fallen a lot, most of that fall has been in the form of reduced profits for the biggest music companies. Smaller music labels have actually been doing okay.
  • One of the big reasons why music isn’t such a lucrative business any more is that there’s so much competition. Consumers have access to more music than ever before. When everyone has access to lots of music, the worth of a particular album or track inevitably decreases.
  • Another reason for declining music revenues is the fact that people don’t need to buy whole albums anymore, which is what they wanted all along.
  • People have gotten too familiar with the idea of not paying much or anything for music. The amount of money consumers have been paying for music has been steadily falling, to the point where shelling out for a subscription to Spotify/Rdio/Tidal seems like too much for many people. I think we need to get better at recognising the value of music and be willing to stump up some cash for it.
  • Music labels aren’t paying enough to artists.
  • The differences between music streaming services’ royalty rates aren’t all that different.
  • Although the different royalty rates aren’t that different, you might want to think about supporting a service that doesn’t have a free subscription option. Spotify’s freemium model, where the company lets you listen for free (with ads) in the hopes that you pay for a premium subscription, means the average amount paid to content creators overall is really terrible. While Spotify’s model may attract lots of customers in the long-term, is it worth it if the company is paying terrible rates in the meantime?

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