Angry Music! Photo by: Arti Sandhu

Stream Wars have flared up again and the world of digital music is in turmoil. The recent round of streaming-bashing originated in a study by NPD group and NARM. Words were harsh “Spotify is detrimental to music purchasing”, the study says. In the words of the researchers, the new digital music climate makes it easier for consumers to avoid taking “high value action”. In words used by normal people, “high value action” means “buying”. Only last week, Coldplay chose not to have their latest release available on streaming services as they understand that they simply make more money selling downloads.

One player who found this out the hard way is the distributor STHoldings, who announced yesterday that they have decided to remove their 238 labels strong catalogue from the streaming services.

The numbers that STHoldings published showed  that for the first time ever, digital revenue for the distributor is down. Results from the third quarter 2011 reveals that all-in-all, digital revenue has dropped 14 percent, iTunes revenue has dropped 24 percent, and streaming services accounted for 82 percent of the music consumed, but only 2,6 percent of the revenue. In the press release from STHoldings, you can find this juicy quote:

“Add to that, the feeling that their music loses its specialness by its exploitation as a low value/free commodity. Quoting one of our labels “Let’s keep the music special, fuck Spotify”

Some aggrieved artist (not necessarily associated with STHoldings) even went ahead and created this angry page.

It eludes me how anyone can be surprised that subscription services eats away at revenue from downloads. If I stream, I don’t buy. The question has rather been one of “can revenue from streaming services make up for the revenue lost from downloads”. And right now, it seems that the answer is no.

One of the problems is of course that the streaming services are reluctant refusing to share their payment rates with the world. Paidcontent calls out for “Transparency On Music Streaming Rates” and concludes:

“…what do the industry’s power brokers have to hide? If the rates really are fair and have merit, it would serve everyone better to get them out in the open now”.

Indeed. And the recent deal negotiated between Spotify and Swedish performance right association Stim is secret even to the Stim-members. It seems a lot of people sign a lot of NDA’s.

A side note: Anyone who understands how a standard record contract is designed quickly realises that when money is portioned out between several middle men in the music industry value chain, and the record labels owns parts of this value chain, the artist is in a sense being screwed more than usually. You have to pay the retailer (or subscription service), you have to pay the distributor, you have to pay the tech-aggregator in the middle, and so on. But what if the label partly owns the retailer, owns the distributor, who in turns owns the tech-aggregator? Suffice it to say, share holders are probably doing OK.

All the fuzz about the takedowns really boil down to this: can I as an artist / label make more money of my music if I take it off the streaming services? Many have determined that the answer to that question is yes. And so they opt out. There’s really nothing controversial about this. One could claim that labels and artists should take a moral interest in the future of their industry and support new tech initiatives. But the life cycle of an artist (or even a label) is simply not long enough for them to afford taking a beating for the good cause.

But in the end, it leads directly to the recurring streaming services argument that it’s either dimes from us or nothing from piracy. But the artist and labels cannot possibly know what a takedown would mean in terms of increased piracy, now that customers are accustomed to renting their music, rather than buying it.

This is the rationale for the artist:

At point A there was downloading – I made 100 bucks.
At point B there was streaming – I made only 10 bucks.

Conclusion: I will revert to point A and hope that I will make 100 bucks again.

The predominant word here being “hope”. But with current data at hand, the hope seems worth exploring.

Show me the money! - Photo by: Dave Barger

Far too long since last update. Here’s a quick one just to get back in the game.

Since last I wrote, Coldplay have stirred up some emotions as they refused to license their latest release Mylo Xyloto to streaming music services such as Spotify and rdio. The reason, of course, is the fear that licensing to these services would cannibalise on a la carte downloads, which are substantially more economically viable.

When the results started pouring in a week later, Coldplay had broken the previous digital album sales record. Of the over 200 000 units sold in the UK alone. Over 80 000 of these (or 40%) were digital downloads.

What to make of this? Well, it wouldn’t surprise me if Mylo Xyloto pops up in the streaming services catalogues soon, and if it does, this would make the Coldplay-strategy very similar to how the movie business operates, with releases to the theatres first. In time the movie becomes available on DVD (or Netflix) as the novelty wears off.

This makes perfect sense for any act that has reached such a vast popularity as Coldplay. The value (in dollars and cents) of “reaching out with the music to consumers” via the streaming services’ excellent music discovery and sharing features, is arguably very low for a band with an already established following. Coldplay have put in their time, done their “reaching out” and now they find themselves in a position where they want to reap the benefits of their labours.

It’s a simple case of conflicting goals. Both Coldplay and the streaming services want to maximise output. It is commonly understood that the revenue coming in from the streaming services to individual acts is minuscule, even if the payouts to the industry as a whole is rather impressive. But until such time that the goals of the big acts and the streaming services converge, I expect we will see more of this.

If this becomes a common strategy, the value of the streaming services will be diminished. The streaming services will be your local video rental shop on the corner, and iTunes will continue to reign supreme as the “movie theatre” where you’ll always find the good stuff first (and on illegal services of course). I think we can expect hard negotiations from the streaming services to prevent such a development.

Speaking of piracy, Mylo Xyloto is currently number five on TPB’s top downloads list. Would the album have been at the top, had Coldplay licensed the album to streaming services? And what difference would that have made for Coldplay’s bottom line?

Photo by: Tom Magliery

Major Label Licensing Will Kill Your Startup

The free spoken Michael Robertson did not mince his words when he appeared at the SF MusicTech Summit this week. Robertson, who founded MP3tunes, made his feelings about music startups and the major labels clear. He basically told the assembled crowd to avoid major label licensing or die a painful death.
 ”The odds of making money with a major record label are pretty close to zero,” Robertson said.

More over at digital music news here.

Music Fans Still Prefer Ownership, study says

A study recently published by eMusic show that a whopping 92 percent of music fans prefer owning their music. In context, this bears significance to the ongoing battle between a la carte downloads and streaming. The reasons cited by the interviewees for preferring ownership were among others “unlimited playback” and “security of collections”.

Read more about the study here.

What an Artist Really Gets Paid

Ever wondered what the financial break down looks like across services? Uniform Motion revealed their stats on their blog, a move that caught the attention of the digital music press. Read the band’s own post here
and checkout what digital music news made of the numbers here

The numbers are unsurprising, but it certainly provides a great overview and Uniform Motion does a great service to other bands by publishing not only the revenue they can expect from various services, platforms and distribution channels, they are also good enough to disclose the total costs involved, which allows for a rather straight forward profit calculation.

Photo by: Sam Howzit

Google Magnifier to boost music discovery

This week Google not only acquired Motorola Mobility, they also launched a new music blog service named “Magnifier”. The service, which is described as “Google Music’s cousin”, makes music recommendations to users and offers daily free downloads. The downloads will be made available in the users cloud library . and that part of the experience is said to be seamless. There is also a dash of editorial content available, as the Google Music team selects one up and coming artist per week to shine a spotlight on. Even though the idea of “staff picks” is not very web 2.0 it’s a nice flirt with the “curation” trend.

Trouble is that other blogs and websites out there do this better, and the logic of hype tells me that Google will have a hard time selling this to the music savvy hipsterati out there. To be honest, Magnifier feels as much as a music discovery experience as walking into a gas station and see a CD of “Best of the 80’s” at the counter, compared to shared playlists and crowd sourced solutions. So, why does Google bother, well perhaps techcrunch nailed it in their header “Google Launches A Music Blog To Remind People That Google Music Beta Still Exists”

Here’s a second opinion from TheNextWeb

YouTube upgrades Music Page

YouTube, who reign supreme as the top music service on the Internet (without even being a music service per se, mind you) recently added a few features to make the music experience on YouTube even better. You’ll now find recommended videos and artists based on your viewing history, local concert listings and publications such as Spin and Vice will offer playlists and recommends music in a very trendy effort to “curate”. Read more over at Mashable here

The times they are a changing

This wonderful animated gif have been floating around the digital music web lately. It does a fine job of reminding us that things change, wether we like it or not. The status quo is not carved in stone. Change is possible.