The Business of Streaming Music

I had lunch with a friend recently and we got into the discussion of digital music and it’s impact on the industry overall.  We discussed Spotify and how their business model and that of other streaming services (i.e. Pandora, Last.FM or Slacker) was impacting sales.

If you’re not familiar w/ Spotify, it’s different from a model like iTunes because it allows you to play any song via stream. You can’t purchase, download or own the music, just listen. Over the last month or so, I’ve been more active on the Spotify bandwagon giving it a test drive to see how it works, advantages, etc.  I’ve found it great to have something as background while working (right now, I’m playing the recently released soundtrack for Pan Am), but unless I am a premium member, once I leave the office, my music stays behind.  There is a mobile app for iPhone or Android, but mobile streaming is restricted to premium membership.

On some level, streaming music sites aren’t too much different than listening to your local radio station. You just don’t have the DJ to contend with and it’s better control over music you are interested in hearing versus what pop culture counts as relevant.

What my friend noted as the biggest issue for Spotify specifically is that the music artist receives very little revenue for having their music available.  Sure, the labels receive their percentage, but the artist percentage is so small that they have to sell the proverbial millions in order to break even.

I hadn’t really thought about the financial impact this structure may have on the artists. I knew they were getting paid, but didn’t know how much (or how little) until I took a look at this infograph loosely breaking down sales and revenue. Looking at this graph, it makes complete sense why The Black Keys chose to not release their last album, El Camino, on a site like Spotify. You can even read more on some of the politics behind the decision in this blog on Gigwise.

I don’t expect this to be the situation for all music artists. I’m not a music industry analyst, but I would theorize that the better-known artists would receive a bigger piece of the pie and the more Indie/Do-It-Yourself artists get something much smaller. Regardless, the overall setup still left my mind blown.

The idea of having your music, your way, when you want it is genius and it’s smart business to create a model catering to this. I also recognize that there are a lot of pieces o this chessboard that all need their “cut.” I just want the artist who is the muse for the melody to get more of a fair share. Don’t you?

What’s your take on online music sites like Spotify, Last.FM, Pandora or Slacker? Leave a comment below or drop us a line on Twitter (@Seagate_Con).

Related Posts:
I’m Professionally Creative
Hey You! Get Off of My SoundCloud
The DIY Urge, and the power of technology in music

2012-01-20T11:46:27+00:00

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5 Comments

  1. PlugStorage January 20, 2012 at 3:33 pm - Reply

    Looking at that infograph, it makes me glad that I don’t consume media through Spotify. It seems like the way to have the best of both worlds would be to continue purchasing songs/albums from vendors like Amazon and iTunes, then host them on a plug storage like the GoFlex Net so you can listen to them on the go.

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  4. […] course, artist royalties.  Much of what was discussed around royalties was on par with a previous blog post but the subject always perks ears.  It was revealed during the panel that Spotify has over three […]

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