18. November 2011 // Label News, Music News // 2 comments

Streaming Services: some calm advice for labels

The role of music streaming services is currently the subject of fierce debate. Spotify, Deezer, Rdio, Simfy and MOG have been making headlines for some time – but recent developments have seen the tone of debate changing, with many rushing to condemn streaming services and their impact on artists’ careers and earning potential.

The decision of high profile artists such as Coldplay and Adele to withhold their albums from streaming services has led other artists and labels to question whether they shouldn’t be following a similar policy.

The concerns are not new: some have long been worried about the payouts they’re receiving from streaming services. However, the idea that streaming services could actually be damaging to artists’ careers was recently boosted by the recent release of some US-based research from NPD Group and NARM, which claimed that access to streaming music services leads people to reduce their spending on other forms of music. Following the release of this research, UK-based distributor ST Holdings announced a decision to withdraw its releases from all streaming services, quoting “poor revenues and the detrimental affect on sales.”

Is the tide now turning against streaming services? It’s hard to say. But we would like to offer some advice to artists and labels grappling with the important questions, such as:

These are valid questions which artists are right to be asking. In order to find satisfactory answers however, it’s vitally important to question everything you read and hear deeply. Many of the figures published in the media during the debate about streaming music income have been wildly inaccurate or misleading. Even some of the research, which on the surface appears to ‘fact’, has been distorted or spun to suit a particular agenda.

It seems rational that the availability of a new album on free streaming services could lead to a decrease in download sales. finetunes believes however that whilst a small amount of cannibalisation is likely, the risk is greatly outweighed by additional income generated.

Where is this additional income coming from? It’s coming from the fact that a great number of the people using free-to-access streaming services were never going to buy the album anyway, yet are now being monetised either through advertising or subscription. Without the streaming services, these users would by accessing your music via bit-torrent, or streaming on YouTube, and you as an artist would get nothing. Bring these people into legitimate streaming however, and you’re getting paid for plays which were previously lost to piracy.

finetunes has been an early supporter of the streaming model and we haven’t seen any sudden decline in download revenues which is being claimed by some other distributors. In fact, our experience has been overwhelmingly positive: download sales have for the most part continued to grow and streaming income has been additional to download income, not instead of.

Those who obsess about the pre-stream rate paid out by such services are asking the wrong question. Comparing a download royalty to a stream rate is pointless. One commentator on Digital Music News summarised it better than we can: “How can you compare a one time purchase to monetizing a lifetime of plays? It’s incredibly short-sighted. I’d rather have someone pay me every time they listened to my song FOREVER (even if its at a much lower rate), rather than pay me $1.29 for it one time.”

Streaming services also have a strong role to play in providing promotion for your music. They enable casual listeners to access, sample and share your music at any time, without the barriers posed by purchasing. And all of this casual use is monetised and tracked. With free users typically listening at low bit-rates, with advertising, this use will never provide a satisfactory replacement for the ‘real’ experience of paid download or full subscription. But it provides an excellent way for labels to spread interest in their music, and to ensure that any potential fan who decides to check out your artist can listen to their music.

Labels who feel that streaming should be ‘cut off’ also need to understand that they have limited control of what they can actually stop. They may choose not to supply Spotify, Deezer or Simfy, yet they cannot stop their music appearing for free streaming on user-uploaded sites such as YouTube or Grooveshark. These outlets cannot be turned off, yet they offer a lower quality experience with far worse monetisation. Cutting off the ‘legitimate’ outlets is to play into the hands of those which have minimal respect for the value of your music.

Whilst we’re generally supportive of the streaming services, we’re not here to dictate to labels how they should feel, or how they should react. We think there’s value however in viewing streaming services not as an alternative to downloads, but as a new format to be used in a different way. Even those labels who feel opposed to the streaming model could benefit from servicing these services. Techniques which we believe can work well include:

Releasing an ‘album sampler’ format on streaming services (example on Deezer). Making a limited number of tracks available on streaming services enables more casual users to sample, recommend and share, attracting interest in the product, whilst not undermining the ‘deluxe’ download product. This technique may even drive additional download sales.

 

 

 

 

 

 

 

Holding back new releases from streaming services for a set period of time. It’s understandable that you may not want your hottest new release available for free streaming. But once the first release window has passed, does this still make sense? We’d recommend that after a certain delay it clearly makes sense to harness the long-tail potential of these services by supplying your full albums to streaming services.

Creating artist and label playlists (example on Spotify). Every one loves a good mixtape. By mixing tracks from your artists with classics from similar genres, it’s possible to drive traffic and interest towards your artist, and hopefully win them new fans.

 

We believe that any move to starve or shut off streaming services is short sighted. Yes, there are unanswered questions and maybe even deeper problems with the model. However, these services are giving users something that they want, recognising that music use does not stand still, and that users previously lost to piracy can in future contribute to artists’ income. It’s not perfect, but we’d rather be with them than without them. We hope that artists can look beyond some of the hysterical debate currently taking place on the internet, and resist the urge to make any knee-jerk and emotional response. Ultimately artists and labels will benefit most from reaching their own, well-informed and carefully considered policies on streaming music.

Update: We’re not the only ones thinking like this. These two great articles on the subject are must-reads:

Spotify – what the labels are doing right (here.org.uk)

Streaming Services (yet again). (Kudos Distribution)

 

Further Reading:

200+ labels withdraw their music from Spotify: are its fortunes unravelling? (Wired)

Mercury nominee says ‘f*ck Spotify’; UK industry voices opinion. (Music Week)

Study: Spotify Is Detrimental to Music Purchasing… (Digital Music News)

It’s Time For Transparency On Music Streaming Rates. (paidContent)

US survey finds streaming services are making a dent in piracy. (The American Assembly / Columbia University)

 

  • Twitter
  • Facebook
  • del.icio.us
  • Digg
  • Posterous
  • StumbleUpon
  • Tumblr
  • Google Bookmarks
  • Orkut
  • LinkedIn
  • Technorati
  • email
  • Netvibes
  • Add to favorites
  • RSS

2 Comments

  1. and with deezer being available from day one of the release on french streaming-service deezer plus rumours apple even paid coldplay for not supporting spotify everything gets even more ridicoulous, isnt it?

  2. Pingback: Hamburger Musik Forum Panel: Streaming – How do Indie-Labels profit? | finetunes

Leave a Reply

Top