There’s billions of dollars to be made in the music streaming market. Apple, Google, and Amazon’s recent moves into digital music will provide a major “revenue boost” to major labels. And do you know what a crowded marketplace of streaming services means to the record labels?
It means competition and that competition is good for the record companies, who charge the streaming outlets substantial licensing fees to use their songs. So in other words, these tech giants are cash rich and they are willing to offer labels high royalties in exchange for exclusive content. Add to that mix the rivalry between the tech companies and what you have is billions of dollars that are paid to the content owners. Now since the record labels are the content owners of a large amount of songs, how much of those monies are filtering down to the actual artists. Because in the end for the record label to license out their catalog it does not require any additional spending. In addition, the record labels use this “content ownership” bargaining chip to also take a part stake in the ownership of the streaming service.
Why do you think that the record labels are really pushing for Spotify to go public?
Yep, it means more dollars for them as part owners. Hell, even Jared Leto, who has battled music label “greed” with Thirty Seconds to Mars, invests in Spotify. As an actor he gets paid for his work however as a musician he has seen the labels take all the money and not share it with them. Seen the film called “Artifact”. After Thirty Seconds To Mars sold millions of albums, EMI/Virgin sued the band for $30 million because according to the label the band was still millions in debt.
That is what happens when the secret deal involves the label giving some money as an advance and then claiming back 80% of the monies earned, and using the other 20% that is for the band to pay back the original advance plus other costs the band might have occurred.
Meanwhile, you have Apple who thinks that spending $10 per month on a premium music subscription is too much for the average listener. The average music consumer spends only around $60 per year on CDs, vinyl, downloads, and streaming services. That’s why Apple is talking with record labels to revamp its Beats Music service with a lower price.
Let’s look at how the recording industry handles conversations of prices.
According to the record labels, there is none — people either like a song and will pay any price for it, or they don’t and they won’t. So when Apple approached record labels at the start of the 2000’s, the labels were resistant to unbundle the album and sell individual song downloads through the iTunes Store, even though the recording industry was spiraling downward, Apple still had to work hard to convince the labels that digital downloads would be a benefit to them.
It is worth nothing that the price of streaming services is not set by the technological companies. The record labels actually set the minimum price these services are able to charge through their licensing agreements.
What about Thom Yorke?
Is he a leader in business model innovations or an out of touch rock star?
We all know back in 2007 that Radiohead shocked the recording business by releasing an album online with a pay-what-you-want pricing model. Not long after, the website Bandcamp allowed lesser-known artists to put their music into the vast expanse of the Internet, even if it didn’t make much or any money.
I think that is pretty innovative.
And a few weeks ago Yorke found a new way to push the boundaries. He put his latest solo album up on BitTorrent for $6.
Is this a new way for people to get the music they want without interacting with all the bullshit of streaming services, mp3 downloads or physical stores?
Is this another brilliant way for bands to have a direct to fan interaction?
Or is it a step backwards to limit access to an artists work because the enemy is obscurity. As we all know, everything is available, so why is Yorke putting up a pay wall, especially when the younger generation are all about racking up YouTube plays, which pay quite handsomely when they’re in the triple digit millions.
It is the consumer who controls the business models today. And the model is not about who buys it anymore. It’s about who is playing it and who is listening to it. And today there are many more avenues to getting paid than there have ever been before. Create something great and you will be paid forever, as people listen down the ages.
And this is the takeaway. People are compelled to make music and to share their music with people. No one is going to stop doing that just because there is some corruption out in the recording industry.