Are streaming services sucking money out of the industry?

I’m just a single person. A music listener and lover, for quite some time. What I was curious about is whether my actual spending on music had changed with the new online options offered these days, most notably since I started using the streaming service Spotify. Artists are complaining, and streaming companies trying to defend their position. So as a user of streaming services, can I still honestly say that I’m a music lover who supports the artists that make it? Luckily I have most of the data that I need to investigate it for myself.

What I used to spend and the revenue.

I own about 150 CD’s. It is not a lot, but looking around it seems above average (also compared to my parents collection of vinyl records from the past). I bought most of them between 2002 and 2012. So let’s assume that I bought 15 CD’s per year. I have no recollection of how much I spent on CD’s, but I believe the €9,99 of iTunes download per album is a reasonable estimation (although in the early days I do recall having bought CD’s at a price of a staggering 42 Dutch Guilders, which would be about €19 per album these days, I also’ve bought plenty of CD’s in discounts for less than €9,99). So in those days I spent about € 149,85 on music per year. The revenue the record labels got from this is a bit unclear. Digital music is probably more efficient, but let’s assume record labels and consequently partially the artists got about the 70% that iTunes is offering. Hence they used earn € 104,90/y.

What I am spending these days

It has become a little more complicated to make similar calculations. Although most of what i spent on music is spent on Spotify, I still occasionally buy an album separately.

Streaming music services

Like many other music-fans I have a Spotify account. It costs €9,99/month. And hence I spent €119,88 on spotify alone in a year. Spotify claims that roughly 70% of its revenue is distributed to the rights holders. Which means the revenue for artists is €83,92.

Other spendings.

The albums I buy are sometimes bought via eMusic, where I share an account, sometimes through iTunes (like the latest Björk album) or Bandcamp and occasionally after a sublime concert (I will leave concert visits outside the equation here). I guess my spending last year was relatively low, around €20. Let’s assume the 70% revenue split again, and artist/label revenue is €14.

Lowered contribution

My total contribution to the music industry has effectively been €98. €7 less then I used to invest. In defence I could say that I assume the physical market to be much less efficient (transport, middle men to support) than digital distribution (handling bits is relatively cheap, although those who are employed by these companies tend to earn more than what a sales clerk tends to make at a record store, but that’s a totally different story). On the other hand: I’ve ignored inflation and ignored the fact that my income has been on the rise.

What it means for individual artists

Artists are complaining that their earnings have significantly lowered with Spotify. My spendings are lower these days, which I could easily fix for myself, but why are big artists still complaining? 7.7% is not that much less (I know, I’m extrapolating n=1 here ;) ). And I would even think that the no fuzz streaming services are able to convince more average spending people to easily spend about €120/Y on music. For many that would probably be an increase in their spending on music.

It may be the long tail

Most of my music listening habits are available on LastFM (these days it is nearly 100% of what I’m listening to, but it has been considerably less when I was still playing mostly CD’s on a never-online CD-player). Last year I’ve played 12044 tracks, so in total the rights holders got about €0,007 per play (that is in line with what Spotify claims it is paying, between $0.006 and $0.0084). Although I’m a Spotify user, the revenue split of Apple Music and alike is (probably) around the same (it is suggested that Apple’s revenue split is a little higher (73%)).

Now let’s have a look at one of my albums that I played a lot. The Amnesiac album by Radiohead. I played it 214 times. Let’s compensate for the times I played it on a CD player (20%). That would have made Radiohead and everything in between the streaming service €2,04. That’s a mere 29% of what they were making if I would have bought the album (via iTunes). That is a serious decline.

What has happened is that I’m now supporting other artists too, artists that I wouldn’t have been paying for before, since I didn’t believe in them upfront as much that I thought it was worth buying an album from. There was a serious barrier before you decided to actually buy an album. I can now read a review and try playing it completely for just a couple of times. Some only then stick. And some simply don’t. And yes, also these artist got payed for my few plays.

And what about the other consumers?

I’ve looked at my own spending habits. In general consumer spending on music has declined over the years. Especially when compared to the peak year 1999 (note the author of this article, Michael Degusta blogged more number crunching articles on the music industry). Do note that there appears to be a slight up in later graphs, surprisingly(?) because of streaming music.

Conclusion

I value music. I value Radiohead and, although to a lesser extend, Tom York’s solo projects. But streaming services have changed the way consumers share their spending of money among the artists. The new reality may be hard for artists that had the luxury of loyal fans buying each and every compact disc, but I would say that the current per play model is more fair (although one could argue that a classical music album is much harder to create than a singer songwriter one, this has never really been reflected in the price of a single unit). I guess it would be even more fair if an artists would only be paid for consecutive plays, but I guess that might be impossible to negotiate especially since there seems to be somewhat of a negative attitude towards trials in the music industry.

I will correct my spending behaviour (increase of with more than 8%), as I hope you will do too . Music is an important part of our culture and it is important that people who are building our culture get paid for it (which holds of course for all artist, music and non-music).

Image by Spencer Hickman, CC BY 2.0