Of Course a Stream is a Lost Track Sale…

The long drawn out crisis in the recorded music industry continues, and one of the much debated questions is whether people are subscribing to streaming services instead of buying downloads and CDs. If they are, the worry is that the amount of revenue and the way it is shared might damage the recorded music industry even more than either piracy, or unbundling, or the shift to downloads did.

To be clear, there is no crisis in the supply of music; the commercially available catalogue is somewhere around 35 million tracks and growing fast still. There is so much more music on sale than any market is really demanding that it has become pointless counting the tracks. Most music goes unheard and unbought these days, except by the creator and a few close friends and family. No, what is feared to be under threat is the big machine that hires studios, professional arrangers and musicians, songwriters, producers, makes glossy videos, and generally delivers a high quality mass pop product, or indeed an excellent example of a genre or niche.

So the complaint from artists, and to an extent from record labels, is that the way the money flows means that they won’t be able in the future to make the sorts of records that they would want to release; and that for many who could survive on modest record sales, streaming payouts make recorded music an unaffordable part of their career. For recording artists, then, rather than for live performers, the game might be up.

And it has become a bit of a commonplace among the music industry’s critics and commentators that these old timers are just wrong! Wrong to compare streaming with album or single sales, and wrong about the rates they think they should be getting.

Responses range from ‘sell something else then’, advised by music industry consultant Mark Mulligan:

If streaming is eating into sales then the obvious next step is to drive other spending from streaming music consumers.


And David Byrne, who surely knows a thing or two about making a living as a musician offered this thought in an opinion piece for the Guardian:

In future, if artists have to rely almost exclusively on the income from these services, they’ll be out of work within a year.


So are these ‘old guys yelling at fast trains’ as Moby described Yorke? Rather than doing the customary forehead slap and writing off the plaintiffs as Luddites who need to be put out to pasture, consider the following. On demand streaming is a way to hear what you want when you want. That is a big win for the consumer, because previously the only way to do that was to buy the record. It bears repeating, because the ‘streaming is not downloading’ camp suffer a logical discontinuity; streaming on demand from a subscription service is a direct substitute for playing on demand from music you own. The second half of the argument, ‘because the listener would not otherwise have bought the music’ is clearly nonsense.

In default of any other way to hear a track on demand, an on demand stream substitutes for a track sale. Some consumers would have bought, some would not, and as music is surely fairly elastic, whether that music would have been bought depends mostly on price and convenience. Here I think the moaning musicians have an excellent point. Some numbers will make this very clear.

The substitute for an on demand stream might not be a track sale at $0.99, or even $0.49. Perhaps it might start to be 1 for 1 at $0.09, or even $0.009, but that is still much more than a normal per stream rate, reported variously between about $0.003 and $0.007 to the label, and a fraction of that to the artist depending on their contract.

Here is food for thought. If you never played any track twice, and if clicking the play button completed a transaction, at $0.009 you could get about 30 tracks per day for a month for a retail value of about $8.20. At the same play rate per day, any subsequent replays would simply reduce the monthly bill, and the effective ‘price per play’ equivalent by 1/plays.

Three months into a $9.99 monthly music spree at those rates, and assuming no replays, each punter would have a collection of 2,700 music tracks – more than academic studies have found on college music fans’ laptops. So, check your own music library, and look at the playcounts of the most listened to tracks. What used to be worth $9.99, or even $17.99 is now available, along with the other 35 million tracks, for $9.99 per month. But you have lost the connection you had with the artist that allowed you to put a few dollars in their specific pockets for the pleasure of hearing their music, and the business now dictates that the rest of your relatively mindless consumption reduces the earnings of the artists you care about.

We need much better models, which take into account long term changes in welfare for everyone involved in the creation, recording, and distribution of music, so that we can think more clearly about the consequences of what we do as music lovers, and within the industry. Perhaps our conclusion might still end up being that as a commercial art form the sound recording has had its day; perhaps though we will find a way to nourish and reward a greater variety and number of its practitioners in a way that makes them feel valued, rather than discarded.

This entry was posted in markets, strategy. Bookmark the permalink.