Deep Dive: Streaming Platforms 101

Tidal may have stirred up significant controversy last year, but critics of streaming platforms have been vocalizing their dissent since Spotify first launched just under a decade ago. The discourse surrounding streaming platforms is essentially identical to the Napster debacle of the nineties, albeit with a fresh cast of vexed musicians, an upgrade in technology and a blurrier definition of fair compensation. What the issue boils down to is this: music producers and consumers are still grappling over what the exact value of music should be in a perpetually advancing digital age. And while streaming services attempted to solve this issue, it succeeded more at complicating things further and creating a new element of the debate. In order to illuminate a highly divisive issue, our latest Deep Dive will discuss the history of streaming platforms, evidence for and against them and their utility within music consumption.

Streaming platforms exist because of illegal file-sharing

There’s really no way to discuss the impetus for streaming platforms without mentioning illegal file-sharing. Regardless of your stance on the issue, it’s an observable fact that file-sharing has dealt – and continues to deal – a significant blow to global music sales. The reason for this is pretty simple: file-sharing is a quick, simple way to gain permanent access to the vast majority of available music for only the price of delivery, being the cost of a computer with internet access. Of course, an ever-growing population of music listeners unwilling and/or unable to pay for music doesn’t change the fact that artists deserve compensation for their craft. It’s important to note, though, that instances of illegal file-sharing are due more to finances rather than apathy towards compensating artists. As consumers grow older and increase their income, prevalence of file-sharing decreases.

These are the problems streaming platforms like Spotify attempted to solve, by offering free, ad-supported access to a wide catalog of music and features while also compensating artists based upon the amount of times their music was streamed. Here’s a quick look at Spotify’s interface:

https://www.youtube.com/watch?v=8bPimpGTzXg

Subscription options also exist, with a premium $9.99 per-month fee covering ad-free streaming and the ability to download tracks to listen to offline on mobile through the Spotify app. In theory, this approach should have struck a compromise between music listeners and artists; the former isn’t required to pay for a legitimate form of music access and the latter receives compensation for their work. But of course, it hasn’t been that simple.

Artists and the music industry decry royalties from streaming platforms

Considering that Spotify’s pay-out rate comes out to a fraction of a cent per stream once all royalty avenues are covered, it’s no wonder that artists aren’t overly enthused with the platform. And seeing as this system has caused multi-million stream artists to receive checks in the thousand dollar range, one can only imagine what the majority of lesser-known bands receive in the mail. But what’s often overlooked is the reason – which is not necessarily an excuse for – why Spotify’s royalty system operates the way it currently does. First, it’s important to note that Spotify had to pay the four major American record labels $300 million for copyright permissions when they were preparing to launch in the states, a large sum that caused the service to struggle with profitability after first launching. More importantly, though, is Spotify’s interaction with the U.S. Copyright Act, which forces Spotify to pay royalties for the both the piece of music being streamed and the voluntary “performance” via the stream itself. So before revenue from a stream reaches the artist, it has to go through Spotify, the Copyright Act and their record label/contract first, all of which causes the paltry pay out rate mentioned above. Here’s a chart comparing what Spotify estimated they’d pay artists at various popularity levels versus what actually appeared on the royalty checks:

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Via Consequence of Sound

Additionally, Spotify has been sued for distributing copyrighted music without first obtaining proper licensing and/or paying out proper royalties. The service is currently facing a $150 million class action law suit from Camper Van Beethoven front man David Lowery, while also attempting to settle a separate law suit filed by the National Music Publishers Association. Yet, as complex as Spotify’s royalty system is, its benefits to the music industry seem to be slightly more positive.

Modern music consumption levels out Spotify’s royalty issues

While the above paragraph may have seemed damning for Spotify, it doesn’t take into account the outside effects it’s had on the way people listen to music. A working paper commissioned by the National Bureau of Economic Research examined the relationship between Spotify, illegal file-sharing and digital music sales in order to discover the impact of the streaming platform on the music industry. The paper reported that Spotify is revenue neutral due to its displacement of both  digital music sales and illegal file-sharing.  So on the one hand, the idea of streaming platforms has attracted music listeners away from purchasing digital music, cutting into artists and industry income. But on the other hand, streaming platforms have also attracted music listeners that either predominately or exclusively downloaded music illegally, causing an uptick in revenue from streaming royalties. This is consistent with prior research on illegal file-sharing trends; people largely prefer legal forms of music consumption, but as was mentioned previously, affordability is their main obstacle. Additionally, it’s been documented in other studies that both illegal file-sharing and streaming platforms encourage supplementary compensation for artists. This phenomenon is best shown through a non-music example: Game of Thrones. This excellent PBS Idea Channel episode provides a great explanation, but there’ll also be a summary written below:

Here’s the gist: A lot of people wanted to watch Game of Thrones when it first came out, but since they didn’t have access to HBO, they decided to watch and/or download the show illegally instead. This created an enormous and dedicated fan base that spent huge sums of money on GoT DVDs and merchandise, which wouldn’t have happened if they hadn’t been able to access the show in the first place. The same logic applies to music, and highlights the strongest utility of streaming platforms.

There is now a stark and important difference between ownership and access

Before the internet, ownership of and access to music were synonymous. Radio, MTV and borrowing LPs/tapes/CDs from a friend were the only means of hearing music without buying a copy of an album for yourself. Illegal file-sharing and streaming platforms removed this barrier; anyone with an internet connected computer may access freely and – in terms of the latter option – legally without having to purchase anything. This is beneficial due to the extension of authorship afforded by music access, as every music listener is allowed editorial power previously owned solely by professional music critics. To bring it closer to home, Heavy Blog wouldn’t exist without the this type of access to music. We primarily receive official promotional copies of albums for review, but we sometimes use official artists streams on Bandcamp or Soundcloud and occasionally access albums via Spotify. More frequently are our recurring “Hey Listen To” featurettes; literally none of these would be possible if it wasn’t for democratized access to music. When Nick wrote his commentary piece about the metal establishment predictable 2015 albums of the year (here), he was indirectly discussing what’s being dissected here.

In his essay The Work of Art in the Age of Mechanical Reproduction, critical cultural theorist Walter Benjamin comments that within the historical environment of limited music access, the “masses are criticized for seeking distraction in the work of art [while] the art lover supposedly approaches it with concentration.” Music listeners have obviously had their opinions as long as the art form’s existed, but before the current level of access to music existed, publications like Rolling Stone monopolized the music opinion business. With the advent of the internet, everyone has the ability to access music new and old and publish their thoughts online for public viewing and response. Sputnikmusic may not provide the readership of Rolling Stone or Pitchfork, but the fact that authorship is at all possible is an enormous benefit of illegal file-sharing and streaming platforms. Unfortunately, this may not remain an aspect of the latter for much longer.

Tidal is detrimental to music access

Jay-Z and a huge panel of A-List musician launched Tidal in March of last year, with the intent of accomplishing what Spotify has not: striking a compromise between music producers and consumers by paying artists higher royalties and providing listeners with a better streaming service. The flowery, masturbatory press conference included a keynote adress from Alicia Keys, during which she launched an interesting rhetorical ploy. In insinuating that the financial and emotional value of music are synonymous, Keys asserted that you can’t claim to appreciate music while also partaking in illegal file-sharing or ad-based streaming platforms like Spotify. Here’s Key’s speech if you want to suffer through it:

Not only is this claim false (as explained numerous times above), but it turns out that – to the surprise of no one – Tidal hasn’t delivered on its promises. For starters, Tidal is offering an almost identical service to main competitors Spotify and Apple Music, albeit with two paid subscription options and no ad-supported option like Spotify offers. But while you’d have to pay for a premium Spotify subscription to receive the same perks as a premium Tidal subscription, you’d still be saving $10. That’s right: in order for Tidal to follow through on “valuing music,” they’re charging $19.99 for their “Hi-Fi” subscription. Granted, the only difference between this Hi-Fi plan and their standard plan – which costs $9.99, just like Spotify and Apple Music – is the inclusion of lossless audio quality, but it’s worth noting that higher quality audio was one of Tidal’s main selling points for why their service is superior.

More importantly, if Tidal truly wants to deliver on its promise to compensate artists more, then it has to have more people paying $19.99 for a Hi-Fi subscription. Unless Tidal someone operates outside of U.S. law, it’s subject to same parameters of the Copyright Act as Spotify, meaning that higher royalty checks are only possible with – surprise surprise – a higher initial revenue point from subscriptions. And with this being the case, Tidal puts the onus on the listener; while boasting pro-artist rhetoric, Tidal is leaving it up to subscribers to foot the bill of compensating artists by paying the $19.99 monthly fee so that higher pay out rates are possible.

Jay-Z can tweet as many #tidalfacts as he wants, but the fact remains that no available evidence significantly distinguishes Tidal from any other streaming platform, except for one important implication that’s being to spread.

Unfortunately the Tidal model is proliferating

In the description of Tidal’s services, you may have noticed the fact that the only options available are paid subscriptions, which is key to note for more than just financial arguments. Eliminating a free, ad-supported option simultaneously curtails access to music and – by extension – also limits extension of authorship. Additionally, as we argued in our editorial on Protest the Hero‘s Pacific Myth streaming service, exclusivity doesn’t exist on the internet. Putting music behind a paid subscription won’t stop a paying subscriber or a someone on a free-trial from lifting and distributing across various channels of the web.

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But despite Tidal’s model being detrimental and ineffective, it seems to be proliferating. Spotify is currently considering some of their music and content subscriber-only, a response to mounting industry and artist pressure. iTunes Radio will be going the same route, as the service – which launched in 2013 and has been free until now – will become a part of Apple Music’s subscription-only platform. If this trend continues, ad-supported streaming might cease to exist, and it’s unclear what effect that would have. Listeners could move to subscription options and increase streaming platform revenues and artist royalties, or they could leave for or return to illegal file-sharing and take potential ad-dollars with them. Whatever happens, it’s clear that streaming is a prevalent and important tool within modern digital music consumption. But the question remains: is an artist-listener compromise possible, and how do we go about making it a reality?

-SM

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