Tom Inniss Journalist and podcaster

Music subscription services: The killer of traditional music sales?

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I have written extensively and with significant frustration about the state of the music industry before, including how record labels are no longer serving best interests of musicians, and how traditional brick and mortar stores are dying.

The latest development in the sphere is the growth of music streaming services. Spotify has been around since 2006, and this month Google threw their cards on the table with All Access. The news comes at a time where there is still significant stagnation with music sales. Recently, Apple declared a decline in track sales, but this is relatively insignificant given the huge market share they hold. However, it is irrefutable that there’s a shift in the way we consume music and, more importantly, how we will think about accessing music in the future. The record labels once pinned their hopes on DRM to protect their profit margins, enforced through the goliath retailer iTunes; now they appear willing to invest in streaming to stop the rampancy of the pirates.

So what is music streaming?

A fantastic question and, surprisingly, one that is slightly more complex then just saying “music you get from the Internet”. If this was the case, the current largest retailer of music (iTunes) would be classed as a streaming service, and to this extent my article would be redundant. For the purpose of this argument, I will define music streaming as ‘an online service which works in cooperation with record labels to provide subscribers with access to music tracks, either for a fee or ad supported, where revenue can be seen to be generated for artists’. Of course, this is just my definition and, while perhaps not of industry standard, does set out clearly what it is.

We should quickly look over the basic premise of streaming. Each of the services, while all Internet-based, have different modes of access, making an accurate description a little convoluted. To attempt a summary: you direct your browser to your service of choice and either download a desktop client or create an account (paying any subscription fees in the process), and then simply start listening to music over the Internet.

Spotify is perhaps the first service many will think of when quizzed on streaming, and with good reason. Arguably the first ‘pioneer’ of this model of distribution, Spotify demonstrated that there would be significant interest in people legally listening to music if access is made easy enough and if priced correctly. The company goes for the ‘freemium’ approach, whereby the core desktop services are available for free, and to get the additional benefits of mobile use, higher bit rate and the removal of adverts, you pay a monthly subscription fee. The company is yet to make a profit, reporting losses in the millions year on year.

Google Play Music All Access, despite having a stupid name, is an incredibly alluring service. It is built on the already successful Google Music service, which allowed you to upload 20,000 of your own tracks and access them in a browser or on your android phone to stream at any time.

So in a sense, Google allowed you to create your own streaming service completely for free. However, for those who want on-demand access to all new tracks or who perhaps lack the upload speeds capable to dump a music collection in the cloud, they have just announced the new All Access service.

Unlike the core service, this is a subscription fee-based service, costing $9.99 a month, and it’s currently only available in the US. It ties in seamlessly with your existing music app on Android, and you can create ‘radio stations’ based on your own tracks. All Access will analyse your listening habits and then automatically recommend tracks and add them to your playlists from its vast music catalogue. The whole thing is effortless. This may sound like a big endorsement for a product I haven’t even used, but the premise is exciting, and it could very well tempt many away from the likes of Spotify or purchasing their own music.

The last model we will look at, although there are several more, is Pandora. Currently the web’s top radio service (but only available in the USA, Australia and New Zealand), the service has been haemorrhaging money, with losses increasing by $8.4m to $28.6m this year despite a 55% increase in sales during the same period. It is very much a mixed bag at the moment as to how successful you rate Pandora. This confusion is unaided by the fact that it has, for the last two months, been operating without a CEO. Pandora blame a lot of the problems as stemming from the rate at which webcasters currently have to pay for track plays, which is being faced by stiff opposition from representatives of musicians. It can be said that Pandora has basically started a war against their suppliers- never a good thing to do in such an industry such as music, where companies have demonstrated an eagerness to cut their nose off to spite their face.

Benefits and limitations

Like all things in life, there are positives and negatives surrounding music streaming, which vary depending on who you are (musician, record label, consumer etc. This article will mainly focus on the view of the consumer and will take the music streaming industry as a whole as opposed to individual services.

Positives

I think the most obvious benefit to being a member of one of these music streaming services would be the immediate access to millions of songs on demand. If you’re having a party, no longer do you need to be burning CDs or dealing with music on tiny MP3 players. You simply hook your computer up to a sound system, log into your service of choice, and start playing. People can share playlists, helping to craft the perfect party soundtrack, or you can head over to the radio section and let the service make playlists based on what it thinks is appropriate. Easy music management. Having that on tap, for free, is an amazing advancement of technology, in my opinion.

Access to this huge library has another benefit. It means you are inclined to listen to a broader range of music as it isn’t costing you anything to try. I have discovered so much music, both through friend recommendations and Spotify’s own recommendations, it’s unreal. These are all bands I would never have thought to listen to before, let alone get excited about seeing at a festival. This is good for both the musicians and consumers as it generates a lot more exposure, which means potentially more life long fans. Consumers are able to delve into this music without the risk of spending a fortune on CDs or MP3s. It is risk-free exploration. This argument is widely used by pirates who want to try before they buy, but now musicians can earn some money while you enjoy free music.

This expands even further. In theory, providing musicians actually permit their songs to go on these services, you are able to listen to all your band’s favourite tracks without ever having to pay for them. For a couple of adverts an hour, you get unbridled access to every song completely free of charge. You could possibly never have to pay for another album again, although this is pretty morally abhorrent as you should always try to support musicians you love.

The final main benefit I see from the streaming music services is the convenience of convergence. Providing you are connected to the Internet, you can essentially have all the music you could ever want accessible on any device you own. Of course, the decision is whether or not you pay for premium services, but hypothetically every track you could ever want is there on demand: on your phone, laptop, tablet, or in some cases Hi-Fi systems or even cars! That is phenomenal. It could potentially render CDs, MP3 Players or even SD cards for storing music on your phone completely redundant. It is indicative of a very streamlined future.

Negatives

One problem of Internet music streaming services is the need to be connected to the Internet for it to work. If you aren’t connected to the Internet, then there will be no music for you (from a free member perspective). Also, access to the Internet, while we take it for granted, does actually cost money! While many young people don’t have to pay their Internet bills, it can be surprisingly expensive to have broadband in a home, and many people simply cannot afford it. There is also the issue that the broadband may not be fast enough to support streaming. Indeed, services like Spotify are pretty much unusable at my house due to our atrocious Internet speeds. The Internet cost argument doesn’t end there, though. If you do wish to use these services on-the-go with a mobile, you need to be consciously aware of your own data limits and acknowledge that going over these has the potential to cost a small fortune. There is no end of horror stories online about people going over their limits and being charged hundreds of pounds

Of course, some services offer caching so you can store some songs offline, which circumvents the mobile data requirement, but this is often a premium feature. This means you have to pay to be able to listen to songs when you aren’t connected to the Internet. So, in that respect, there is little benefit over buying music and putting it on your phone.

Streaming services traditionally don’t allow users to claim ownership over music, instead you are often renting a license to access songs. Google Music is combating this slightly by allowing people to upload their own music, but it is a long and convoluted process. What this means is that you basically have no ownership of your music, and no protection should the service close down. All the money you have spent to access the music catalogue leaves you with nothing should the service disappear. This however is not unique to the streaming industry, as the RIAA has decided you don’t own music you buy on iTunes.

Finally, there is the issue of licensing. Due to stringent and complex licensing agreements, consumers are unable to benefit from the full range of services available. If you keep up to date with technology news, you will notice that many services (Spotify excluded) often launch in the United States first. That is due to it being the single biggest, and therefore easiest, market for western services to exist in and less jumping through hoops with record labels’ legal teams. The disarray of licensing rights across the globe is systemic of the needless complexity of record labels’ greed and unwillingness to either cooperate or do what is best for the consumer and the artists they represent.

It leaves consumers without means to listening to all their favourite artists’ songs easily, and with the rapid decline of physical sales, I believe that this will be the record labels’ undoing. If we take The Beatles as a prime example: it wasn’t until 2010 that they FINALLY came onto iTunes, which is just insane in itself. However, the negotiations resulted with Apple having exclusive rights to digitally sell The Beatles catalogue, which means there is no chance of them coming to streaming services in the near future.

As an aside: the current licensing agreements on royalties does totally screw over artists, who earn basically nothing on streaming sites, which is even more incentive for you to support your favourite bands by seeing their shows, buying merchandise, or even occasionally purchasing a CD just to show appreciation for the work they throw into things.

So is it sustainable?

At this point in time this is an incredibly hard question to answer, and anybody who says they know the answer are purely speculating, much like I’m about to.  At first inclination, I would say probably not. There is a lot to say about the benefits of streaming and the convenience of it, but nothing in this world can exist forever if it continues to lose money. At the moment in time, no service to our knowledge is making any money, and this is simply unsustainable.

There is an exception to this, however, and I fear this may well be the way it goes. There are those who can afford to offer the service as a ‘loss leader’. Google can afford to do it because to use the service you need to have a Google account, which is used to gather anonymous data to run personalised ads to you, generating revenue. Apple gets their revenue from the premium hardware they sell and the relatively high prices of their iTunes content. Basically, what I am trying to say is those who can afford to lose money are those who have loads already. This does not bode well for services like Spotify or Pandora, who have no hardware so to speak of nor any real incentives to draw you in. This is further exacerbated by the latter being sued by the BMI.

And the issues don’t end there. There is every possibility that record labels will pull support for the streaming sites if they feel that enough revenue isn’t being generated or if the services prove insecure. This has been a problem for Spotify, who last month had a bug exposed in the form of a Google Chrome extension. The extension allowed you to download the source file of any song you played from their web service. The exploit has since been patched up, but it does harm the credibility of the service.

This point can however be countered, or corroborated (depending on your outlook), by the similar exploit discovered on iTunes. This particular exploit was discovered when they were doing their pre-release streaming of Daft Punk’s latest album, Random Access Memories. Hackers discovered that the whole source file could be ‘scraped’ and downloaded for free. I personally think that this would have been more damaging to Apple’s credibility than the exploit found in Spotify due to the draconian authority Apple has stamped on the record labels.

With this in mind, it could be the one saving grace for streaming sites. Apple has proven that their unsinkable ship is not, in fact, water tight, and this could give labels the opportunity and push they need to start investing more into alternative services to break out of the strangle hold they are currently in. However, their profit driven attitudes are unlikely to see them abandoning their main source of income.

Conclusion

This article wished to provide context to the current fragmentation of the streaming industry and challenge the idea that it could, in fact, replace traditional sales, be it physical media or downloads via iTunes or other equivalent services. Unfortunately, this article, from a point of practicality for artists and consumers, has to end on the ever-infuriating conclusion that it simply is too early to tell if it will succeed or not. While there does appear to be a market for such a service, the market seems unwilling to pay to support it, or more likely the companies are yet to find a compelling method of monetisation that sways large portions of the population.

The service is also equally resting on whether or not the record labels are willing to support it or if they will remain as consumer unfriendly and resistant to change as they always have been. The issues surrounding limited Internet access, or data caps, will also be a factor in the widespread adoption.

For me, the biggest thing holding me back from grabbing a music subscription as a consumer (excluding my appalling Internet speeds) is the lack of ownership I get from buying music. I like to know that I can still listen to my music should a company go bust or if I stop paying for a service. I want to be able to take my whole library round in my pocket, back it up on external hard drives, and play it whether I’m connected to the Internet or not. That’s why I still rock an iPod Classic. At this point, I just feel that the limitation of such services fail to provide enough benefits for me to make the jump, including the huge drain of my phone battery!

No article regarding the future of music would be complete without the customary mention of pirates. While the cost of accessing literally millions of tracks is relatively small per month (and less for Spotify if you have an NUS Card), there will always be a small subsection of people who want to have everything for free. This, in my opinion, is something that is never going to change. People will always want more for less- such is the nature of consumerism. If you have been on such pirate websites (for research purposes), you even witness people complaining about either the quality or time it takes to download… while paying NOTHING for it. I think people need to accept piracy as an inevitability and just focus on improving services to the point where there are enough compelling reasons to not bother illegally downloading. It originally worked for iTunes; there is no reason it couldn’t happen again.

It is necessary to stipulate that not many people do care about wanting to be able to ‘hold their music’. Many young people have grown up completely in the digital age; the dwindling desire for physical media is only seen as a crisis to some of us CD lovers. There is, alas, no argument against this ‘hyper-digitisation’ further than just doing it for the sake of heritage. The industry just needs to become much less cautious. Perhaps another Steve Jobs-esque maverick is required to force adoption of an interesting and potentially market-changing idea.

About the author

Tom Inniss

Tom is a journalist and feature writer with interests in politics, technology and culture. He currently works as the editor of Voice - an online magazine for young people interested in art and culture.

Tom Inniss Journalist and podcaster

Tom Inniss

Tom is a journalist and feature writer with interests in politics, technology and culture. He currently works as the editor of Voice - an online magazine for young people interested in art and culture.

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