Music Streaming – Temporary gravy

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Stop Press.

• Apple has now reversed its position and will now pay the labels for music streams during the trial period reverting to the percentage model when users convert from trial to paid.
• I suspect that Taylor Swift will now allow her album 1989 to be streamed by Apple Music.
• This about face does not change my view that the real problem with the economics of music streaming is the labels rather than Apple or Spotify.

Music labels likely to have share to more with the artists.

• Taylor Swift’s withdrawal from Apple Music (see here) is good news for Spotify but it brings into focus where the real problems with music streaming lie.
• Taylor Swift’s latest album 1989 will not be available on Apple Music during the three month free trial period.
• This is because Apple will not be paying artists for their music during this period as per the deals it has struck with the labels.
• Apple gets the free trial period for free but in return it will pay 71.5% (inside US) and 73% (outside US) of the revenues it receives back to the labels.
• This is slightly higher than what Spotify pays (70%) but Spotify pays up during its free trials and also for its free users.
• The labels then share this money with the artists they have as per the terms of the contracts signed with their artists.
• This is where the big question mark lies as how much the artists receive and how much the labels keep for themselves is a black box.
• Given how much the artists appear to hate music streaming, I am thinking that the labels keep the vast majority of the revenue for themselves and give only a tiny fraction to the artists.
• I suspect that when a lot of these contracts with the artists were negotiated, music streaming was a minor issue given that the vast majority of revenues were coming from album sales and digital downloads.
• Hence, it would appear likely that the percentage of revenue paid to an artist of the revenue from a streamed track is orders of magnitude lower than that from an album sale or digital download.
• This is why I suspect that Spotify (and soon Apple Music) is deeply unpopular with the artists as they see it as the reason why their revenues are not meeting their expectations.
• Given Taylor Swift’s withdrawal from Apple Music, it would appear that the economics of a track streamed from Apple Music will be little different than one streamed from Spotify.
• As a result, I do not see Apple Music being any more popular with the artists than Spotify meaning that it will not be getting any advantage when it comes to securing content for its offering.
• It also highlights the probability that the real culprits behind artist woes are the labels.
• As contracts expire and need to be renegotiated, I suspect that much greater attention will be paid to this form of revenue generation and that the labels will have to give the artists a bigger share.
• This also highlights one of the major weaknesses of Tidal where many of the acts on stage at its launch actually had no say on where and how their content is accessed.
• Although the financial impact for Spotify and Apple Music will be neutral from the artists getting a better deal from the labels, there will be a benefit all round.
• This is because if artists finally start making a decent return from music streaming they will be more willing to engage with it which will mean a larger opportunity for all players.
• I still think that the streaming market will be carved up between Spotify and Apple as many of the other players are too small or too beset with problems to make it in the long term.