MUSIC BOX: Days of digital free ride may be over

By on November 18, 2014

Jackson Hole, Wyoming – Do you enjoy free music streaming, digitally, via a service such as Spotify, Beats (owned by Apple), AT&T, Google, or Pandora? A major shift in the music industry over the last few weeks suggests that you should enjoy it while it lasts.

Third quarter 2014 statistics show that physical CD sales and digital download sales continue to nose dive. On-demand streaming sites are all the rage, and vinyl sales are up a whopping 47.5 percent. The good news is that people are consuming more music. The bad news is that there is either no money on the table, or that the money is going to CEOs of streaming sites. Illegal downloading and file sharing still accounts for a great deal of revenue bypassing songwriters and publishers, though the biggest streaming sites are finally getting pressure from the three bigs (Universal, Sony, Warner) to leverage their free users to become paid subscribers.

Tension with Spotify in particular came to a head last week as Taylor Swift, utilizing her pop star status, pulled her new album as well as her entire catalog from Spotify. (Swift was predicted to make about $6 million from the streaming site in the next year, and her new album accounts for more than 20 percent of all album sales in the last two weeks). She joins the ranks of artists like Foals, Thom Yorke (of Radiohead), The Beatles, The Black Keys, AC/DC, Garth Brooks, Beyonce and Coldplay, who have taken a stance against Spotify.

Black Keys drummer Patrick Carney comically criticized the owner of Spotify saying, “He’s richer than Paul McCartney, and he’s 30, and he’s never written a song.”

The artists argue that it’s not that they don’t want their music on Spotify, they just don’t want it available to the free riders because the royalty payout is so low per stream (less than a penny per stream in 2013). Swift’s team had sought to make her music available to paid subscribers only, but Spotify wouldn’t have it. High fives to these folks. It may save the struggling indie artist. 

In case you’re not familiar with Spotify, an iPhone user, for instance, can download the free app and enjoy just about any artist’s catalog, provided that they shuffle the songs (laptop and tablet users can actually stream some songs on-demand). Free riders account for 37.5 million users, while 12.5 million pay $10 per month for no ads and on-demand streaming. So why the push by labels to turn these free riders into subscribers? Seventy percent of the subscriber revenue goes to record labels and music publishers.

From the vantage point of a songwriter, part of the problem is rooted in the fact that services like Pandora and Spotify utilize their free service to drive the paid service with ads like: “Just sign up for Spotify to listen to this song and all your music for free.” This further perpetuates the “free” culture, and the fine print (that you can opt to pay a monthly fee and get just a tiny bit more convenience and control) is not substantial enough to convert most consumers.

Leave it to Google and YouTube to step up to the plate. Just a few days ago, Google announced its long anticipated service, YouTube Music Key. Rather than fight an irrational battle against labels and songwriters putting them on the wrong side of history, YouTube has reportedly sealed deals with the three big labels and “hundreds” of small labels, though no details have surfaced and many indie labels resisted. Music Key will have a price tag of $10 per month with no ads and offline streaming of more than 30 million songs, including in-app videos, and full discographies of artists.

This shift is good news for songwriters. Fractions of pennies for streams may turn into silver in the short term. And oh, what a handful of nickels can buy you – a song.

About Aaron Davis

Aaron Davis is a decade-long writer of Music Box, a singer-songwriter, multi-instrumentalist, member of Screen Door Porch and Boondocks, founder/host of Songwriter’s Alley, and co-founder of The WYOmericana Caravan.

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