In an increasingly
digital world it is no surprise that the music industry has changed drastically
in terms of the way people are listening. There is no doubt that in order to
keep up, the industry was forced to adapt to a society that has become
accustomed to instant gratification. As a result, music apps were created and
made available to the masses. Among the most popular of these apps are Spotify
and Pandora. These allow music fans to listen to countless songs and artists
either for free or with a monthly subscription. Although there is no question
whether these music apps are able to gain revenue, whether or not they will
ever make a real profit is the central issue.
According to a
report from The Recording Industry Association of America, digital sales from
music services such as Spotify, Pandora, and Rhapsody were up 39 percent from
2012 in 2013, (Friedlander). Meanwhile, “Permanent digital downloads
(including albums, single tracks, videos, and kiosk sales) declined 1.0%,” (Friedlander).
Physical shipments also declined as well, dropping 12 percent from 2012.
Obviously, it is clear that digital music services are rapidly rising in
popularity and usage. With more and more subscribers each month, these services
are beginning to overshadow permanent downloads from industry giants like iTunes.
In fact, these trends are so threatening to iTunes’ services that they have
recently released their own version of a digital streaming service in the form
of iTunes Radio. However, it has not been able to compete with Spotify or
Pandora. They are currently rumors that Apple is formulating another plan in
their fight to stay on top of the music industry.
In
a recent article from Digital Music News,
writer Paul Resnikoff
states, “
If the future of music is streaming,
then it’s a disastrously
unprofitable one.
Generator projects massive increases in
streaming usage and paid subscription, but no recognizable way to profit from
it,” (Resnikoff). No matter how popular digital streaming becomes, if the
companies involved never make a profit and shareholders are forced to take
these financial blows, the future of these seemingly successful companies
remains uncertain.
(Photo from Digital Music News)
The
reason for the lack of profit is made clear in an article written by Ben Sisario for The New York Times blog. In this
article, Sisario discusses the current financial situation for Pandora and
Spotify. He states, “Both are losing money, and for largely the same reason:
the cost of music royalties,” (Sisario). What is interesting about this is that
Pandora and Spotify go about paying royalties in different ways. Pandora pays
their fees through federally regulated channels. On the other hand, Spotify
negotiates with record companies directly. However, neither method seems to be
better than the other as both companies continuously fail to make a profit.
Although
some of Pandora’s revenue does come from paid subscribers, they rely mostly on
advertising. Yet, they cannot successfully make enough from these
advertisements to cover the steep cost of royalties. In recent years, Pandora
has been fighting to lower the cost of music royalties. Although there was a
bill created, they were not able to make it pass and therefore Pandora finds
themselves again without a solution.
In
the case of Spotify, there does seem to be some hope for profits in the
future. As Sisario points out in his article, “It’s possible that Spotify’s licensing costs could go down in
the future, as record labels monitor its progress; they could decide to make
changes to ensure that Spotify thrives and can keep sending over its royalty
checks,” (Sisario). It appears that their method of dealing directly with
record companies and music distributors could potentially pay out in the long
run. Of course, that is not currently the case.
In
the video below, the CEO of Pandora discusses the aspect of profitability for
the company. It is evident that the cost of royalties is among major concerns
for this digital streaming service.
As
the majority of people today use digital streaming to access and listen to
music, it is easy to see the success of services such as Pandora and Spotify.
Of course, it becomes questionable how long a company can stay in business if
they continue to fail to make a profit. Do you think that Pandora and Spotify
have a sustainable future in the music industry?
Kelsey Scriven
Kelsey Scriven
Sources
Works Cited
Friedlander, Joshua P. News and Notes on 2013 RIAA Music Industry
Shipment and
Revenue
Statistics. Publication. N.p.: RIAA, 2014. Print.
"Pandora Prepares for Q1 Earnings:
Video." Bloomberg.com. Bloomberg, 23 May
2013.
Web. 29 Mar. 2014.
Resnikoff, Paul. "Streaming Services
Will Never Become Profitable, Study
Finds…."Digital Music News Streaming Services Will
Never Become Profitable Study Finds Comments. N.p., 18 Feb. 2014. Web. 29
Mar. 2014.
Sisario, Ben. "Pandora and Spotify
Rake In the Money and Then Send It Off in
Royalties." Media Decoder Pandora and Spotify Rake In the
Money and Then Send It Off in Royalties Comments. The New York
Times, 24 Aug. 2012. Web. 29 Mar. 2014.
The future of digitally streaming music seems to be a little shaky to me. Despite Pandora and Spotify’s advertisement fees and monthly paying user fees, music royalties are a huge issue. In, “Pandora and Spotify Rake in the Money and Then Send it Off in Royalties,” author Ben Sisario writes, co-founder of Spotify admitted to losing around 70% of its revenue to royalties; however, “a closer look at its recent financial statements shows that the ratio may be even higher. Last year its “cost of sales,” which includes licensing fees and distribution expenses, was $229 million, or 97 percent of revenue,” (Sisario). If Spotify is only keeping around 3% of their revenue than why is it worth having and why haven’t they changed the standards yet? The article also states that work with record labels to create agreements and contracts about royalties and use copyright to stream songs and abide by the federal royalties limit. (Sisario) If such a large amount of revenue is being lost then Pandora should negotiate contracts with record labels. Pandora might even be able to pay lesser royalties to small artists and bands since they are known to help discover music.
ReplyDeleteAnother issue may be the increase in interactive media that has recently come about. New applications provide interactive opportunities for true fans of participating artists. For example, in, “Getting Appy: How Artists Use Music Apps to Engage Fans,” “Gaga’s album app allows fans to listen to the Artpop album (if you’ve already purchased it), create animated gifs, access song lyrics, see a countdown for additional content, and play around with a number of other nifty features,” (Getting Appy). The app Artpop is designed specifically for Lady Gaga provides her fans with the incentive that purchasing her music will allow greater gifts that last as long as her music does. Other artists that have also created apps include Bjork and Jay-Z. I think another move artists can take is to also provide incentive to purchase CDs and use barcodes or tags inside the actual CD casing to use for exclusive apps. This way physical purchases can have a higher advantage over iTunes. Streaming websites like Pandora and Spotify cannot even compare to the interactivity of these apps unless they start creating deals with artists. However, I believe that artists are not as willing to do that because users of these sites will never actually have to purchase their music.
Kyle Anderson of, “These Guys want to Reinvent your Playlist: Jimmy Iovine and Trent Reznor make the case for Beats Music,” introduces a new app that is both interactive and innovative to the music industry. The app is said to focus more on the emotional stigma of the music that an algorithm cannot comprehend. (Anderson) Trent Reznor of Nine Inch Nails stands on the opposite side of the spectrum when it comes to royalties and says musicians are not getting paid enough in royalties. This app is based on royalties fair to the musicians and the ability to know how much they are getting for how many times their music is streamed. (Anderson) This idea is more likely to succeed than other streaming services because they lack deals with musicians and keep losing money because of royalties. I cannot see digitally streaming music succeeding in the future if they do not change some of their fees for royalties. In the future royalties might even increase, thus putting streaming sites in an even deeper hole.
Marissa Himbele
Work Cited
Anderson, Kyle. "These Guys Want to Reinvent Your Playlist." Entertainment Weekly 24 Jan. 2014: 16-17.
"Getting Appy: How Artists Use Music Apps to Engage Fans." Nielsen.com 21 Nov. 2013. Web.
Sisario, Ben. “Measuring Growth in Dollars and Page Views.” Media Decoder (New York Times blog) 16 Jan 2013. Web.
There is no doubt that streaming subscriptions have and will continue to play a major role in the future of digital music. As you stated Kelsey, Spotify and Pandora allow music fans to listen to countless songs for free or with a monthly subscription. An important feature Spotify brings to the table is that its files can be easily uploaded not only from the major record companies but also from independent companies and even individuals. There is now a much lessened need for major record companies and other intermediaries if one wants to reach a large audience. But while this is all grand, the online music industry runs into a unique catch 22 situation. The more successful it is, the more money flies out the door. Digital music companies pay dearly for the rights to stream music. In Pandora and Spotify Rake in the Money and Then Send it Off in Royalties written by Ben Sisario for the New York Times blog, he states “But even at their level of scale and hype- and despite having very different business models- Spotify and Pandora exemplify the business challenges for digital music companies. Both are losing money, and for largely the same reason: the cost of music royalties” (Sisario). Unless digital music companies can figure out a strategy to turn a profit fast, it will continue to be a downward spiral. Streaming services like Pandora and Spotify probably could have gotten away with charging consumers $10 for a subscription just for the vast amount of music it shares and accessibility it gives to the people. Unfortunately if they would try to increase the subscription fee now, consumers may jump ship and leave the streaming companies since they’ve been using their services for “free”.
ReplyDeleteMusic streaming sites’ goals are to grow a service which people love, ultimately want to pay for, and in turn provide the financial support to the music industry necessary to invest in new talent and music. Millions of people are gravitating towards these sites which means more and more advertisers will go where the listeners are but the problem for the streaming service is that they need to stick around long enough to generate a profit. In Measuring Growth in Dollars and Page Views “The growth of services like Pandora and Sirius XM Radio has been the driving force behind the increased royalties” (Sisario). So could Pandora be blamed for the loss in profitability to other streaming sites? Probably, but maybe we should look at music streaming from a different approach. Maybe we should look at Spotify, Pandora, and other sites as loss leaders rather than a million dollar industry. As loss leaders, these sites can help artists be discovered while at the same time can operate as a promotional apparatus to get fans to make other purchases. This business strategy has been a practiced for a long time and can be very successful if applied properly. Studies have shown that these music streaming sites curtailed the use of illegal downloading and also carry the idea that fans may be more inclined to buy merchandise and concerts to support their artists. In my opinion even though Pandora and Spotify may never be profitable, it is a necessary loss to keep around in order to keep the music industry alive.
Work Cited
Sisario, Ben. “Measuring Growth in Dollars and Page Views.” Media Decoder (New York Times blog) 16 Jan 2013. Web.31 Mar. 2014
Sisario, Ben. “Pandora and Spotify Rake in the Money and Then Send It Off in Royalties.” Media Decoder (New York Times blog) 24 Aug. 2012. Web. 31 Mar.2014
The music industry in America has evolved many times throughout the years. From phonographs used in the early 20th century to mp3s commonly used today, the evolution of the activity of listening to music has come light-years in just one hundred years. In the modern day of music however, ways of listening and even viewing music have evolved and expanded at an almost exponential rate. While just fifteen or twenty years ago we were marveling at the release of a compact disk, we now have the ability to download entire albums from our couch at home in a matter of a few minutes. With the incredible development of music technology however, a music industry that used to be amazingly profitable and sell record numbers of CD’s with every major artist’s new release has recently seen a noticeable impact due to the emergence of music streaming and free and/or illegal downloads.
ReplyDeleteCompanies like Pandora, Rhapsody, and Spotify are among the leaders in online music streaming, with sales increasing 39% from 2012-2013 (Friedlander). While these providers have been very popular with online users, especially younger audiences who have the ability to quickly grasp and take advantage of the service they provide, they have encountered a problem that has plagued other revolutionary startups like Twitter or Facebook: profitability. In order to turn a profit and stay afloat in today’s economy these companies must find a way to combat not only a way to reliably make money, but enough of it to offset their biggest expense: music royalties (Sisario). Recently in order to address these issues, most online music streaming providers integrated ads into their musical platform. For instance on Pandora, ever two songs or so, a thirty-second ad pops up. Unfortunately for all three major music streaming companies, none of them have been able to turn a profit since their creation.
Interestingly enough however, the notion that if these companies can hang around long enough, and garner a large enough loyal base of users, record labels may in fact deem their existence, and its byproduct of royalty checks, worth negotiating over. If record labels do in fact come to be of this opinion, Pandora, Spotify, and Rhapsody may be able to negotiate for lower royalty costs, which may enable them to actually turn a profit. To clarify, these providers are undoubtedly incredibly popular with Pandora alone having 67 million listeners each month as of over a year ago (Sisario), but the current profit margins concerning royalty fees and advertising profits/subscription revenues result in negative profit margins for all three companies.
The current trend in music consumption is that of leaning towards whatever is free. Especially in this economy, when presented the option of buying a $15 CD or downloading and/or all the tracks for free online, the vast majority of music consumers will opt for the free option. With this choice, consumers undoubtedly win, and record companies and their artists get royalties. The “middlemen” of the deal, providers like Pandora and Spotify, are more often then not the ones left out in the cold. Unless these companies address the very real problem that “there’s no recognizable way to profit” from them (Resnikoff), these music providers may find themselves in the same boat previous music providers like Napster did; wildly popular but unavoidably bankrupt.
Work Cited:
Friedlander, Joshua P. News and Notes on 2013 RIAA Music Industry Shipment and
Revenue Statistics. Publication. N.p.: RIAA, 2014. Print.
Sisario, Ben. "Pandora and Spotify Rake In the Money and Then Send It Off in Royalties." Media Decoder. The New York Times, 24 Aug. 2012. Web.
Resnikoff, Paul. "Streaming Services Will Never Become Profitable, Study
Finds…."Digital Music News Streaming Services Will Never Become Profitable Study Finds Comments. N.p., 18 Feb. 2014. Web. 29 Mar. 2014.
Sisario, Ben. “Measuring Growth in Dollars and Pageviews.” Media Decoder. The New York Times. January 16, 2013.
Nicolette Illiano
ReplyDeleteIt seems that in today’s digital world paying for music is just something we don’t do anymore. It’s so much easier and affordable to stream music online through sites like Pandora, Spotify and even Youtube rather than purchasing an entire album. Sometimes you just don’t like every song on that album, so why would you spend money on something you don’t like?
Digitally streaming and downloading music has been around for years. Remember Limewire and Frostwire? Although they were illegal, these two computer applications seemed to be the main source for many to download and stream music files onto their computers in the early to mid 2000s. Once you downloaded a song from the app, it was saved to your Limewire or Frostwire library as well as your music file on your computer. A simple and free way to get the music you wanted, except you were breaking the law (and probably getting a computer virus in the process).
Today we have hundreds of different ways to get free music, some of the most popular being streaming sites like Pandora and Spotify. However, while these sites are used by millions of people, it’s not too shocking that they’re not doing too well financially. Yes, these sites have subscription plans contributing to their income but they rely mostly on advertising and that just doesn’t seem to be cutting it. According to Ben Sisario’s New York Times blog post titled “Pandora and Spotify Rake In the Money and Then Send It Off in Royalties,” Spotify’s 2011 cost of sales was 97% of its revenue and that the company lost $57 million that year, while “Pandora lost $20 million on $81 million in revenue.”
So if these companies aren’t profiting from sharing music, who is? The listeners and the artists. Many people believe that if they listen to music through Pandora or Spotify they’re getting “free music,” however, when you look into it the content isn’t exactly free. The music that these companies provide is free to the listener, but the companies themselves have to pay for content acquisition. That would be like me paying Justin Timberlake to use or listen to his song, and then allowing you to listen to it for free. No money coming out of your pocket or going into mine, but you’re getting a free song out of it at the price of listening to an advertisement here and there. In another article by Sisario titled “Measuring Growth in Dollars and Page Views,” he states that “by law, satellite and Internet radio services must pay the performers and copyright holders of a recording, in addition to songwriters and publishers” in order to obtain and release that recording to the public via their website.
So with all that said, the question is do Pandora, Spotify and other music streaming sites have a future when their profits are so low? The answer is yes. We’ve reached a time where people don’t want to spend money on things that they can get for free. Personally, I havn’t purchased a song or album through iTunes or any other costly source for years because I always use Pandora and Spotify for free music. With these websites becoming so prominent in the music industry it would be impossible to get rid of them without another “free” music streaming site popping up somewhere.
Works Cited
Sisario, Ben. “Measuring Growth in Dollars and Page Views.” Media Decoder (New York Times blog) 16 Jan 2013. Web. 31 March 2014.
Sisario, Ben. “Pandora and Spotify Rake in the Money and Then Send It Off in Royalties.” Media Decoder (New York Times blog) 24 Aug. 2012. Web. 31 March. 2014.
The future of digitally streaming music is becoming more evident as time goes on. As Kelsey mentioned society, especially the younger generations have become customary to instant gratification, and will go above and beyond to receive it.
ReplyDeleteInstead of paying to see a movie in the theatre, or waiting for it to come out on DVD, many people despite the illegality will buy bootlegs, go on movie websites that leak the films for free while they’re still in theatres, or wait for it to come out on Netflix. This pattern follows the same for music, when I was younger my friends and I all used illegal digital streaming programs like Limewire and Kazaa. This was the best way for us to get new songs to our computer without paying 99 cents per song on iTunes.
Now, it is no longer necessary for people to have these programs because of applications like Rhapsody, Spotify, and Pandora. These music programs are not illegal and allow you to listen to whatever music you would like, at any time, for as long as you desire, free of charge! According to Ben Sisario, “At least 33 million people have tried Spotify, more than 150 million have registered for Pandora.” When walking around campus or sitting on the shuttle students usually have their iPhones in hand with their buds in their ears listening to Pandora. Many people have shied away from iTunes, 1. because they don’t want to pay for music at all, and 2. because they really don’t want to pay the increased price of $1.29 a song. Although iTunes has recently tried to compete with these free music applications by creating ITunes Radio, in my opinion it cannot compare. It does have fewer ads, but it is constantly slow and freezing mid song. I think they released it to early, before they got all the glitches fixed.
Music app revenues on both iOS and Android grew by 77% in 2013, Pandora topped these chart being the highest earning music app in the world (Jones). According to billboard,” For the first time since the iTunes store opened its doors, the U.S. music industry finished the year with a decrease in digital music sales.” This shows how heavily people are relying on free music apps for their music consumption, instead of buying songs through the iTunes store. I can honestly say that about ¾ of my music on iTunes are from another streaming site other than their music store, not necessarily Pandora, or Spotify, but other websites that convert YouTube videos into songs on your iTunes.
Like Kelsey stated, isn’t it extremely hard for these companies to make any money when they are free for consumers, have to pay royalties and rely on income only from advertisements. Recently, Pandora has offered ad-free listening for a monthly charge, but I don’t know many people that wouldn’t rather bare through the advertisements than pay. Obviously these music apps are extremely popular and loved by consumers, but how long can they stay alive with so little profit and such big costs?
Sisario, Ben. “Pandora and Spotify Rake in the Money and Then Send It Off in Royalties.” Media Decoder (New York Times blog) 24 Aug. 2012. Web.
Jones, Rhian. "Music App Revenues Up 77% in 2013, Pandora Highest Earner." Music Week 31 Jan. 2014. Web.
Christman, Ed. "Digital Music Sales Decrease For First Time in 2013." Billboard. Billboard, 3 Jan. 2014. Web. 31 Mar. 2014.
t the digital era has begun, and we made this transition from traditional forms of media (physical forms, ie books, CD’s, records, tapes, etc.) to new forms of media through the internet, such as iTunes, Amazon, etc. This is also a new era for artists, as Alison Hillhouse revealed through her Viacom blog that artists “are expected to be constantly accessible, especially on social media, offering unique and intimate moments to their fans,” known as ‘Zero-distancing’. This is accomplished mainly through Facebook, Twitter, YouTube, etc. She also added that “today, there’s an expectation for direct interaction between fans and musicians. Millennials crave intimate glimpses into the mundane daily activities of their favorite celebrities.” With the current methods of musicians being able to interact with their fans, it seems reasonable to believe that sales would be through the roof, pretty much sealing the deal on the digital era.
ReplyDeleteBut to know that there is another strife arising through the world of music absolutely shocks me. It’s amazing to think that iTunes is experiencing tribulation, considering how it was the most pivotal force of the digital market, and it was this market that pretty much ran record stores out of business. It’s amazing to learn from Arbitron that more than half America’s citizens listen to the radio every week, but given this data, it is no longer difficult for me to believe that there is another strife arising through the music world, especially when it comes to the category of radio-like forms of media, such as Pandora or Spotify. I would have considered the biggest threat to digital music to be piracy, not the decision to download music through a radio-like program rather than to permanently download music through iTunes or Amazon. It’s also amazing to see how the politics of the music industry extend beyond record companies and their stars, all the way to the distributors of the material. Because Beyoncé struck a deal with iTunes to release the new album for a week, Amazon and Target have refused to sell her new album, an action that Yahoo! Finance journalist Jim Edwards calls “cutting off their noses to spite their faces.” And to top it all off, the queen of today’s music struck another deal, this time with Walmart, an arch-rival of Amazon and Target, by visiting a Walmart in Tewksbury, Massachusetts, handing out $50 gift cards.
But getting back to what I was saying… there has been a huge decrease in number regarding sales in music, which I believe through the given information is due to the modern craze for radio-like programs, through which people can listen to music either for free or by monthly subscription. Randy Lewis of The LA Times noted that 2013 saw the dip in sales over music singles at the lowest point since Nielsen Soundscan started to monitor sales in 1991, with Justin Timberlake’s “Blurred Lines” at 2.43 million copies, compared to Adele’s “21” selling 4.4 million copies. One could guess that the rise of internet radio has a part to play in this change of numbers.
Edwards, Jim. "Beyonce Has Gone To War Against Amazon And Target For Refusing To Stock Her Album." Yahoo Finance. N.p., 22 Dec. 2013. Web. 31 Mar. 2014.
Hillhouse, Alison. "STUDY: MTV’s ‘Music to the M Power’." Viacom Corporate. N.p., 5 June 2013. Web. 31 Mar. 2014.
Lewis January 3, Randy. "Justin Timberlake, Robin Thicke Post 2013's Top-selling Album, Single." Los Angeles Times. Los Angeles Times, 03 Jan. 2014. Web. 31 Mar. 2014.
Kevin Ganey
First sentence: It is obvious that...
DeleteThis comment has been removed by the author.
ReplyDeleteI’m one of those people who still purchase music through my iTunes account even though I have subscribed to Spotify (and pay $9.99) and Pandora (free). For some years iTunes served as my go-to source for instant gratification and that too was a transition and took some getting used to because I preferred my CDs. I remember driving to Wal-Mart to search through racks for my favorite music on CDs and a few times I would come home disappointed because I didn’t find what I wanted in the store. I think part of my desire to have something tangible is due to a culture of acquiring and collecting items. It gave a boost to look at one’s CD collection and see a huge stack. It was validating and made one feel like they owned something and so my interest in streaming music was not something that happened willingly. Recently though my Spotify account has become something I go to quite often and this convenience and experience cannot be compared to anything else. (Maybe Netflix, these days)
ReplyDeleteInstant access to tons and tons of music on – the - go is quite an advancement from the days of lugging around CDs and boom-boxes: it is cheaper, more convenient and we have endless music. Apparently someone gets to feel the pinch somewhere, after all nothing good comes easy they say. According to the article titled “Pandora and Spotify Rake in the Money and Then Send It Off in Royalties.” by Ben Sisario, “Spotify and Pandora exemplify the business challenges for digital-music companies. Both are losing money, and for largely the same reason: the cost of music royalties.” Both companies employ different financial models but which unfortunately are yet to reflect profits. Even though Spotify has a subscription plan that raises revenue, the money does not add up to over-head costs brought on by paying artistes royalties. So the sad downside to our endless streaming music is that the companies make little to no profit.
There is no doubt that digitally streaming music will eventually hurt music sales for record companies after all if I can get the music everyday and as many times as I want just by paying $9.99, why clog up my iPod or phone memory with too many gigabytes of music? So right now it appears as if the only real winners are the consumers who are getting great music for cheap. Some even hope Spotify will reduce their subscription rate but I don’t see that happening. For a service that streamed 4.5 billion hours in 2013 with 1 billion playlists created so far, according to the “Spotify Year in Review 2013” on the Spotify official website, they are paying way too much to be able to provide cheap service. It isn’t going to happen and if anything I were to be changed, I think the subscriber rates should be raised in all fairness. If Spotify charges users $15 a month, that is nothing compared to the average $1 per song which iTunes charges its customers. It’s a no brainer to pay for Spotify and/or Pandora, and if we are smart as consumers we will support these companies and take advantage of the service before it goes away due to companies being unable to keep up with management costs.
Work Cited
Sisario, Ben. “Pandora and Spotify Rake in the Money and Then Send It Off in Royalties.” Media Decoder (New York Times blog) 24 Aug. 2012. Web. 31 March. 2014.
"2013." Spotify Year in Review. 2013. Web. 01 Apr. 2014. .
I have always thought that the music industry is a tricky business. But recently, with all of the advances in technology, it has become even trickier. Music has always provided an outlet through which people create individual identities as well as uniting individuals globally. Because of the immense power of music it is highly valued in society. But, as we have recently found out, the high social value of music doesn’t always translate into high profitability for the music industry. This seems to be counterintuitive. If consumers value a certain product, they should be willing to pay for it, right? Not true when it comes to music these days. I think that this is something specific to Millennials. Because we have grown up in the age of the Internet, our relationship with the music industry has altered radically from the relationship our parents had with it. Whereas our parents were willing to go out and buy the albums of their favorite musicians, we hate paying for music. Advances in technology, and especially our notions about the Internet, have forever changed the way we think about music. The majority of Millennials would agree that music should be free. Nowadays we would rather download music illegally than pay for it via a provider like iTunes. I think a lot of that attitude stems from the idea that we know most of our money isn’t going straight to our favorite musicians. Due to advances in social media and independent marketing many music listeners have taken the anti-record label position.
ReplyDelete“Next Big Sound, a company that measures the social activity surrounding online music, this week offered another encouraging glimpse of the market. In its year-end report, it said it measured 93.8 billion streams of songs last year, up 45 percent from 2011. Combing through artist Facebook accounts, Twitter feeds and other sources, it found find 17.1 billion profile views and 5.7 billion “new fans” of music” (Sisario). Sisario also notes that “Next Big Sound’s report covers only a certain chunk of the overall market. It excludes data from Pandora, Spotify, iTunes and other services whose listening data is not public, as well as visits to artists’ own Web sites.” But even without that data it seems that it still holds true that high engagement with music online doesn’t equate with high profit margins.
Many companies have struggled with the dilemma of how to make their services online profitable, it’s not specific to the music industry. But I do think that this problem is specific to the Internet. The Internet has changed the way we think about products and services forever. We think that because the Internet provides us with services that aren’t always tangible, or available to us in a physical form, then we don’t want to pay for that service.
In another article, Sisario addresses this. He writes, “with artists and labels hit hard by declining sales over the last decade, it’s hard to argue for lower royalty rates. But the graveyard of failed digital services, and the financial struggles of Pandora and Spotify show that the music industry hasn’t yet figured out the balance between licensing costs and how much money a digital service can make.”
Ultimately, I think that we are going to need to change the way we think about services available to us via the Internet. If we value a service, we’re going to have to pay for it. Literally. I think the success of the music industry especially depends on it.
Sisario, Ben. “Measuring Growth in Dollars and Page Views.” Media Decoder (New York Times blog) 16 Jan 2013. Web.
Sisario, Ben. “Pandora and Spotify Rake in the Money and Then Send It Off in Royalties.” Media Decoder (New York Times blog) 24 Aug. 2012. Web.
This comment has been removed by the author.
ReplyDeleteI love all types of music. From country to hard rock to jazz, if it has a discernable beat and some sort of melody I’m going to love it. But if you were to look at my iTunes library you wouldn’t see that. My library has a great deal of country music and not much else. Why is that? Because despite my wide taste in music, I feel a loyalty to certain country artists that I do not feel for artists in other genres. This loyalty is why I am willing to buy their music rather than stream it or illegally download it. I am not alone in this either, my generation only buys music when “they want to support an artist that they respect and connect with” (Hillhouse). This is a media trend that has only grown stronger with the increased popularity of sites such as Spotify and Pandora radio. Music is universal and is appreciated by everyone, so how can these sites turn appreciation into profit?
ReplyDeleteThe lack of profitability is not due to a lack of popularity. Spotify alone currently has 24 million active users who streamed 4,500,000,000 hours worth of music in 2013 (2013). Pandora and Spotify are encouraging interest in more diverse types of music, which allows the industry to flourish but at the same time they are crippling themselves. Their popularity has become a double-edged sword because the more their free services are used (and abused) the harder it becomes for them to implement a fee, or some sort of profitable change. We, as consumers, are resistant to change, especially when it could mean the loss of a free service. But if we continue to hurdle down the track we are on, change will be inevitable and the later it happens the greater the cost will be.
I believe that Jimmy Iovine and Trent Reznor have the right idea with Beats Music. But if they are going to get consumers to pay $10 a month, they have to offer more than just the best of Spotify, Pandora and iTunes Radio. As was said in the "Entertainment Weekly" article “People aren’t gonna pay just for access [to music]. Access is not the problem. The service has to be of service” (Anderson). Their idea of “melding tech and heart” is great, but right now I don’t think it offers enough of a service for people to pay for it. However, there is definite growth potential as they feel out just how much the market is willing to pay for. The one advantage that Beats Music has over Spotify and Pandora is that it started out as a paid-for service, and therefor has more freedom than the others to experiment with different profitability tactics, specifically fees. There is a very fine line between giving people what they want and crippling the industry. I think that Beats Music has come closer to finding that harmony than any service before it, but I still do not think that it is going to draw enough demand to turn a profit just yet. Beats Music is brand new and given a year or two I think it will go where no music site has gone before: actually getting users to pay for it and turning a profit.
Works Cited
- "2013." Spotify Year in Review. Spotify, n.d. Web. 31 Mar. 2014.
- Anderson, Kyle. "These Guys Want to Reinvent Your Playlist." Entertainment Weekly 24 Jan. 2014: 16-17. Print.
- Hillhouse, Alison. "STUDY: MTV’s ‘Music to the M Power’." Blog.Viacom. Viacom Corporate, 5 June 2013. Web. 30 Mar. 2014.