Following on from Apple’s announcement at the WWDC 2015 conference that they will be entering the increasingly competitive music streaming market, the tech commentariat has been out in full force. All sorts of theories on why Apple, the world’s most valuable brand, would involve themselves in something as increasingly controversial as music streaming has become. Of course this is no small part down to the outspoken Spotify CEO, Daniel Ek who has made an enemy of Taylor Swift because of his insistence on offering a free ad-heavy service on Spotify as a means to entice consumers to subscribe to the premium service. Swift’s argument is that Spotify doesn’t pay artists enough for their ‘art’ and offering the music for free subsequently devalues it. Of course she isn’t the alone in this argument although she is the biggest-selling artist to take action by removing her music from the platform.
Ek was undoubtedly going to have some sort of opinion on the threat of Apple’s involvement but we didn’t expect him to tweet and then delete ‘Oh ok’.
The simple fact is that Spotify will have to rethink their ‘freemium’ service. The free offer consequentially means artists don’t get as much return value for their music, just $0.007 per stream (so low my admittedly not perfect but competent mathematical ability couldn’t convert to pounds). I am in no means having a moan at Spotify here, but let’s be honest unless you’re one of the Taylor Swift’s or Sam Smith’s of this world you’re hardly going to be rolling in it. In fact, per 1 million streams Spotify pays out approximately £3,370 but an equivalent amount of purchases from the iTunes Store would generate £790,000 based on the customary £0.79 price for a single digital download. Of course it is worth noting that streaming represents a different type of offering to digital downloads because the ‘commitment to a purchase’ aspect isn’t there so people are bound to play a wider variety of music, more consistently. However the difference in those two figures is still way too large.
It remains to be seen just how committed Apple will be to providing a service that is fair to both the artist and the consumer. They do have a distinct advantage – they operate the world’s largest online downloads store (of which the streaming service will be integrated with via iTunes, allowing listeners to also have access to their music library) accumulating no less than 800 million credit card details since it’s inception in the early 2000’s. Their disadvantage may prove to be the lack of a free option to the service aside from an initial three-month free trial. It is still early days and perhaps rightly so, much of the focus & detail has been on the user experience with virtually nothing mentioned on the technicalities regarding royalties. It would be rather naïve for anyone to presume that Apple will take a financial hit in order to pay artists their just dues, it just won’t happen. Like any successful corporate entity it’s profit above all else.
The complications evident in streaming services are entrenched in the tech start-up culture, where venture capitalists put up millions of their money expecting exponential returns, which in turn fuels strategies that may be good for capital gains but completely negligent of the consumer and rights holders. Soundcloud have created a free platform for those who wish to offer their music without financial incentives, with relative success, whilst also doing a decent job of policing breaches of copyright. But for all their efforts the service is also now pursuing the data breaching, ad-heavy strategy after posting heavy losses for the financial year 2013/14. The reports will undoubtedly have left their angel investors less than impressed, hence the change in focus to a more revenue focused model.
Amongst all the commotion served up by the transition to a more digitally centric world, it is time the music industry revisited the value of physical media. Yes consumer trends are much more volatile with those, but CD’s & Vinyl currently represent the best available means for artists to get optimal returns for their music. All it takes is a little creativity with the packaging, good quality music and incentives for purchasing the music.