Music streaming: change the product, not the price

Much has been made about how Taylor Swift yanked all the songs from her new album, along with all her previous music, from Spotify’s streaming service yesterday. Ms Swift is unique in that she can, and does, sell many copies of her album, in digital and physical form and she has control over her music (which apparently is rarer than I realized.) Ms Swift has also been very vocal about her thoughts that artists should be paid for their music and Spotify, which pays fractions-of-pennies in royalties per play, apparently does not pay artists enough.

1989, the deluxe CD

Taylor Swift’s 1989, the deluxe CD

I’ve written before about how consumers have paid a constant amount, around $45 to $65 per year, for music over the last decades, and have kept that number steady despite constant changes in music formats. But whereas before I have used this number to make a case for what streaming services should charge, perhaps it is time to take another look at conflict between artists (and, let’s face it, the record companies that represent them) and these services.

In decades past, the price of an album was more or less constant regardless of what form it took. From vinyl to cassette tapes to CDs to digital albums, the price was set, and remains, at $11-$16. Singles have also had a mostly constant price across time, around $2 (adjusted for inflation.) The cost of singles has always been such that it will make more sense to buy the entire album than individual songs. What music customers used to do, before streaming, is simply to prioritize their music purchases in order to stick to their $45-$65 annual budget. It may not have been a conscious decision to adhere to a “budget” per se but it was certainly the purchasing decision was made per album. Streaming changed that dynamic, with users getting access to all the music ever created (theoretically) for a price they were willing to pay. They never had that access before, streaming was a brand new product, yet they expected to pay the same annual price as before.

With music streaming, users’ expectations are such that once a new album is released it should be automatically included in the service. But why? Users don’t expect every new TV show or every new movie to be released on Netflix the moment it is shown on TV or released in theaters. They have come to expect “windowing,” the delay of one type of sale in order to promote another. With movies, they are first released in theaters, then on DVD, then digital purchase, then digital rental per movie, and only then streaming. Why do consumers expect instant availability on the streaming services for recently released albums? Can and should those expectations change?

I’d like to take a look at Google Music, not just as a place to download digital music, but the way it has become a repository for all my music which I can access anywhere. Once I add an album to my music collection, Google Music allows me to stream it anywhere I am logged in. It’s a mix of all the music I own (if only I had time to rip more of my CDs and add them to my collection… but I digress) and whenever I buy a new album I automatically add it to my collection. True, I don’t get access to all the music ever created like Spotify promises (with a few exceptions) but I do get access to everything I have purchased, where purchased means that I care enough to own it and have prioritized my spending to include it in my virtual annual music budget. Perhaps this limited streaming of only music I have purchased is the middle ground? After all, I don’t really need access to all the music ever recorded.

PandoDaily made a compelling argument for Taylor Swift being the tipping point to a new streaming model. Instead of Apple becoming just another option to stream music, without any feature-based differentiators, the difference can become the artists and how new music is integrated into the services. Just including Taylor Swift in streaming services, even if only after a month after the release of the album, could be the product differentiator. Then again, there really aren’t that many artists today that command the loyalty and inspire such purchases as Taylor Swift and perhaps this differentiator won’t end up being such a big deal. There is so much focus on this particular album that we forget that downloads are losing ground to streaming and within music downloads, album sales are decreasing as well.

In the end, there will be a “steady state” in music streaming, where consumers stick to their budget, the artists get paid and the services earn enough to thrive. Something, either the price, the features, or the content, will have to change for that to happen. The current demand of “all access” for the annual budget consumers are willing to pay with the miniscule royalties that entails will not be sustainable.

One final note, though, that all these wild conjectures refer to the traditional music creation business model, one where artists are signed by record companies who then  record, market and distribute their music for a profit. If a “steady state” of music streaming won’t be reached, perhaps this entire model will be tossed away. The new model might be based on artists promoting themselves via Youtube and other music channels and music consumers spending their money on concerts and merchandise after getting the actual music for free.



Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s