I’ve been thinking about music streaming a lot this week. I’m sure the launch of Apple Music and Spotify announcing new, higher user numbers (55 million non-paying active users and 20 million paying subscribers, up from 45 and 15 million respectively) had something to do with it. I also stumbled across a great infographic that quantifies artist income from music on the different platforms by showing how many units are needed to reach minimum wage. I recommend taking a long, deep look at the data. Note that at the very bottom of the graphic, where all the music streaming apps reside, it is YouTube that pays artists the least for each stream, despite the seeming increase in pre-rolls and text overlay ads.
What’s interesting in this data is the clear difference in income between two types of artists: signed and unsigned. On the lower part of the graph, signed artists are represented by dark pink circles and unsigned by the light pink ones. The circle size is determined by how many plays are needed for an artist to earn the US minimum wage. The smaller the circle, the less plays are needed because each play pays more. InformationIsBeautiful defines signed as “an artist on an indie or major label” and unsigned artists “bear production, manufacturing, marketing costs out of their cut.” So the income that a signed artist receives can be considered a more of a profit, while the unsigned artist still has to deduct some costs.
Also, there are always the benefits of exposure for artists ranging from Ed Sheeran,who can sell out Wembley Arena in London, and YouTube comedian Lilly Singh, AKA Superwoman, who is selling out performances around the world. These two, and many other artists, are doing a good job leveraging YouTube views, plays on the streaming platforms, and social media to grow other revenue channels. That said, the difference in revenue from various platforms is vast.
So how could this influence the future of music streaming products?
Farhad Manjoo, in a post last week in the New York Times, talked about discovery being the next musical frontier. Shiva Rajaraman, Spotify’s vice president of product, explained how they want the app to be “more of a ritual. You’ll begin to use it for a set of habits, and we will start to feed content for every slot in your day.” In order to do that, Spotify “has to show there’s a lot more to music than the narrow band of songs you think you like; instead, there are many tracks and artists that you may have never considered, but that may match a particular moment or activity the app thinks you’re likely to be doing, from waking up to working to exercising.” Their data has shown that “playlists based on moods and activities — like “running,” “focus” and “party,” which contain songs that may cross many genres — are just as popular as those for specific genres like rock, pop and hip-hop.” What this means is that listeners are willing to listen to new-to-them music as long as it fits their physical activity, mood, or whatever they are doing. It may be that the artist matters less than the specific song.
I have talked before about the four players in the music business, artists, labels, distributors (the streaming apps) and the fans. I’ve also talked about why the current dynamics are unsustainable from each player’s perspective. Most artists aren’t being paid enough, labels are getting money that they are not paying out to the artists but not earning as much as they earned in their heyday, streaming apps are losing money, and music lovers, AKA the fans, have historically not paid more than $65 a year for music and most services currently charge $120.
These dynamics could be the drivers for product change. What if, instead of partnering with labels for music, Spotify and other streaming apps put more of an emphasis on unsigned artists and added a higher proportion of their songs to their themed playlists? What if listeners could select how much new music they wanted to hear? Sort of like how Google Music gives me the option to play only downloaded music in the app, how about letting users choose how much new music they wanted in a playlist? Spotify (and others) will need to do more to attract such artists, promising a higher payout for unsigned artists vs the signed, and making them a priority for inclusion in different playlists. They will also need to be great at determining what music fits a playlist’s theme, and make those themed playlists fun to listen to. What if, by reducing their dependence on the labels and their artists, Spotify was able to come up with a pricing model that more users would want to pay for, while paying artists more and becoming profitable?
It’s not that I think that the big-name artists will become irrelevant on streaming apps. After all, look at the stir Taylor Swift caused when she withdrew her music from Spotify and look at the excitement when Beyonce released exclusive content on Tidal a few weeks ago. Yet the days when select radio DJs decided what songs to play from a selection pitched to them by the labels are gone, and music products will need to adjust.
To use a phrase from that long gone era: stay tuned.