Is streaming technology saving the music industry?

[Shawn]

I used to work for a competing online music store (long gone), for each .99 cent track sold in the iTunes store .74 cents went to the record label (average, it varied a couple pennies here and there depending on the deal). Apple didn't care about the profit margin for song purchases from the iTunes store, it was a marketing tool to sell more iPods. They would have operated the store at a loss if need be, because the profits from hardware sales were much higher.

We made even less on per track sales, we had the same basic deal with the record labels but we also paid a third-party that provided the catalog and hosted it. We basically broke even.

[David Ayers]

My understanding was that the iTunes store is a loss leader for the devices.

[Ligeti]

If you do a Google search you will turn up plenty of evidence that the "break even" mantra isn't accurate.

I have found trying to have a critical discussion with users of Apple products is not too fruitful. I commend the company for its indoctrination of its fans though. Regardless, the latest estimates on profits at the iTunes store is 15% of revenue (apparently around $2b based on 2012 numbers).

Still - Apple rose to be a big seller of music, and they can fall to the wayside in time. I have no idea what the market for iPods are these days (I've always bought other brands), but I would imagine they're in decline - everything is Smartphone now, no?

Here's a quote from Forbes:

The other thing that I found interesting was the explanation of the costs and margins of iTunes. Apple makes a 30% gross margin on whatever is bought through the store. For example, a song: but the credit card company is going to be charging some 25 cents as a basic fee on the purchase. A 99 cent sale, with a 30 cent (roughly!) margin and a 25 cent fee: well, Apple around and about washes its face on the deal.

But the card company isn’t charging 25 cents per dollar of sales: it’s much more like 25 cents minimum fee and then perhaps 1.5 % or 2% of the total sale. So two songs sold in one transaction start to make Apple a profit. And a $15 book makes them a very good one.

Which I find really quite amusing. It’s iTunes, to a large extent, which has moved us all from buying albums to single songs: but Apple makes little to no profit by selling us single songs but would make out like bandits if we all bought albums.

So the argument they make nothing and it's a loss leader may hold water if you're buying one track at a time - but otherwise.........

Edited November 16, 2014 by Ligeti

[Scott Dolan]

.

Mind you, trying to tell Apple junkies anything negative about them is akin to trying to hold you breath the entire journey under water between Cuba and the US, so I simply don't bother to tread the same old ground over and over. There's nothing more gullible than someone with an iPhone and iTunes account, imo.

Well you were honest enough to say "imo" instead of "imho".

And hopefully his quote clears things up for Daniel.

David, it's a loss leader by default. It is indeed used almost exclusively to sell devices. ITunes is far more beneficial to artists than Apple as far as actual music sales are concerned. They are the biggest distributor in the world, at a fair price (for both artist and consumer), and with millions of subscribers who can download songs/albums in the comfort of their own homes with a click of a button.

The impulse buying power involved there cannot be overstated. When folks can listen to music samples and then buy an album right then and there all from the comfort of their easy chair, that's a huge paradigm shift in music consumption.

Edited November 16, 2014 by Scott Dolan

[Ligeti]

.

Mind you, trying to tell Apple junkies anything negative about them is akin to trying to hold you breath the entire journey under water between Cuba and the US, so I simply don't bother to tread the same old ground over and over. There's nothing more gullible than someone with an iPhone and iTunes account, imo.

Well you were honest enough to say "imo" instead of "imho". And hopefully his quote clears things up for Daniel.

David, it would have to be a loss leader by default. It is indeed used almost exclusively to sell devices. ITunes is far more beneficial to artists than Apple as far as actual music sales are concerned. They are the biggest distributor in the world, at a fair price (for both artist and consumer), and with millions of subscribers who can download songs/albums in the comfort of their own homes with a click of a button.

The impulse buying power involved there cannot be overstated. When folks can listen to music samples and then buy an album right then and there all from the comfort of their easy chair, that's a huge paradigm shift in music consumption.

It's not a loss leader, the numbers don't show that at all. It may have been at the beginning, but not now.

[The Magnificent Goldberg]

I'm not at all sure that $0.006 IS an abysmal rate of pay per play. It's not .6 of a cent per album but per play - so a ten track album, which gets played through would earn 6 cents. If I'd have had to pay someone 6 cents every time I'd played Grant Green's 'Born to be blue' - oh it's a nine cut album, so that's 5.4 cents, it would have cost me getting on for twenty dollars by now. Of course, albums I don't listen to wouldn't have cost nearly as much as the hard copy versions in Spotify terms but, although I have a few of those, I keep them for discographical reasons. And, also of course, I haven't played my recent acquisitions hundreds of times - yet, and may never do so, as we inevitably die before we've got full value out of lots of the things we buy Oh well.

What artists probably need to think about is making music that customers will want to come back to decade after decade. If they can do that, these tiny payments can add up to a good income.

MG

PS - like Ligeti, I don't watch TV or even know how to USE a mobile anything, so I have plenty of time for music.

Decisions, decisions. Now, what shall I listen to next - Edmundo Ros 'Dance again'

MG

At $.054 per album play you would have to had played Born to be Blue about 370 times to generate $20.00 of revenue. You must really like that album.

At $.06 per song, a ten track album would have to be played all the way through 100 times to make $6.00. There are very few, if any, albums in my collection that I have listened to 100 times.

Most jazz albums are considered successful if 1000 - 2000 copies are sold. For musicians who sell that few albums, the economics of Spotify do not make sense.

Sure I like it!

I'm surprised at someone playing their albums so little, but I don't know how old you are It takes me a LONG time to listen to an album many, many times. Only about 27% of my collection has more than 100 plays - but 60% of my collection is stuff I've bought since 2000 and that's too short a time for me to listen to anything as much as that. But returning to an album year in and year out for up to fifty odd years... it mounts up. And I still greatly enjoy those albums; I don't play them out of a sense of duty or getting value for money.

I'm actually quite shocked to find you saying that 1-2000 copies are regarded as success for a jazz album. Do you think that reflects a perception on the part of the public that jazz isn't entertaining any more? Even in a small country like Senegal, NORMAL first runs of Mbalax albums are 25-30,000 and, since royalties have to be paid on numbers manufactured rather than number sold, those first runs are set conservatively. The black population of the US is several times that of Senegal and there are, in addition, a lot of white people who like jazz.

MG

[Scott Dolan]

MG, those are some great points. Now, I personally will listen to an album until I'm thoroughly satisfied. Sometimes that's twice in a row, sometimes it's ten times in a row. I've always been that way. I like to pick them apart, break them down into their smallest pieces, then put them back together again. I suppose it borders on over-analysis, but that's the way I approach everything.

I could likely make artists that I like pretty wealthy if I used Spotify!

As for the racial element you unfortunately tacked on at the end of your post, my experience with Jazz has shown that the American audience is by far more white than black.

Edited November 16, 2014 by Scott Dolan

[Ligeti]

I'm not at all sure that $0.006 IS an abysmal rate of pay per play. It's not .6 of a cent per album but per play - so a ten track album, which gets played through would earn 6 cents. If I'd have had to pay someone 6 cents every time I'd played Grant Green's 'Born to be blue' - oh it's a nine cut album, so that's 5.4 cents, it would have cost me getting on for twenty dollars by now. Of course, albums I don't listen to wouldn't have cost nearly as much as the hard copy versions in Spotify terms but, although I have a few of those, I keep them for discographical reasons. And, also of course, I haven't played my recent acquisitions hundreds of times - yet, and may never do so, as we inevitably die before we've got full value out of lots of the things we buy Oh well.

What artists probably need to think about is making music that customers will want to come back to decade after decade. If they can do that, these tiny payments can add up to a good income.

MG

PS - like Ligeti, I don't watch TV or even know how to USE a mobile anything, so I have plenty of time for music.

Decisions, decisions. Now, what shall I listen to next - Edmundo Ros 'Dance again'

MG

At $.054 per album play you would have to had played Born to be Blue about 370 times to generate $20.00 of revenue. You must really like that album.

At $.06 per song, a ten track album would have to be played all the way through 100 times to make $6.00. There are very few, if any, albums in my collection that I have listened to 100 times.

Most jazz albums are considered successful if 1000 - 2000 copies are sold. For musicians who sell that few albums, the economics of Spotify do not make sense.

Sure I like it!

I'm surprised at someone playing their albums so little, but I don't know how old you are It takes me a LONG time to listen to an album many, many times. Only about 27% of my collection has more than 100 plays - but 60% of my collection is stuff I've bought since 2000 and that's too short a time for me to listen to anything as much as that. But returning to an album year in and year out for up to fifty odd years... it mounts up. And I still greatly enjoy those albums; I don't play them out of a sense of duty or getting value for money.

I'm actually quite shocked to find you saying that 1-2000 copies are regarded as success for a jazz album. Do you think that reflects a perception on the part of the public that jazz isn't entertaining any more? Even in a small country like Senegal, NORMAL first runs of Mbalax albums are 25-30,000 and, since royalties have to be paid on numbers manufactured rather than number sold, those first runs are set conservatively. The black population of the US is several times that of Senegal and there are, in addition, a lot of white people who like jazz.

MG

I've heard the 1000 number previously, I think it's about right. I recall being shocked at the time that so few copies of a disc were made, and trying to imagine world wide sales of a physical disc being as low as 1000 total. It's a scary thought. It's difficult in the digital age to aggregate all digital sales, but I suppose the physical number of copies reflects the size of the audience in some way.

We should also acknowledge that not all Jazz is the same. So I'd imagine Miles Davis' Kind of Blue has done very well in total sales - it has crossover, and a lot of people seem to have heard of it - as opposed to say a Brotzmann title. Like everything else, Jazz sales probably has a top 1% that defy the usual, and the rest struggle.

I think there is a subtle difference these days - on the one hand we have more genres and sub-genres than you can wave a stick at. On the other, specific genres seem to mean less and less to an attentive audience - I guess it comes with easy and free access to many different types of music. I fear that if Jazz artists made music that they thought a larger audience would want to hear, that I'd like it less. I mean, I can't imagine a mass-friendly Brotzmann, and what it would sound like..... maybe I'd be surprised......

[David Ayers]

I think it is pretty clear that the combined take of the retailer AND the distributor of CDs is greater than the 30% taken by Apple. The general consensus is that most of the yiled on iTunes is reinvested, but I am not making any sort of case about that. I don't feel excited about the issue.

As far as can be deduced by browsing around, the general yield to artists on $10 purchase price of a CD at the retailer is maximum $1.00 but usually less, maybe $0.30. On $10 spent at iTunes it is said to be about $0.94 (though conceivably less). It seems to me that iTunes yields to artists are similar to CDs with the advantage that there is no need to manufacture and hold stock. Weirdly, this discussion takes no account of that fact. See, for example, the extensive releases from ICP and Sun Ra which have recently appeared on iTunes. I'd say it is certain that these catalogues are making money for the owners that they simply could not make when the material was - in the main - OOP on CD. Now anyone can find it easily.

Not sure how a discussion about streaming morphed into one about iTunes.

[Ligeti]

Well, it hasn't (hopefully) morphed into being about iTunes. Views are without a doubt fully entrenched on the matter. If you own an Apple Smartphone or PC you're not going to be able to ditch iTunes entirely even if you wanted to.

But the fact there is no physcial stock has certainly been taken into account - it is why I argue that digital prices ought to be far lower than they are. No physical product ought to mean lower pricing. If I recall correctly the physical product costs around $2 to produce. I am pulling from a long held memory bank there though, so it could be a little more or a little less.... Don't forget, profits on digital downloads largely depend on whether there has been a purchase of 1 track (no profit) or two or more tracks (increasingly profitable).

I don't think anyone buys from iTunes because they think it's better for the artists - it's mostly about convenience as far as I can work it out. Apple release a phone with their own proprietary OS on it, they tie it into iTunes automatically, and that's the end of it - if you buy an Apple device you're going to be shopping on iTunes. It's a convenience thing, and part of the horrible practise that is becoming common of tieing specific devices into single storefronts. I recall the good old days when you shopped where the prices and service suited.... in the digital era, that's gone to an extent. The idea of a competitve market for some of these devices is gone, signed away with the software license agreement.

OOP CD's are another issue again. Of course, if no-one is stocking an item, it cannot be bought. It is easier to keep them alive in the digital era - but you don't need iTunes for that. As I've said, eventually we'll be forced to buy digital, including me. However, that won't be MP3's.

Here's something I came across:

Much of what you see there applies to digital and physical. The size of the band and the skill of the manager in negeotiating the contract may swings things one way or the other, but it's a ballapark. I saw a documentary recently about a band called.... something like 10 Miles to Mars or something..... sorry, their music was horrible and I've erased it from memory - but anyway, the main point made was.... digital sales in their contract were treated identically to physical product sales. Just another way the record companies remain to screw over the people that make them money.....

Edited November 16, 2014 by Ligeti

[The Magnificent Goldberg]

MG, those are some great points. Now, I personally will listen to an album until I'm thoroughly satisfied. Sometimes that's twice in a row, sometimes it's ten times in a row. I've always been that way. I like to pick them apart, break them down into their smallest pieces, then put them back together again. I suppose it borders on over-analysis, but that's the way I approach everything.

I could likely make artists that I like pretty wealthy if I used Spotify!

As for the racial element you unfortunately tacked on at the end of your post, my experience with Jazz has shown that the American audience is by far more white than black.

MG, those are some great points. Now, I personally will listen to an album until I'm thoroughly satisfied. Sometimes that's twice in a row, sometimes it's ten times in a row. I've always been that way. I like to pick them apart, break them down into their smallest pieces, then put them back together again. I suppose it borders on over-analysis, but that's the way I approach everything.

I could likely make artists that I like pretty wealthy if I used Spotify!

As for the racial element you unfortunately tacked on at the end of your post, my experience with Jazz has shown that the American audience is by far more white than black.

Wasn't the case when most of my favourite jazz musicians were having R&B chart hits. I'm confident that smooth jazz is still represented. And gospel music frequently appears on the R&B album chart even in this day and age. To say there's a difference in musical tastes is not racist, young man.

MG

[Scott Dolan]

Go to Vision Fest in NYC one of these days, MG.

Try out the Chicago Jazz Festival.

And note the much higher of percentage of whites to blacks.

And also note that not only will you hear absolutely NO Smooth Jazz at either, but that Viz is strictly Free/Avant Garde.

If you're going to lecture me about the realities of the American Jazz audience, I highly encourage you to actually know what you're talking about first.

[The Magnificent Goldberg]

Go to Vision Fest in NYC one of these days, MG.

Try out the Chicago Jazz Festival.

And note the much higher of percentage of whites to blacks.

And also note that not only will you hear absolutely NO Smooth Jazz at either, but that Viz is strictly Free/Avant Garde.

If you're going to lecture me about the realities of the American Jazz audience, I highly encourage you to actually know what you're talking about first.

I don't deny anything you're saying, Scott. It's been clear since the fifties that there are two fairly separate jazz audiences. I happen to like Soul Jazz, of which smooth jazz is the rather lame descendant. You happen not to. OK. But it's all jazz, lame or great; it's not compulsory for jazz to be good.

MG

[Clunky]

I've been a Mac user for 7-8 years and own an iPhone. I don't use iTunes nor download MP3s at all. It is possible to be selective. Sure macs are pricey but the hassle I've saved myself over the years has been massive.

[BillF]

http://www.theguardian.com/music/2014/nov/15/taylor-swift-music-spotify

[Ligeti]

HERE is a great article.

A couple quotes:

The Cynical Musician breaks it down in terms of U.S. minimum wage, currently $7.25. Based on a 40-hour work week and four weeks in a month, the monthly earnings for a minimum-wage employee would equal $1,160. The same amount of income would require 1,813 downloads per month on iTunes. Justin Bieber's song "Boyfriend," for instance, is the fourth best-selling download of all time. His record label collected $390,000, iTunes received $200,000, and Justin earned $83,000 from downloads of the song.

Some musicians aren't fans of programs that allow consumers to download music. Pete Townshend of The Who made headlines in 2011 when he blasted iTunes in the media, calling them a "digital vampire." According to The Huffington Post, Townshend believes that iTunes "profits from music without supporting the artists who create it."

Artists pay distribution services like TuneCore a yearly fee to enable the streaming of their music. To break even on the cost of a $50 yearly distribution fee, an artist would need more than 15,127 plays on iTunes Match or 5,171 plays on Spotify, a difficult feat for lesser-known bands who don't have millions of fans.

That's not to say other storefronts wouldn't have the same issues necessarily..........

[David Ayers]

Ligeti, you haven't got your facts right. Downloads cost less than physical product and you can play any music file on iTunes, it doesn't have to come from the iTunes Store. Also, iTunes Store purchases are .aac not .mp3. I don't use iTunes that much but I see it as a perfectly ethical enterprise.

[Ligeti]

Ligeti, you haven't got your facts right. Downloads cost less than physical product and you can play any music file on iTunes, it doesn't have to come from the iTunes Store. Also, iTunes Store purchases are .aac not .mp3. I don't use iTunes that much but I see it as a perfectly ethical enterprise.

I think that would depend on the flutuating price of the physcial product, no? I generally pay less than $10 for the discs I buy - though of course it varies based on rarity, the nature of the release (box sets etc,). How much is a single track from iTunes? The only thing I could find is that a single track costs somewhere between ,69 to 1.29 per track. What do they vary it on, length?

Apple themselves are not an ethical company - but dislike of them isn't solely to do with iTunes, it's just one facet. I don't intend to go into detail on that because a) It's not musically related, and b) it's so divisive a tipic it can only end in a flame war. Still, if you keep up with news about Apple their practises shouldn't be too difficult to find.

AAC is lossy compression, just like MP3.

[xybert]

Well, i just ordered a couple of Chris Speed CDs after checking them out on Spotify.

So like others here, that's the use of Spotify for me, checking stuff out. I've also found it really good for going back and revisiting stuff that i traded long ago = want to hear it again but not badly enough to repurchase the CD.

It's getting under my skin though; i'm getting more and more used to the concept of streaming. The music is out there, it exists, nothing is going to change that whether it's in your collection or not. With streaming you can listen to it whenever you want without 'owning' it. Hey, i'm a CD addict as much as the next guy, but streaming itself ain't so bad. Whether artists are getting compensated fairly is another issue... one that it's very tempting to throw your hands up and let the lawyers worry about it. I don't think that the general public will tie themselves in knots worrying about where the money is going any more than they ever have: the service is available and they will use it.

[JSngry]

How does the royalty rate for Spotify compare to the royalty rate for conventional AM-FM radio play (when there used to be that in quantity)?

Different experiences, I know, but when broken down into Hit Song X generates so much per hit on Spotify vs Hit Song X generates so much per play on WEEP-FM, what are we looking at?

[Д.Д.]

How does the royalty rate for Spotify compare to the royalty rate for conventional AM-FM radio play (when there used to be that in quantity)?

Different experiences, I know, but when broken down into Hit Song X generates so much per hit on Spotify vs Hit Song X generates so much per play on WEEP-FM, what are we looking at?

Guys, it is wrong to talk about Spotify per-stream "rate". It changes depends on the number of paying users and the number of streams (or, to be exact, the share of streams of a particular track out of total Spotify streams). When there are more paying users (and remember, this is just 12.5 million people at the moment) the payout for individual streams will be higher.

[JSngry]

So you're telling me that the answer to the question "somebody just listened to my song on Spotify, how much did I just make?" is nothing more than. "Well, that depends..."?

Seriously?

[Ligeti]

Well, i just ordered a couple of Chris Speed CDs after checking them out on Spotify.

So like others here, that's the use of Spotify for me, checking stuff out. I've also found it really good for going back and revisiting stuff that i traded long ago = want to hear it again but not badly enough to repurchase the CD.

It's getting under my skin though; i'm getting more and more used to the concept of streaming. The music is out there, it exists, nothing is going to change that whether it's in your collection or not. With streaming you can listen to it whenever you want without 'owning' it. Hey, i'm a CD addict as much as the next guy, but streaming itself ain't so bad. Whether artists are getting compensated fairly is another issue... one that it's very tempting to throw your hands up and let the lawyers worry about it. I don't think that the general public will tie themselves in knots worrying about where the money is going any more than they ever have: the service is available and they will use it.

I think this is a good post. Even old gits like me have to accept that the way music is consumed these days is rapidly changing. The biggest problem the music industry has had up until now is that they're far too slow to get with the needs and wants of its audience. That would be bad enough, but they compound it by continuing to be backwards in their thinking. This is pretty transparent when it coems to the contracts they offer artists - they're mired in 1960. Then new technology money came in and pulled the carpet out from under their feet - now they're followers, not leaders. It boggles the mind that no-one in the industry knew this was going to happen......

Piracy is always the whipping dog, and of course on many levels it is indeed the bane of the industry. But it also speaks to the desire of the audience to consume music quickly, online, and on the move. I will feel much more comfortable turning to digital if I can access the open market for my purchases, rather than being driven to a specific storefront. Consumer choice needs to be paramount from a user perspective.

Arguing against Spotify seems like a simple thing, but in the end you're talking about renumeration based on the music made. Well, artists have been given 20% to the manager/promoter, a huge slice to the record companies, and then there's studio costs, marketing, blah blah blah. It's not surprising that the new media hasn't really helped the artists. As Townsend said - storefronts like iTunes has invested nothing in the artist, to them it's just product. At least the record company provides access to recording studios, pays up front for the recordings and productions, the design, manufacture, and distribution etc. In other words, the record labels are invested in the success of a release. The storefronts don't really care - it's all unit sales based on bits of data.

[Dave Garrett]

I have found trying to have a critical discussion with users of Apple products is not too fruitful. I commend the company for its indoctrination of its fans though.

I have found trying to have a critical discussion with bashers of Apple products is not too fruitful. But that's generally the case with any sort of technology-specific religious wars. I'd suggest that anyone who finds Apple users intolerable needs to have a chat with a few Linux bigots to put things in perspective.

About the only thing that I use iTunes for regularly (on a Windows box) is for local backups of my iDevices and iOS upgrades. I've ripped a few CDs with it, but when I finally get around to ripping all of my CDs, I'll almost certainly be managing that library with something other than iTunes. I prefer FLAC for archival/backup purposes, which can then be downsampled to mp3 for portable listening devices. I've never purchased any music through iTunes, and although I hesitate to say "never", it's unlikely that I will, absent a really compelling reason to do so.

[Ligeti]

I have found trying to have a critical discussion with users of Apple products is not too fruitful. I commend the company for its indoctrination of its fans though.

I have found trying to have a critical discussion with bashers of Apple products is not too fruitful. But that's generally the case with any sort of technology-specific religious wars. I'd suggest that anyone who finds Apple users intolerable needs to have a chat with a few Linux bigots to put things in perspective.

About the only thing that I use iTunes for regularly (on a Windows box) is for local backups of my iDevices and iOS upgrades. I've ripped a few CDs with it, but when I finally get around to ripping all of my CDs, I'll almost certainly be managing that library with something other than iTunes. I prefer FLAC for archival/backup purposes, which can then be downsampled to mp3 for portable listening devices. I've never purchased any music through iTunes, and although I hesitate to say "never", it's unlikely that I will, absent a really compelling reason to do so.

That would be the entrenched views I mentioned earlier.

Frankly, as long as people are buying music, and first and foremost enjoying it, it's all good.

I understand concerns about artists getting a fair share - at the same time if I see a secondhand CD that i want then I'll pick it up. Of course, artists get nothing from that sale.....