Streaming Economics

If Home Taping was supposed to have killed music (it didn't) then streaming is supposed to be starving artists and performers.

Look at a history of music. Musicians have always been badly paid, not paid at all, relegated to the servant's quarters, screwed over by record companies and mangers, and otherwise as badly treated as actors. Even a Court composer might not get paid for months on end and have to live on credit. Unless they were a celebrity or wrote popular opera. And even Mozart died a pauper.

Music streaming companies are carrying on a long and mildly despicable tradition.

The core of the streaming proposition to the customer is that the marginal cost of a stream is zero, and the average cost decreases as the amount streamed increases. In the UK this is only beaten by BBC Radio, which has zero cost, a decent quality of content but a now fairly lamentable quality of transmission, and is paid for by the people who watch television, so there are no advertisements. Either beat the heck out of buying CDs. Or listening to adverts.

Imagine that the marginal cost of a stream was not zero. That in addition to the monthly fee, we had to pay, say 20p for the first time we streamed a track, and then it was free thereafter. Taylor Swift's 2019 album Lover is £6.88 for 18 tracks at Amazon, or £3.60 under this suggestion. (Keeping a record of a customer's free list and doing the accounting is easy, though making it blindingly fast might be a challenge.) Maybe we get "20 free tracks" a month.

I image that the number of people streaming would fall faster than Disney losing subscribers for firing Gina Carano (that reference isn't going to age). Even at 10p a track. That zero marginal cost gives people the feeling they are getting something for nearly free. Which is a powerful feeling for a marketing department to have working for it.

Hold those thoughts for a moment.

Streamers pay the artists per play. I might play a favourite CD 100 times over four years (say), and at £0.0022 / stream for a 10-track CD, that's £2.20, which is about what an artist with a good lawyer and agent gets from the sale of a CD. But the CD (or downloads) pay the artist's royalties up front, when the money is most useful. Artists would love my suggestion of an up-front charge followed by free repeats, because it matches what happens with CDs, vinyl and downloads. (Except for the bit where I own the CD, but I only have a free repeat as long as the streamer a) stays in business, and b) decides to change its mind because that's what big corporations do. Let's note this ownership issue, and move on.)

What's good for the artists is going to put off the customers, and vice versa.

But then again: what's the point of providing music to people if the artists don't make money from it? Or if the effort it takes might be more profitably used in another medium?

None. Which is why the streamers make it very easy for artists to get their music onto the service. If the streamers charged the artists (as Spotify is rumoured to be thinking of doing), I imagine a lot of the artists would simply vanish. The expected benefit for most of them would be close to zero at best.

Streaming looks like a robust business model. It piggy-backs on fast broadband that is going to be there anyway, on super-capable mobile computers masquerading as phones that everyone has, on the willingness of artists to provide music and accept what amounts to deferred payments for an extended period, and a pricing scheme with a zero marginal cost. What could go wrong?

Well, something is, because music streamers are not making scads of money. It's news when one turns a profit in a year.

What really go wrong is the Regulators enforcing minimum payments to artists. Governments in need of money realised a while ago that digital businesses are not paying enough for the access to the markets those Governments provide. It is taking them some time to figure out how to get the money while not losing the service, but they will get there. Legislation grinds slow, but it grinds fine.

It's also a thought that Amazon or Apple could buy all the major streaming services (except each other) with about half-and-hour's profits, take the savings, and run them as brands. Is that going to be what happens a few years down the line?