Music Industry Is Keeping Streaming Services Unprofitable 118
Lucas123 writes "Music streaming services, forced to give from 60% to 70% of their revenue to the record industry, will never be profitable in their current state, a new report shows. Unless the services can monetize their user base by entering new product and service categories, or they can sell themselves to a larger company that can sustain them, they're doomed to fail. One method that subscription services might be able to use to achieve profitability is to up sell mobile deals or bundles to subscribers. For example, a select package of mobile services would be sold through the music service provider, the report from Generator Research suggested. 'Services like iTunes Match and Google and Amazon are already heading in this direction,' the report states. Another possibility would be for a larger company to purchase the music service or for the service to begin offering sanitized user behavioral data to advertisers, who could then better target a customer base."
Morons One And all (Score:5, Insightful)
And exactly how profitable are torrents to the music industry?
Re:Morons One And all (Score:5, Insightful)
And exactly how profitable are torrents to the music industry?
Without driving people to torrents and claiming the world is rife with piracy the record labels have no bogey man to haul out and parade back and forth for more corporate welfare laws. I think Princess Leia said it best: "The more you tighten your grip, Tarkin, the more star systems will slip through your fingers." A pretty good analogy.
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Yeah, it is.... Ok, so... wait. Who is the fingers?
Re:Morons One And all (Score:5, Insightful)
Without driving people to torrents and claiming the world is rife with piracy the record labels have no bogey man to haul out
Oh its much worse than that.
Here Itunes, Google, Pandora, and World Plus Dog have demonstrated to the music industry EXACTLY how they can reshape their business, both for
streaming and for buying. They have handed them an entirely new business plan, and proven that it works.
Yet still they seem content to press CDs, and let someone else manage the on line sales without lifting a finger, yet all the while moaning about piracy,
and raping the artists.
As soon as the artists decide to go direct to Google and iTunes the Labels are done, and good riddance to them.
Re:Morons One And all (Score:5, Funny)
But, but, but! The world where they robbed foolish hick kids into signing away their lives for a paltry advance; they made payola to drive out talent and make room in playlists for their brand; they went after people who only wanted to listen to their record or CD when they were in their car or jogging. That's the only world they know!
You can't expect an industry entrenched into that way of thinking is willing to emerge from their bunker.
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As soon as the artists decide to go direct to Google and iTunes the Labels are done, and good riddance to them.
It's a nice theory but in practice I doubt it'll happen, because the labels control many popular artists and have huge back catalogs of popular music. Any streaming service who tried doubling as a label would either see higher prices or get no license at all, and a pure-indie streaming service would go nowhere. It'd be like Microsoft declaring that they're going to build Microsoft PCs themselves, of course Dell and HP and Lenovo would be up in arms about it.
Besides, who says it's be easier to get a good dea
Re:Morons One And all (Score:4, Interesting)
Wait, What?
Several companies are already doubling as a label.
Look here: https://play.google.com/artist... [google.com]
And here: https://www.apple.com/itunes/w... [apple.com]
http://www.tunecore.com/index/... [tunecore.com]
And the Music industry isn't in a position to take on Google and Itunes and Amazon. Those three companies decide not to sell your crap-music, at your crap-prices, and you are pretty much dead in the water as a label.
Artists are getting smarter. They are starting to care about the license terms, and while they may release their first hits to a label more and more of them are declining to take long term contracts and trying the indi market.
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Together, no. But individually, yes.
When iTunes was the only provider around and calling the shots, the music industry was afraid. Very afraid. So much so they cut Amazon a very sweetheart deal - sell music, but DRM-free, in an attempt to break up the grip iTunes had on digital distribution. It'
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Apparently, she can't play fully dressed.
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As soon as the artists decide to go direct to Google and iTunes the Labels are done, and good riddance to them.
And now guess once again why the labels don't want to keep independent streaming and download services from pushing into the market.
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"As soon as the artists decide to go direct to Google and iTunes the Labels are done, and good riddance to them."
Which is a large part of what Kim Dotcom's "Mega" thing was about and why it had the labels cacking in their pants.
Options in Canada (Score:1)
Actually just had a bit of a b*tch session about this.
Android mobile devices are overall the most well selling, with 40% [mobilesyrup.com] adoption (IOS follows at 35%).
That comes to roughly 9m users on wireless devices. I'm not sure what adding other media devices (tablets, tv-boxes, etc) would contribute, but there are those as well.
So I heard a song on the radio I liked, and tried to buy it online.
Google Play Music: Not available in Canada
Amazon Mp3: Not available in Canada
iTunes: Not available on platforms other than IOS
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Please, no more Star Trek references!
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All right, then how about:
“Alia grasps the power firmly now.” She looked back at Idaho. “You understand? One uses power by grasping it lightly. To grasp too strongly is to be taken over by power, and thus to become its victim.”
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Im willing to bet iTunes is pretty profitable, and that the assumption is that Pandora etc all cut directly into iTunes profits.
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Re:Morons One And all (Score:5, Insightful)
The problem is there is absolutely no need for a record company anymore. The record companies are trying their damnedest to keep that a secret for as long as possible.
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I dunno about that. A good label curates a catalog that I can use to discover "new" music, can help with setting up shows, and what not. Distributors, now that's a different story.
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Most artists aren't salesman.
Mobile YouTube costs hundreds per year (Score:2)
With a bit of tweaking, YouTube could also easily help you discover "new" music.
Only if either A. you want to sit at home at your computer to discover music instead of discovering music during your commute, or B. you want to pay hundreds of dollars per year to a wireless carrier for a data plan on top of what you may already pay for Internet at home. FM radio stations stream music to a vehicle with no recurring fee.
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Record companies have nothing to do with that. They hire other people to do it and subject them to the same nasty contracts the artists are subjected to.
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I dunno about that. A good label curates a catalog that I can use to discover "new" music, can help with setting up shows, and what not. Distributors, now that's a different story.
In other words, the only real purpose most labels serve is as a marketing firm. The big thing with record companies is that the artist only gets something like 10%, and I think that's wholesale, not retail.
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This is very true. In the Indie world, it can be more amenable to the artist and I hope that the music "industry" figures out that, hey, treating artists like more than chattel can be profitable to both sides of the equation. When folks ask who does it right, I point at Dischord Records out of DC. They have a very limited focus (DC based punk/post-punk bands) and have very simple terms with all costs listed up front and full accounting. Once that number is reached, it's 50/50 after that. They don't do
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That's what the Internet is for now.
Re:Morons One And all (Score:5, Insightful)
Yes there is. The record company has "producers".
The producers ensure that the music does not annoy anyone[1], is de-s'd, autotuned, limited, compressed, and what not to sound exactly same as everybody else.
Imagine what music would be without aforementioned professionals! It might sound interesting, for god's sake!
[1] The worst that can happen to a radio station is listeners to change the station. Sounding annoying or being (too) different is sure way to do it.
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Well, no, producers are good... but when they are controlled by the Record company and not the artist they usually do more harm than good. You can litterally hire a producer online now-a-days. I know a guy that does it for a living now. He produces entire records remotely and it works out pretty well.
Accidental infringement (Score:2)
The problem is there is absolutely no need for a record company anymore.
Who else will vet your music to make sure you didn't accidentally copy a song that someone else had already written?
Cut Out The Middle Men (Score:5, Insightful)
Music streaming services simply need to form an association so they can publish direct and basically cut out the publishers who do nothing but bring junk music to the scene. So direct from artist to music streaming services and skip those shit head, money sucking, politically corrupting, parasites. There is plenty of money there once the middle men parasites are pushed out of the system.
"Myspace bands" (Score:2)
Two words: "Myspace bands".
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Except this is a situation where some kind of a middle man is clearly required. Artists have neither the means nor the capacity to negotiate and manage licenses with dozens of different streaming services. And it simply wouldn't be worth it to them, because the per artist payout from a given service isn't significant enough to warrant the hassle of dealing with a licensing agreement. You could argue that a different middle man is needed, but simply eliminating the middle man isn't a valid solution to anything.
You missed the part where he said
Music streaming services simply need to form an association
You sign with an association once and done, and your music is syndicated to all the streamers or resellers.
No long term contract, no signing away your rights forever.
The only problem would then to get access to studio sessions so that it didn't sound like it was recorded in a garage.
There really isn't shortage of them either, (google will find studios in most mid size cities) but they can a bit expensive.
So getting your first single out there may be a problem of money. But y
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...or they just need to set themselves up in china and tell US record companies to fuck off
Cuts both ways (Score:2)
Or the publishers could start streaming their "junk" direct to the consumer.
Re:Cut Out The Middle Men (Score:5, Insightful)
Music streaming services simply need to form an association so they can publish direct
This is very true. Recording and editing the music with the decent quality used to be very expensive. The analog consoles used to be hundreds of thousands of dollars producing similar quality what a thousand dollar computer with a decent audio card can do today. The studios nonetheless demand copyright ownership for offering studios (cheap now) and distribution service (also became cheap).
Similar state existed in photography where the equipment had astronomical cost and companies could offer equipment, hire photographers "for hire" and keep the copyright. Nowadays, is is nearly impossible to see contracts where the photographer does not retain the copyright on his/her images. Still, plenty of services are available that remove all the "negotiation" part when selling and advertising the images. The photographer is free to offer images for sale with multiple brokers and some have agreements where if an images available for sale on one service will be offered for sale on the other too. There's no reason the music industry cannot follow the same model. The musician will be in charge of the recordings.
What really is killing the development of this market is the fact that one can sell "the ownership" under the current copyright laws. Once the labels buy the "ownership" of the recording they haven't produced, they can also buy the laws that benefit them and no so much help the musicians or the music industry in general. Kill the labels and let the artists to be the deciders of where the music to be played and it will increase the competition among services too -- bringing the new and innovative distribution channels.
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Umm, the middlemen looks to be the music stream services. All they have to do is distribute a product that someone else has produced to the consumer, and for that they are getting to keep a whole 30-40% of the total sale.
Sorry, but if they can't make a profit on that, then they are doing something seriously wrong, or there are too many companies competing for too small of a market.
In other news headlines today: (Score:3)
"Sky Is Still Blue"
"Politicians Are Still All Lying Crooks"
"Death, Taxes Still A 100% Certainty"
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With 7BN living people and 100BN people having ever lived, human death still only at 93%
Fuck the RIAA (Score:1)
They are destroying their own business. Not that I really care though because most of their music is commercial crap anyway
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With record profits, and laws being passed in their favor all over the world ( beyond just the RIAA but the entire industry ), it would be hard to convince them they are destroying their business.
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Oh, make no mistake about it. The RIAA has actively funded these initiatives (and in a few cases been the ones to write the laws on behalf of the US government)
The entities pushing this in other countries are so closely affiliated with the RIAA as to make them more or less a cartel which act as if they're not all
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Didn't mean to imply they weren't driving it.. just that the laws are being passed.
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No, but when you say "beyond the RIAA" you make it sound like independent entities are pushing the same thing.
For purpose of these kinds of laws, there is no 'beyond the RIAA', just the domestic proxies who have standing to lobby for it in the country.
But since they're usually funded by, and essentially fronts for, the RIAA -- essentially we see multinationals promoting laws around the world favorable to them, and occasionally backed up by the US government who does the same thing through trade agreements a
The Problem (Score:5, Insightful)
I know that "music companies are being stupid and greedy" is implied by the piece, but I'm not sure it's the fault of the music industry that ad-supported music is just a crappy source of revenue.
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AM radio is almost dead, and FM radio is dying because of the amount of commercials they need to air to be profitable.
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As was nicely put in "south Park"
This month he was hoping to have a gold-plated shark tank bar installed right next to the pool, but thanks to people downloading his music for free, he must now wait a few months before he can afford it. Come. There's more. Here's Britney Spears' private jet. Notice anything? Britney used to have a Gulfstream IV. Now she's had to sell it and get a Gulfstream III because people like you chose to download her music for fre
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Some people like to have a choice of music other than what the station manage wants to foist on you.
These streaming services mentioned in this article aren't chock-full-of-ads, and you can tailor your listening to what you want.
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I know that "music companies are being stupid and greedy" is implied by the piece, but I'm not sure it's the fault of the music industry that ad-supported music is just a crappy source of revenue.
Ad-supported music is not a crappy source of revenue. Ad-supported internet streaming music IS a crappy source of revenue.
Every user you add, adds to the bandwidth, cpu, power, etc requirements for internet based streaming. There's also a very direct and easily tracked log of exactly how many streams to how many distinct devices were happening at the same time, and when.
The old radio broadcast reaches fewer people with one tower, but seems to be doing ok still, even with far fewer listeners these days. That
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Well Streaming services for unlimited music still cost you around $10/mo. (regardless of which of the services you choose).
So its not all ad supported any more.
Most of these services, and there are a boatload of them [cnet.com] are all hovering around the same price. Some offer sales as well as streaming, others don't.
There is still the Free services that are ad supported.
Bypass the Middle Man (Score:5, Interesting)
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Because musicians are well known for their ability to negotiate complicated contracts with dozens of large companies.
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How about a system that lets the artists themselves opt in (bypassing ASSCAP) for a reasonable set of royalties. The artists would get more money than the record companies give them for their streamed music, the streaming companies would pay less in royalties, and the tyRIAAnosaurus rex can take another step towards its destiny.
Because musicians are well known for their ability to negotiate complicated contracts with dozens of large companies.
... and because even if musicians got every cent of the revenue from streaming, the amount of money they'd get would still suck. Streaming is a nice way to make steady money off of a long term mega-hit but not a good way to make money off of short term hits and relatively few songs become evergreens.
ASCAP/BMI/SESAC/SOUNDEXCHANGE (Score:3)
These are the 4 agencies you have to pay royaltees to.
I've seen the rates. Altogether it's about $6k per year to stream your standard shoutcast style station. When streamers like spotify, etc have revenues in the millions, that's a drop in the bucket.
The only time there is a sabot in the gears is when it's video. Then your standard mechanical/compositional licenses fees are required, and on top of that a Sync license is required which adds an entire clusterfuck of problems. With non-sync you just pay the 4 agencies, but none of them collect Sync rights. You have to track down every person involved in the production to get permission to stream any music with video in it.
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The rate you are quoting are only for Small Broadcasters who qualify for the flat rate minimum. These rates don't apply once you get past a certain number of Listener Hours (Which Spotify / Pandora / ect are way past to be able to use). For a larger Broadcaster, you pay a certain rate per listener per hour for a non-interactive broadcast (I think it's .006 per listener per hour just for SoundExchange, not including the other THREE licenses you have) . For a interactive broadcast (Which Pandora / Spotify
Sanitized? (Score:2)
Because, you know, listening to music streaming is predispose to lewd, perverted and... in any case, highly imoral... behavior?
There's these guys: (Score:2, Interesting)
http://www.mosesavalon.com/why... [mosesavalon.com]
Old thinking. (Score:1)
My empathy is 100% with the artists, not a thing for the non-musical side of the business.
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Who needs to get the 21st century when you've got big ass law firms at your beck and call and Congress permanently wrapped around your finger?
Streaming services need to be scouting bands (Score:2)
Record contracts are out.
Streaming contracts are in.
riaa more concerned about control than money (Score:2)
Legal streaming or illegal streaming. (Score:2)
Music can be obtained from torrents, purchasing online or it can be obtained from legal streaming services. These are all valid if not legal sources of music. If one or more becomes too expensive or unavailable, the others will fill in the gap. This was quite visible when the music industry refused to embrace mp3 music distribution. The illegal sources flourished during this time. Once Apple, Amazon and other started selling mp3's without DRM, these illegal sources became less attractive. Note that al
Better idea (Score:1)
They could start promoting artists on their own, without the music industry's help. They could be the new music industry, and put the old music industry out of business.
Youtube video plug. (Score:2)
I produced http://www.youtube.com/watch?v... [youtube.com] from conception to completion within a day (yesterday, Valentines Day if you care about pink fluffy luvviduvvy stuff). This says all I think I can say abou the Music Industry's 'think of our struggling artists when you ponder not giving us more money than we need' attitude.
Doomed to fail (Score:2)
That is the plan. Until the industry finds a way to charge yo for every time you *think* about a song they are not going to give up any thing to new technology or delivery methods.
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They damn will better pay 60-70% of their revenue to the people who have actually made the music. 30-40% margin really ain't that bad reselling someone else's work. Why should the streaming services get to keep 70% of their money when all they are doing is streaming an audio file over the internet. So simple to do these days. If the streaming services want higher profits they'd should commission their own music being made. If anyone is trying to be a free loaders it's the streaming services.
Haha, so cute! You think that money goes to the people who made the music!
Man, I needed a laugh today.
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I might agree with you for the services where I type in the song I want to play and it plays. But for the service I use, I type in a few songs I like and the service finds hundreds of other songs I might like, plays them, and learns my habits to find more of them. And then I go buy downloads of those songs so I can listen to them all the time, and I go see those artists at clubs when they come to town.
That service deserves more of the money, because they aren't just serving a file, they're deciding which
Streaming services are just new middle men (Score:1)
The streaming services are just new middle-men - we don't need them. At least a good label attempts to develop their bands.
OMG! (Score:2)
You mean the fact that a business is on the internet doesn't mean they're entitled to print money?
quite the news flash... (Score:5, Insightful)
I was the CEO of a company that sold ringtones and MP3s a la carte for mobile devices. When you added up (1) the licenses paid to record labels, (2) the fees paid to mobile operators for payment processing, and (3) publishing royalties, it was something like 120% of the retail price for the content. So, umm, not a really scalable business model[1].
We eventually built out an ad-supported streaming model, under the compulsory licensing model for "internet radio" (a la Pandora), and I actually believed there was a viable business there, even without premium (ad-free) subscriptions. But I'm not so sure now. The music industry, which for so long made money by controlling marketing and distribution, is now too accustomed to making money through venture capital. Not directly, of course -- they extract it via a never-ending stream of venture-backed music startups, who either pay licenses in advance that they'll never be able to recoup with sales, or pay with legal settlements when they try to do something innovative that doesn't fit into the existing (untenable) licensing models.
I do believe that ultimately we will get to more of a free market that escapes the cartel of the legacy music industry, but it's certainly taking longer than I had expected. There are a lot of powerful entrenched interests.
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I find this fascinating, especially given that the prices charged for ringtones were pure usury. I wonder if you'd be willing to relate a more detailed story of wha
Re:quite the news flash... (Score:5, Informative)
There were basically three types of ringtone companies back in the heyday:
1. Subscription: These were companies who convinced people to sign up for a recurring $9.99/mo charge on their mobile phone bill to receive some number of monthly "credits" for download;
2. A la carte: Companies who provided the implementation of the carrier "decks" that sold ringtones for $1.99-$2.99 a pop;
3. User Generated: services that allowed users to upload content that would be made available for download by other people.
The fundamental problem with the Subscription services was that they could only possibly make money by breakage - that is, if people who signed up for the service failed to download all of the content they were entitled to in a given month. Or, better yet, the subscriber forgot (or never knew in the first place) that they had signed up for the service, and therefore kept paying until Daddy noticed the charge on the phone bill and called the carrier to complain. The royalties they were paying (together with the carrier transaction charges) forced them into this unhealthy operating model that was clearly unsustainable. There were several US companies that reached revenues in excess of $100M without ever turning a profit. Venture capital pumped money into them on the way up, lured by the top-line growth. Crazy.
The a la carte providers didn't fare much better. There is really no possibility of negotiating realistic licensing with the music labels, because there are only four (three now?) of them, and they all refuse to do any licensing deal that doesn't have a "most favored nation" (MFN) clause. Essentially what this says is that if the licensee does a subsequent deal with another record label, and that subsequent deal has better terms than what was negotiated with the first label, then the first label automatically gets those terms. In practice, this means that the company would do a deal first with the smallest and most hungry label (cough, EMI, cough) at terms that seemed viable - making the company think they had a real business -- but then the deals with Warner, Sony, and UMG would progressively make the economics worse to the point where there was no real way to make money. And because the deals are heavy on upfront payments, and annual guarantees, the labels are making money even when the retailer never really hits escape velocity.
The user generated sites, which were attempting to cut out the unnecessary middlemen, allowing artists to connect directly with their fans, were mercilessly sued by the labels. Untold millions of dollars were transferred from venture capitalists who had funded these companies to the labels that sued the companies - along with their directors, their investors, their managers - in settlements and coerced licensing deals specifically designed to ensure that the money going to the labels would stay in their own coffers and would not have to be shared with artists.
The economics of MP3 and streaming sites are not much different. One day I expect it will be taken for granted that a service can operate profitably by providing a useful service that allows artists to sell (or share for free) content with their fans without fear of litigation by major labels. But that's not today.
Ultimately, I still believe that the copyright and legal systems will come to understand that protecting the rights of artists is different than protecting the legacy music labels. I've been amazed and enthralled over the past few years by the incredible amount of beautiful new music being released - no label required.
Re:quite the news flash... (Score:4, Interesting)
You may not like Lady Gaga, but as long as there are people like her willing to 'sell out' in exchange for promotion, the recording industries will not change drastically. Because they will own all the copyrights.
Well, duh. (Score:4, Insightful)
That has been obvious to anyone associated with this business since about 2002.
I think this is a feature, not a bug, from the point of view of the record labels.
Or ... (Score:2)
Or, I will stick with my current strategy -- buy physical CDs, rip them to MP3, and listen to them wherever the hell I want ... and you don't get to sell my sanitized behavior to advertisers.
It's been working quite well for me so far.
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Garth Brooks loves you
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Hey may not, but there's a bunch of punk bands and the like which probably do. I discovered psychobilly from the cool CD cover art, and subsequently have found several bands I really like because I can tell right away what kind of music it is because of the cover art.
I've discovered more music I've never been exposed to from rooting around in CD stores than I would otherwise, and I've spiraled back and gotten stuff I missed when I was younger.
But when I buy the CD and rip it, I don't
Monopolies (Score:3)
Record companies can extort huge license fees because they control most of the artists, which is because they control the biggest market, which is because they extort huge license fees to make other industries unprofitable.
Trying to supplant the record industry by licensing its content can't work. If the streaming industry wants to go anywhere, they need to deal with the artists directly. Which popular artists hesitate to do to avoid hurting relations with record companies.
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Now, with the net, it brings back competition IFF it will step forward.
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Go to the musicians directly (Score:3)
Try signing your own artists (Score:2)
There are a lot of people making music in their garages. And yes... most of it is terrible. But some of it isn't.
Social network it... and sign people that are decent. Then as part of the deal your site would promote those singers.
Add on to that, music coaches, sound studio time, and finding concert venues for top singers.
how is this calculated (Score:1)
Gives 60% of profits to X.
Isn't profitable.
Where does that 40 % go?
Doesn't mention spottify or Deezer (Score:1)
Both Deezer and Spottify have 5 million paying subscribers.
So make your own music (Score:1)
If Spotify isn't happy paying royalties, they're welcome to make their own music.
Seriously though, if your business model can't support paying $0.004 (or less) per play, when you're serving an audio advertisement (and theoretically a well-targeted one) every 3 songs, and have endless display advertising, then you're doing something really, really wrong.
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The only problem there is the calculations. For radio, a "spin" is a single broadcast of a song. It may reach a million people, but it's still just one "spin". Services like Pandora, by contrast, pay per stream. That means that on Pandora, if 10 people are listening to a song at a given time it counts as 10 "spins". If Pandora paid the same rates under the same rules as broadcast radio, they'd be paying less than 1% of what they currently are being charged.
What's wrong with iTunes Match? (Score:2)
I've been very happy with the service so far. I can access my music from a variety of devices, whenever I want, and I only pay a little more than $2 a month. I even had a hard drive failure last summer, and I was able to redownload every single track without any loss. Obviously, the service will never be any good to people who hate Apple, but for non-fanboys who like the right tool for the job, it's fine. If this is the model the industry is moving towards, is that so bad?
Nonsense (Score:2)
The Industry is Completely Out of Touch (Score:1)
On the other side I've seen artists complaining that when they do get a lot of play on streaming services they still don't get much in royalties. I would venture (meaning I have better things to do this afternoon than research the real numbers) that in terms of revenue to the independent artist that sells their own music, one customer who purchases a download or buys physical product is equivalent to a much larger number (10? 100?) who play them repeatedly on streaming services. From a label or self markete
Profits vs. Stock (Score:2)
""Putting to one side the quality of the actual service, which most users would rate very highly, the facts show that Pandora -- when viewed objectively as a business -- is in dire straits," the report stated. "We are at a loss to know why the company's stock has performed so well, especially over the last 12 months."
Over the past year, Pandora's stock price has jumped from $11.48 to $37.95."
So, Apple has a record quarter, a sustainable business model, yet their stock goes down on news of their sales. Pand