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Streaming is making the music industry more unequal

This year we saw that streaming music favors the few

Justin Sullivan/Getty Images

This year, in lieu of the traditional Best Of Lists, we thought it would be fun to throw our writers into a draft together and have a conversation. Jamieson Cox and Micah Singleton talk about how the rise of streaming music is making one of the music industry's big problems even bigger. Apple is making a big investment in streaming, YouTube's joining the circus, and Google and Spotify's products keep getting bigger. Is any of the new money coming in trickling down to the artists who deserve it?

Here's what we learned in 2015.

Jamieson Cox: Micah, there’s an idea I can’t get out of my head when I think about the music industry in 2015: musical inequality.

Micah Singleton: That doesn’t sound promising. In what sense?

Jamieson: This was the year in which the gap between the world’s biggest artists and its version of blue-collar workers — the difference between Adele and your favorite indie rock band, basically — became really striking. It was also the year music streaming took off, and you can bet the two are related. Spotify increased its user baseApple joined the race, YouTube launched a paid service, and Tidal… tried its best. The problem is that all of these services are contributing to a system that only really works at scale.

Micah: I agree. The major acts have always controlled the lion’s share of artist revenue, but not to this extent. It’s gotten to the point where indie artists aren’t able to make a living simply by releasing albums. A good album by itself isn’t financially sustainable for many artists.

Spotify made Drake millions this year

Jamieson: That’s right. Let's look at an example. Drake’s If You’re Reading This It’s Too Late was one of 2015’s most popular albums, and it was available on Spotify as soon as it was released. When we had this conversation, the album’s tracks had been played a combined 768 million times. Not bad, right? Spotify quotes its average payout to rights holders somewhere between $0.006 and $0.0084 per stream. Let’s be charitable and give Drake the high-end payout. If we do so, IYRTITL generated about $6.45 million in revenue for The Boy. (This is a big simplification, but let’s roll with it for a minute.)

But Drake is part of music’s 0.1 percent, and even relatively successful bands fare far worse. Baltimore duo Beach House's Depression Cherry debuted in Billboard’s top 10 in August to positive reviews. If we apply the same math we used above, Depression Cherry has earned Beach House approximately $126,000 on Spotify since its release. That’s about 2 percent of the amount Drake made, and it’s surprisingly low given how successful the album was. There are thousands of artists less prominent than Beach House trying to make a living with their music, and they aren’t making enough money to do it.

Micah, I know you can help me out here: how are musicians going to make enough money if they’re not at the industry’s highest level?

Micah: If you believe music executives, the answer is getting more people to pay for streaming. Around 40 million users pay to stream music right now; the current industry-wide target is 100 million paid users. Hitting that number might give per-stream payouts the bump most artists need to achieve financial stability.

Jamieson: But it’s not like all the money the services shell out goes right into musicians’ wallets, right?

Labels can make money from both ends if streaming keeps growing

Micah: Unfortunately not. Labels take a big cut of that money, and they own stakes in companies like Spotify and Vevo, meaning they can make money from both ends when streaming becomes more popular and profitable. Tidal was the only service that made the "artists are underpaid" argument directly to consumers, and it botched that message so bad that it may be a while before anyone else can use it. Sure, people are getting more accustomed to paying a monthly fee for music, but it could take a while before that shift translates into increased revenue for artists. It's a good thing there are so many major companies investing in music streaming. The digital downloads market was defined by iTunes’ near-monopoly, but the streaming market is competitive, and that could lead to artists getting better streaming deals in the long run. Or it all could backfire, and streaming services may slash prices to help grow their user bases if people aren’t signing up fast enough.

Do you think we’ll get any closer to solving this so-called inequality problem next year?

Jamieson: It’s hard to say, but I’m not optimistic. On a platform level, the distribution of wealth could change — you mentioned some of this year’s new competitors above, and other big companies (Facebook?) could yet decide to make their own concerted efforts at grabbing a piece of the pie. Other services could end up folding or consolidating the way Rdio did late this year.

But you said it yourself: platform jockeying and changes in the size of the paid user base don’t necessarily trickle down into better deals for garden-variety artists. It became clear this year that there are only a few artists with the cultural and commercial leverage to make decisions re: their music’s availability. Taylor Swift can yank her music from Spotify and convince Apple to change its royalty policyDrake can sign over exclusivity to Apple Music; Adele can tell everyone to go to hell and set records while doing it. Everyone else is just struggling to make money and be heard, and I think that struggle is going to continue in 2016.