The music industry is on the rebound thanks to paid streaming

The music industry is growing once again thanks to paid streaming services. This year, the industry is on target to bring in the most revenue since the mid-2000s. If the numbers hold, 2016 will be the first time the music industry has seen its revenue increase year over year since the late '90s.


In the first half of 2016, the industry pulled in over $1 billion from paid streaming subscriptions. That’s basically already matching the $1.2 billion in revenue the industry collected from paid streaming in all of 2015, according to a midyear report released by the Recording Industry Association of America (RIAA).

Paid subscriptions have grown to 18.3 million in the first half of 2016, doubling the total from this time last year, and up from 13 million in December. That growth has helped offset the continued decline of physical media — including vinyl, which was an industry favorite last year but is down 9 percent — and is just shy of closing the fiscal gap with digital downloads, with single and album sales topping paid streaming revenue by some $60,000.

It’s clear that paid streaming subscriptions are rapidly becoming the future of the music industry, and the segment's rapid growth is exceeding what many in the industry have expected. But how exactly is the music industry getting people to convert from free streaming services to paid ones? Micah Singleton and Ben Popper sat down to discuss the shift.

Ben Popper: To me this feels like the music industry is succeeding despite itself. They have not stopped demonizing services like YouTube and Spotify in the press, and yet those same companies are the ones fueling the one bright spot in an otherwise shrinking business. They also had a big boost from Apple, which has the cash to subsidize record labels, both by paying artists for exclusives and by moving away from free, ad-supported streaming. I don’t think either of those trends are good for consumers, who have less choice when it comes to what they can listen to and how they pay for it.

Micah Singleton: I’d argue that Apple has been the one leading the charge for paid streaming, given the huge marketing push the company has put behind Apple Music and the artists who have done exclusive deals with the service, like Drake and Chance The Rapper. And yes, the lineup of exclusives from Apple Music and Tidal haven’t been great for consumers who just want to pay someone $10 a month to listen to everything, but I don’t think this is the permanent future of the music industry. It seems like Apple and Tidal to a lesser extent are just using these exclusives to hopefully attain some sort of positive revenue flow. Once that happens they will taper off, but that time frame is still unclear.

As for Spotify, it seems that the ad-supported services have been a great launching pad to move users up to the paid tier. Spotify touts a 25 percent conversion rate. (YouTube hasn’t shared subscriber totals for its premium Red service as of yet.) Spotify is still the biggest music subscription service in the world with 40 million paying subscribers. Has the heated competition with Apple, and to a lesser extent Tidal, pushed all of the services to work a bit harder on getting people to pay for music? And is that necessarily a bad thing for consumers? Music can’t stay free forever.

Ben: I would be more comfortable with music moving away from the ad-supported model if there was more flexibility around the pricing. Back in the go-go '90s when the industry was at its peak, the average consumer spent something like $50 a year on albums. So why do we expect today’s listener to shell out $120 over 12 months for streaming? Free streaming is the gateway to paying customers, as Spotify has shown. Tiered service pricing would only increase that trend.

It’s great to have competition in the market, but I would prefer Apple and Tidal succeed on the strength of their software — the product and experience they deliver — and not on exclusives that keep certain artists or albums only on one platform for weeks or even months at a time. Spotify has been leveraging artificial intelligence and machine learning to offer users personalized playlists, and the results were so good, products like Discover Weekly are now the centerpiece of their advertising campaign.

As for streaming services signing up artists themselves, and cutting out the label as a middleman, I want to say amen. The less fat there is between the artist and the consumer, the more money flowing into the pockets of the people making the music, right? That is, at least until artists start to see Spotify and Apple as the new gatekeepers and rent-seekers.

Of course, Apple signing artists isn’t going to make the RIAA’s members very happy, is it?

Micah: Yeah they aren’t happy about that, from what I’ve been told. It has always been the music label’s biggest fear that artists could skip out entirely on the label structure and head straight to the distribution point to deliver their music. To be clear, most artists can’t do this successfully, but the ones that can — the superstars — are the artists who bring in the majority of revenue for the labels, which puts them in a precarious situation.

Sure, the labels could and will get mad at Apple for working directly with artists, like they did with Frank Ocean on his last album Blonde. (The release deeply angered Ocean’s former label Universal Music Group and caused them to ban exclusives for the foreseeable future.) But there’s no getting around Apple given the amount of money they’re spending to secure artists and marketing. Not to mention iTunes is still a thing the music industry needs to exist.

But I don’t think the labels are going anywhere just yet. It doesn’t seem like Apple wants to do anything to develop artists — it is far more interested in established artists that it can push to the next level with a strong marketing plan, while simultaneously using them to grab more paying subscribers. The question is, can the labels survive without their superstars if they decide to go directly to the fans? I don’t think they want to find out the answer.

Comments

"The Music Industry". Strange term when these days any great artist worth their salt can record and distribute for themselves.

That would make them part of the music industry……

it’s an industry no matter how many labels there are or aren’t.

Rather "music industry", not "the music industry", meaning the oligopoly of big labels.

And yet so many unsigned artists want a record deal, and signed artists generally want to keep them too. Maybe there’s value in it somewhere, after all.

Maybe there’s value in it somewhere, after all.

Exactly.

Some people say "record labels are evil!"

And yet some artists are begging to be signed.

So which is it?

That independent artists would like to sign to labels for all the benefits it entails and that labels use their leverage to abuse their power and, therefore, artists are not two mutually exclusive ideas.

Not everything is binary.

Yes, but when artists claiming that labels are parasites trying to get a cut of their profits on one hand, but tripping over themselves to get signed on the other. It comes off that artists want to have their cake and eat it too.

There seems to be a sense of entitlement among artists that labels should handle all the side business of being a artist (promotion, distribution, advertisement, booking gigs, etc), but then take a pittance for the services provided.

If a label is as parasitic and useless as people like to claim then artists should have no problem going about it by themselves.

I very strongly dislike this argument for a number of reasons.

Even in today’s age of democratization, labels have a de facto oligopoly and, for all intents and purposes, operate as a cartel: price fixing, creating artificial scarcity, suppressing competition. And for all the reasons you listed and more, labels have an incredible amount of power and influence. Labels aren’t just an option or nicety for artists. Labels are a necessity to have even a small chance of success. It is what allows them to be abusive. Chance and Macklemore and Ryan Lewis are exceptions to the rule. They are not the rule. Most artists need labels and it isn’t as simple as going about it themselves.

Secondly, this argument, implicitly, rids the labels of accountability. Because artists receive benefits from these companies, they are no longer allowed to criticize them? Should an aspiring lawyer not have the ability to criticized the BAR, a de facto monopoly? Or is that "entitlement"? What about teacher whose town only has one school district? Should no longer criticize their employer for what he/she might perceive as low pay while still receiving said pay along with other employee benefits? Or is that would be having his/her "cake and eating it too"? Even is his/her pay was at or below minimum wage?

Lastly, it inaccurately assumes, to some degree, that labels won’t abuse their aforementioned power. They will if they can; and they do. And it’s made all the easier when the profession, in the case, music artists, is a passion career, in which most will do and allow anything if it means success.

Of course, an example of label’s abuse of power comes from 90’s, not by what each did to artists, but what each did to fans. Collectively, labels jacked up prices of albums while simultaneously phasing out the single, forcing fans of artists, at times, to pay upwards of $15 for a single song. A clear abuse of cartel status. By your logic, fans should have stopped by their favorite artists music. Untenable and ridiculous for most and for obvious reasons, respectively. And gone "about it themselves", I guess making music themselves, which is, also, untenable and ridiculous. Complaints and outrage could be and were dismissed as entitlement. Ultimately, it was piracy that gave fans the power and leverage that would eventually force the creation of iTunes and, later, streaming services that would bring inflated prices back down. It should be noted, however, that while piracy helped consumers, giving them the power to prevent abuse, no such tool has ever existed for artists, which is why they are so easily maligned.

Good points there, fellows, esp the core one that being signed being good and being signed being exploited are not mutually exclusive. Solid logic.

The only people who don’t see value in what record labels bring to the table are technologists who love to pontificate about how technology has made them irrelevant. These people care more about their theories of technology disruption than they care about actual music. Nine Inch Nails and Radiohead both tried the independent release thing. Turns out it was huge pain in the ass and they both went back to labels.

Any person period can record and distribute themselves.

What you’re disregarding is that labels offer:

  • Large-budget marketing and exposure
  • Immediate funds to pay for studio time, production, concerts and tours
  • Booking opportunities
  • A network of artists to be associated to, both in terms of marketing and music creation
  • Handling copyright and trademark filing
  • Accounting

And other things.

Personally, the switch from purchasing CDs and albums to paying for an apple music subscription stems from evolving listening habits. When I younger, listening to music was an activity by itself unless I got really crazy and read a book at the same time. I was completely focused on the music and cherished each song.

Nowadays I am primarily listening while performing another activity such as driving, surfing the internet, playing video games, etc. This has consequently made the majority of my music library background noise, and often times I couldn’t tell you the names of the last three songs I just heard. This is not to say I don’t like the music I am listening to, on the contrary I still routinely purge songs I am no longer fond of. My point instead is that I see more value in paying for an endless supply of tunes vs paying for individual songs or albums which will more than likely become only white noise.

It’s a lot to do with availability too. You’re more likely to discover artists you like with a wider collection. Since many people cannot afford to purchase the entire catalog of music available with these services it is far easier to "window shop" the songs you like. If services like this were available when you were younger I’m sure you’d have been taking advantage of it.

holy hell, shout out to the Grados! Best bang for your buck if you want premium headset that can actually be powered by a smartphone.

back in the "go go 90s" I would spend $50 a MONTH on music.

Even with amazon prime music, spotify, and odd itunes or cd purchases I don’t spend anywhere near that today. Some of that might be age, I’ve got other expenses. But really music just doesn’t cost enough anymore.

$10 a month for access to almost every song ever recorded on demand? I spent more than that to get ONE cd in 1994. I cannot believe how badly the music industry is doing when some don’t see value in these services. Netflix only has a few thousand titles and costs more than Spotify and no one seems to be writing articles questioning their value.

$10 a month for access to almost every song ever recorded on demand? I spent more than that to get ONE cd in 1994

We have a generation of little Veruca Salt’s now… they want it all, they want it now and they don’t want to pay anything for it. Hold back one album from their free plans for even two weeks so they artist can make some money from people who are actually willing to pay and they scream like babies.

Veruca Salt was just a one-hit wonder with Seether. I doubt the youth even know who they were.

I will assume you are being cheeky in pretending you don’t know where Veruca Salt got their name

Or…. maybe what you really meant was that modern music is filled with one-hit wonders like Veruca Salt and streaming services would have saved a lot of people a lot of money and holding back on streaming would counter that.

…… it fits, right?

To be direct… when my 4 year old son acts up I open the windows and say the squirrels are going to come and throw him in the garbage if he isn’t quiet. Works like a charm — hates squirrels tho.

"Volcano Girls" was a hit too.
both tunes appear on my spotify playlist "90s Alternative Female Rock"

Children, teens, & young adults growing up in the streaming world will continue to make it grow. I like to own my music, just so I know I always have it and can either move between services or not have one at all. Probably showing my age, but for me, anything worth listening to over and over again is worth purchasing.

Plus, I have seen things I like drop from services. For instance, when Prince came off of Spotify, I was happy to have my own collection to fall back on.

I grew up buying lots of music but now 98% of what I listen to is streamed. The other 2% gets uploaded to Apple Music from my own collection. I gladly pay for a family plan for my household. I want artists to have a sustainable way to make a living.

Prince is just the random oddball. Who else has their music everywhere then pulls it, then puts it back, then pulls it again and only puts it on one service that few people actually subscribe to? Only a billionaire eccentric who doesn’t need the money anymore can afford to behave like that.

I used to DJ, all on CD 15 years ago. I still pick up odd jobs for family and friends for weddings. I just use a mac and some software now. Worked fine until this last weekend when I was doing a reception at in the middle of no where with no wifi and no cell signal. I got so used to being able to just download a request as it came in, i was ill-prepared for the number of country songs these people wanted to hear…

"The music industry is on the rebound thanks to paid streaming" so thanks to Apple then

People have to be willing to pay more for a monthly subscription and artists have to get paid more. I love being able to stream everything. But I make a living playing music. When I see how much an artist is paid per stream it’s really messed up. If my song streams a million times, it doesn’t add up to much at all and that’s a problem.

View All Comments
Back to top ↑