Streaming Music is an un-economic model
I am greatful to Sharky for this article. It supports an analysis I recently did on streaming services.
Lets take a 30 year scenario. If I were to sign up to Spotify for the next 30 years I would need the following:
A computer probably, lets say I change the computer every 2 years so call it £50 per month (it’s a good computer!). I need WIFI at home so thats another £14 per month, I better throw an MP3 or Iphone in the mix as well to in order to take full advantage of the streaming so lets call that another £20 per month for the hardware and another £20 for the dataplan. Then add the £10 per month for the streaming service — So all in all I am paying out £114 per month for music.
Now okay, you will say, that the computer shouldn’t be included because you already have that, and the phone, because you already have that blah blah blah. Well hang on a minute, these costs have to be accounted for somewhere so they might as well be accounted for here. And as you will see you also need hardware to play music traditionally, so we need to compare apples with apples.
Now £114 per month, £1,368 per year, £41,040 after 30 years, what do you have at the end? Nothing.
Now lets compare this with the old model.
A CD costs £8, a new hifi system costing £2k every 10 years costs c.£17 per month. Lets assume you buy 5 CD’s a month (£40), this means that for £56 per month £672 per year or £20,160 in 30 years time, what do you have at the end — You have 1,800 CD’s that you own, probably have a couple of good hifi systems, and something you can hand down to your children. Now, I don’t know about the rest of you, but having over 20,000 songs in a CD collection is pretty large. With this model you don’t pay for music you don’t listen to, and you can lend your music to your friends. How cool is that.
So for half the price of streaming you have accumulated £20k of value, which is a tangible asset that you can give to anyone you like. So what we are saying here is that for the privilege of listening to a song “NOW”, we need to spend £40,000 as a consumer. That to me seems a bit steep, specially when you consider that the old music distribution model seemed to suit the artists and the new one doesn’t.
All in all, I can confidently say that the streaming business model is not a sustainable one, so if you are thinking about throwing out your CD collection, just remember that Apple grew their streaming service on the back of all your CD’s that you burned and uploaded into ITunes. Also bear in mind that the music industry who offer to buy all your old CD’s and Records are self serving. In the future, owning music in a physical format will be a threat to online companies.
So, treat music as something you CAN own, something that you CAN share if you wish, without having to upgrade your membership, and something substantially cheaper than the streaming model. My analysis suggests that over 50% of revenues do not make it to the artist based on this model.