New Relationship Goals: Spotify & Artists

image via DigitalMusicNews.com

34.3% of America’s total music revenue is from streaming services such as spotify, apple music, or tidal according to the Recording Industry Association of America. (“RIAA”, 2016). For the first time, streaming services were above digital downloads even if it just by 0.04%. (“RIAA”, 2016). It is expected for this gap to grow even more in the next couple years. This shows the current up trend in how our society gets their music now. With popular streaming services such as Spotify having 30 million and counting users, it is fair to say that streaming services are quickly gaining ground in becoming the go-to way to listen to music. (McIntyre, 2016)

The question of the streaming services has been the effect of these services on the artists. Many big name artists are pulling their entire music catalog from streaming services due to their concerns about the services. Taylor Swift is the most known for her public feud with Spotify when she pulled all of her music from the service and wrote a blog about how these services are devaluing music and hurting smaller artists revenues. (Swift, 2016)

Taylor Swift, Image via Celebmix.com
“Valuable things should be paid for. It’s my opinion that music should not be free.” Taylor Swift, via The Wall Street Journal, 7/7/2014

So what is the impact of these services on artists? In a study done to figure out this question in October 2015 by Luis Aguiar and Joel Waldfogel, they measured Spotify streaming and the sales of digital music in 21 different countries for eight months in 2013, and all of the music sales in the U.S. from April 2013 to March 2015. (Aguiar & Waldfogel, 2015). They found through their studies that on average artists make $0.82 US on per sale of song. On streaming services, the artist receives 0.007$ US per one stream of a song. (Aguiar & Waldfogel, 2015). So for an artist to make the same amount of money from a digital download, they would need their song to be streamed around 125 times. (Aguiar & Waldfogel, 2015). This does seem like a lot but if you imagine the amount of times you listen to a song it would be able to even out eventually. With Spotify’s high user count, it is realistic for a song to be played that much. In an interview with Digital Music News, Daniel Ek, CEO of Spotify, stated that a song being played 500 thousand times is equivalent to a song being played on the radio once. (Ek, 2014).

Streaming services is a win or lose situation for artists, depending on the size of the popularity of the artist. For example, Ek stated that artists like Taylor Swift could receive over 6 million dollars in compensation for their music on Spotifiy. (Ek, 2014). Some artists will never hit this big payout, David Lowery, who is best known for his bands Cracker and Camper Van Beethoven, says that for his more well known band Cracker that these streaming services are great. (Flowers, 2015). He believes that the streaming services allow for people who would not buy his music to have a chance to listen to it and it is more of an added payout. His other band, Camper Van Beethoven that is lesser known, struggles on Spotifiy due to them not being as popular. He says that he thinks people use the streaming service to get their albums for free or cheaper. (Flowers, 2015).

The main argument that Spotify presents is that they are reducing piracy and giving artists a compensation for their work. In the study done by Luis Aguiar and Joel Waldfogel, they found that streaming services actually reduce piracy. (Aguiar & Waldfogel, 2015). They did discover a correlation between the reduced digital download sales and the streaming services. (Aguiar & Waldfogel, 2015). These services do seem to reduce the amount of digital downloads that is purchased, but due to the heavy presence of people using these kind of services, the numbers are coming out to be even.

“Given the current industry’s revenue from track sales ($0.82 per sale) and the average payment received per stream ($0.007 per stream), our sales displacement estimates show that the losses from displaced sales are roughly outweighed by the gains in streaming revenue.”
Via the Study of Streaming Music Effect on the Music Industry by Luis Aguiar and Joel Waldfogel
Daniel Ek, CEO of Spotify, image via Billboard.com

The thing that Aguiar and Waldfogel did discover is the effect of the streaming services on reducing piracy. They did this by comparing the growth of the artists on the streaming services to the top 8000 artists on the weekly volume of torrents. (Aguiar & Waldfogel, 2015). They saw that for every download of a song that the song was being streamed 47 more times. (Aguiar & Waldfogel, 2015). Even though this is not the same as the artist being paid, this is better than the artist having their creative works stolen and receiving no compensation for their work.

The idea of having and listening to music has drastically changed over the past couple years. When iTunes first came out, most people could not imagine a better thing then being able to buy any kind of digital music at the flip of a hat. Now with streaming services, the access to music is even greater than before. With this newfound access, we are seeing a struggle between the artist and the streaming services in payment. The question that people ask, are streaming services negatively affecting the music industry? With the information presented, I believe that these services such as Spotifiy and Tidal are helping the music industry out. With the ability for people to be able to listen to artists without having to buy their products is a great way for people to discover other artists that are similar to their current favorite. With this in mind, Spotify and other streaming services provide compensation to the artists for their streaming which means the artist is still making a profit from these kinds of services. It has been proven by studies that streaming services do not have a negative effect in the profit gained from music sales. With piracy ruining ramped on the Internet, these services fight piracy and benefit the artist which is a win-win in my book.

Bibliography

2015 Mid-Year RIAA Shipment and Revenue Statistics | RIAA — RIAA. (2016). RIAA. Retrieved 12 June 2016, from http://www.riaa.com/reports/2015-mid-year-riaa-shipment-and-revenue-statistics/

Aguiar, L. & Waldfogel, J. (2015). Streaming Reaches Flood Stage: Does Spotify Stimulate or Depress Music Sales?. http://dx.doi.org/10.3386/w21653

Ek, D. (2014). I’m Spotify CEO Daniel Ek. And These Are the Facts… — Digital Music News. Digital Music News. Retrieved 12 June 2016, from http://www.digitalmusicnews.com/2014/11/11/im-spotify-ceo-daniel-ek-facts/

Flowers, A. (2015). Maybe Spotify Isn’t Killing The Music Industry After All. FiveThirtyEight. Retrieved 12 June 2016, from http://fivethirtyeight.com/features/maybe-spotify-isnt-killing-the-music-industry-after-all/

McIntyre, H. (2016). With 30 Million Users, Spotify Is Gaining Subscribers Faster And Faster. Forbes.com. Retrieved 12 June 2016, from http://www.forbes.com/sites/hughmcintyre/2016/03/21/with-30-million-users-spotify-is-gaining-subscribers-faster-and-faster/#24d78485402e

Resnikoff, P. (2015). Spotify Kills Piracy AND Paid Downloads, European Study Finds. Digital Music News. Retrieved 12 June 2016, from http://www.digitalmusicnews.com/2015/10/28/spotify-kills-piracy-and-paid-downloads-european-study-finds/

Swift, T. (2016). For Taylor Swift, the Future of Music Is a Love Story. WSJ. Retrieved 12 June 2016, from http://www.wsj.com/articles/for-taylor-swift-the-future-of-music-is-a-love-story-1404763219

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