Is It Time to Press ‘Reset’ on the Streaming Business Model?
The case for a more robust direct-to-fan experience
To say last week wasn’t particularly good for Guvera might be an understatement. The Australian streaming service announced it would seek an $80 million (AUD) IPO, and the response from other Aussie tech bigwigs was swift. That response, unfortunately, came in the form of comments generally associated with horror films or mass catastrophes — one venture capitalist dubbed it “horrifying,” while another claimed it left him “terrified.” The only response Guvera’s CEO could muster was to basically call them haters, which works if you’re a rapper or Taylor Swift but isn’t so great if you’re the head of a major company.
In all fairness to Guvera, they’re not the only streaming service that’s struggling right now. Deezer called off an IPO last year, and Spotify has yet to pull the trigger despite multiple rumors of an offering. Spotify also came under fire during a panel at music business conference MIDEM, where a prominent VC pointed out the despite being the biggest player in the space, they still lost a couple hundred million dollars last year. She went on to explain that this was why VCs tend to avoid the music space.
And while more users have been adopting streaming technology, the numbers don’t suggest the massive uptick that these services might need to survive. There’s a decent possibility we could be left with streaming services that are all part of much larger companies that essentially subsidize them as loss-leaders for other products or services. Add to this a growing backlash from many artists who feel they’re not being paid enough, and it looks like dark days for streaming up ahead.
So what if we ripped up the streaming model and just started over from scratch? I’m not saying we will, or even that we should — but it’s worth pondering. What would the music world look like if we all just hit a giant reset button and began again?
It might look like the solution posed by Matthew Inman, who writes the Oatmeal cartoon. He did a quick three-panel take on the music business, and the solution is basically to get rid of the middleman and let artists and fans deal directly with one another. There are already a number of services that allow this and plenty of artists who sell direct-to-fan, but they’ve never quite reached a critical mass, in part because many of them are still focused on downloads and physical sales and haven’t quite figured out a way to embrace streaming.
One of the biggest issues that many artists have with streaming is that every song essentially costs the same, regardless of the song’s value to the artist or to fans. When analyzed through the lens of other industries, this is truly odd — a meal at Burger King costs less than a meal at Per Se, even though the end of the day they provide calories to fill up whoever is eating them. A jacket at Prada costs more than a jacket at the Gap, but they both keep you warm. What matters is the quality, the externalizations, and the perception of value. But in the music world, a song by an artist you love that he or she recorded with an orchestra costs the same, essentially, as one an artist you may or may not like recorded on a basement four-track in ten minutes.
What if artists were able to set costs for their songs based on their perceived value, and what they know about their fans? Beyoncé could charge more for a song than an unknown artist, and it’s also easy to conclude that fans would probably pay more for a beautifully produced track than a demo of her goofing off and trying stuff out (or maybe vice versa, as all those Dylan demos demonstrated).
In terms of pricing, fans could set a ceiling and then decide to spend more when they hit the limit, or maybe prices could increase and decrease depending on how often the song is streamed, or how popular it is. Amie Street tried something similar seven years ago, and while it was purchased by Amazon before streaming started to take off, maybe it’s an interesting model to consider.
Artists, especially developing artists, can and should still give music away for free to build fanbases. But this would give them the opportunity to create a premium tier of music for fans who wanted to invest more, and still allow for discovery and casual fan interaction.
This idea also allows artists to connect directly with their fans, and it gives them the freedom and autonomy to charge what they think their creative labor is worth. Whether people will pay it is another question, but by building some sort of decentralized hub, maybe one that is artist/worker owned, it would cut out the middleman and let artists keep more of the money they make.
Labels still exist in this scenario, and perhaps make even more money, if they take a cut of each track an artist releases. If an artist is so popular, or offers something so groundbreaking that fans want to pay a premium, they could clean up — something they can’t do when every song is the same price.
Look, streaming services as we know them probably aren’t going anywhere, although there will absolutely be consolidation in the next few years. Maybe they’ll figure out a way to solve issues with artists and negotiate better terms with labels so they won’t continue to lose money. But it’s always worth exploring the alternatives, and how they could better serve artists and fans. A more robust direct-to-fan experience can only serve to benefit creators and consumers alike.
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