I read and think a lot about the business of recorded music. Raging today is a debate about whether streaming music services will ever be viable (even profitable), and it’s difficult to see how the market will all shake out. No one is making money on streaming music except highly paid executives or engineers at the streaming companies. Spotify, the leading streaming service worldwide, has taken $537.8 million over 7 venture capital rounds according to CrunchBase to yield a ~$4 billion valuation. However, Spotify is still not profitable even though they have 50 million subscribers, 20% of which are paying for premium subscriptions.
Time magazine says that Sam Smith’s megahit “Stay with Me” was played nearly 30 million times on Spotify in October 2014, which should net the total payout from Spotify to Smith, his label, publishers, and songwriters between $170,000 and $240,000. Sam Smith is a major label success as a new artist, and it has been said that to break a new artist in today’s climate a major label must spend between $1 million and $2 million in marketing alone. So looking a little bit past the surface numbers, one can surmise that it’s a difficult climate to make money from streaming services unless there’s a megahit on an artist’s horizon.
However, for the consumer, streaming is a huge win. I myself love to be able to pop open Spotify or YouTube and instantly check out some new music I’ve either read about or a friend suggests. My typical usage of Spotify, iTunes, and XBox Music is to either listen to a few songs at work or in the shower or pop through music I’m curious about. And yes, I’m one of those paying for a premium subscription.
Another interesting trend is the resurgence of music released on vinyl records. According to the Recording Industry Association of America (USA is the largest music market in the world), sales of vinyl LPs is up over 40% from 2013, and that upward trend has seen major growth since the mid-2000s. Numbers are still small, but New York Times notes the trend is significant, especially among young people. Record plants, which had been closing and downsizing for decades, and now so jammed that they are adding new capacity for the first time probably since the 1980s. United, the largest plant in the USA, produces about 40,000 records a day and is adding 72% more capacity. Their current operation runs 24-hours a day to keep up with demand.
My preferred format is still the compact disc, which unfortunately is not enjoying such a rebound. However, I think it’s heartening that physical media is making a comeback, at least among the enthusiasts. New turntable products are coming online, and young people are buying them with fervor. I think finally people want to connect with their music a little more than just tapping and clicking around on a digital device. The visceral, tactile aspect of holding an object – sometimes beautiful – with art, creative packaging, heft, and permanence is to me something I don’t want to disappear. I also remember learning so much about the music I love by reading the credits in liner notes, cross-referencing musicians, producers, recording engineers, and songwriters. When was the last time you saw any of those credits on an MP3?
My opinion is there is a place for both the new digital, streaming world (as long as someone finds a viable business model) as well as the physical recorded media world. If anything, today’s complex marketplace is about choice and access. I’m glad finally that choice is beginning to include more and more physical media and even high-quality digital files. Since bandwidth is growing and devices are becoming more capable in terms of compute and storage power, high-quality streaming services and lossless digital music stores have begun to pop up. Even the loudness war seems to be waning given new loudness metering and broadcasting standards, which increases the quality of recorded music across the board.
I won’t make any predictions or pretend to know what will happen in 2015 or beyond. However, with increases in access, quality, and hope that recorded physical media is not disappearing, the trends to me look quite positive. Here’s to the future.Posted: December 24th, 2014 | No Comments »