Why Subscription Based Streaming is Bad for Artists

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On Spotify which allows free ad supported streaming and premium streaming, 7/11 – a song off of Beyonce’s self titled album “Beyonce” generated over 118 Million streams. On Rdio, a subscription based platform with much more restrictive free access, Beyonce generated a little over 4 Million streams for the entire Beyonce album.

Let’s pretend that all of the streams for 7/11 were free ad-supported streams. This would mean that, at $0.006 per stream, Beyonce earned $710,895 for roughly 118 Million streams. By comparison on Rdio, at a rate of a penny per stream, her 4,364,385 streams earned her $43,643. 7/11, a single song from Beyonce’s album on Spotify could earn $667,252 more in free ad supported streams than the entire album earned on a platform that restricts access to subscribers.

The only way subscription based streaming works for all artists is if everybody is subscribed to a streaming platform. If that were the case all streams would earn artists a penny and not $0.006. This is the dream of record companies but it’s a fantasy far far from reality. As the former CEO of Emusic stated in his article “The Price of Music” in 1999 when you had to buy a CD album to get even a single song, the average music buyer only spent $64 for the year. When albums were de-bundled into individual song downloads the average amount spent per buyer dropped.

The three major record companies imposed a minimum on streaming platforms where none of them can charge less than $10 for their service. At $10 consumers would be paying $120 per year on music when the average consumer only spends $28 per year on music, and music buyers in particular only spend $64 currently. They’re looking at the success of Netflix without recognizing that it’s a service popular among cord cutters who turn to paying $10 per month as an alternative to paying $130 per month for Cable. At the current price, streaming platforms don’t make much sense for the budgets of most consumers and won’t be able to convert the average music buyer and certainly not the average consumer.

All things considered, restricting access to subscribers would be counterproductive for artists because we’d be cutting our nose to spite our face. It would be like a job bumping your pay from $10 an hour to $12 but slashing you from 40 hours a week to 20. As artists our streaming revenue is based on the number of streams our music receive. The more streams we get, the more money we make. The less streams we get, the less money we make. Period. Restricting access to people with subscriptions, to any streaming platform, will result in less streams which will result in less streaming revenue for, mainly Indie and unsigned, artists.

Record companies take equity in streaming platforms which means they get a percentage of overall profits. Subscriptions guarantee profits for the subscription platform and its owners which includes the record companies. The streaming platform and the record company make money no matter if a subscriber listens to zero songs or 30. With ad-supported streams money is only made if people actually use the service to stream music. Artists don’t get a percentage of subscription revenue, we get paid from streams.

Major artists generate millions of streams from big marketing campaigns, tv and radio airplay, etc. When you go on any streaming platform all you see featured on the homepage are major releases. Every playlist generated by the platform contains songs from major artists. If “New Releases” really showed users what was newly added to the platform it would change every time they loaded it up rather than having the same albums featured for weeks at a time. Spotify actually got busted for allowing labels to buy their way into the top playlists. Streaming platforms, outside of Youtube and Soundcloud do nothing to get the music of less popular artists heard.

The music of Independent artists often spread by word of mouth. We’re the ones that drive traffic to our music by going directly to our fans and music fans in general through social media.  Somebody listens to your album, they like it and tell a friend. Because your album is free to listen to there’s no apprehension in checking it out so that friend listens and likes it, he posts it to Facebook where it reaches a ton of his friends who share it, and so on and so forth. The free access fans the flames as more people listen and talk inspiring more people to listen who talk which drives up the number of streams. If you posted a Spotify link of your album and when people clicked on it they were prompted to subscribe and pay a monthly fee to gain access, you’d lose the vast majority of people you were marketing your music to and it would compromise your fans’ ability to spread your music across the web.

Spotify doesn’t really pay per stream, they pay based on a formula where artists get a percentage of revenue based on their percentage of the total number of streams. Exclusively subscription based streaming would result in a drastic decline in the amount of streams Indie artists can generate which would mean they’d be responsible for a smaller percentage of streams and thus a  smaller percentage of revenue. Alternatively, this would result in major label artists accounting for a higher percentage of streams and as a result, a higher percentage of revenue. More money for major record companies, labels, and their artists. Less money and exposure for Independent artists.

1 COMMENT

  1. Exactly. If you go with what folks like Bob Lefsetz says, indies don’t count because they aren’t getting the traction among enough fans to make it worth it. There have always been artists that serve a bit more of a niche market, and those markets still seem fairly willing to invest in physical recordings, as well as some of the smaller or more unique subscription services like Vinyl Me and SubPops old Single Club…

    As for major label streaming and the death of radio, I don’t know, but I think that is going to take a generation or two…it’s hard for me to justify even the $10 a month for Beats 1 – why would you pay for a crapshoot of what you are going to hear? This simple concept is what drives Youtube numbers for songs, no?

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