But streaming has completely changed the game. For the first time, financial success is no longer based on one-time sales, but on ongoing streams. The more a track is played, the bigger the payout. The implications of this shift are massive.
What makes people download pirated music? Karla Borja and Suzanne Dieringer, economists at the University of Tampa, surveyed 1,052 college students enrolled in introductory business classes at two Florida universities (one public and one private) in 2014 and 2015. Seventy-eight percent reported to have downloaded music illegally in the previous month.
Borja and Dieringer reason that streaming services and digital piracy are either substitutes or complements. If substitutes, streaming could put an end to piracy. If complements — where listeners use a streaming service to discover new music and then download it illegally — streaming might have no negative impact.
Apple Music may be preparing for a major price drop, according to a pair of sources working closely with the streaming service. If implemented, the drop could be as much as 20%, which would put the final monthly price below $8. The change, if implemented, would allow Apple to minimize any damage from a seriously undercutting Amazon Music.
The sources are not inside Apple, but have been working closely with the Apple Music service since its launch. They also emphasized that the changes are still under discussion, albeit ‘under serious discussion’. Still, there are valuation debates underway, and the price chop may not be implemented.
Already the place where users went to listen to music, it was easy enough for platforms to become the discovery platform of choice for their users. Spotify’s Discover Weekly hit 5 billion listens just 10 months after launching. With just about 100 million users, that’s about 50 new songs discovered via Discover Weekly per Spotify user.
Now labels have effectively become data companies, looking to the streaming platforms to find the new hot artists. Instead of sending A&R teams out to discover new acts, they monitor things like listens, adds, and skips across platforms to see which artists are worth signing.
The new promotional tools are rolling out on the heels of Pandora’s first direct-licensing deals with the major record labels in its nearly 17-year history. Pandora struck the deals in order to launch an on-demand, $10-a-month subscription offering—due out by year’s end—that would compete with services such as Spotify AB, Apple Inc.’s Apple Music and the new Amazon Music Unlimited.
Until this year, Pandora’s relations with the major labels had been chilly as it used government-mandated licenses to play its 2 million-track catalog at federally set rates for its nearly 80 million free listeners.
According to to new calculations released by Manatt, Phelps & Phillips, LLP, signing to a major label can cost an artist dearly when it come to streaming royalties. Specifically, an unsigned artist can expect to receive nearly four times the royalty from streaming than an artist signed to a major label.
Here’s a quick breakdown of what a major label artist can receive from every dollar of streaming revenue. This assumes that the artist wrote 100% of the music, and is the sole performing artist.
Subscription services have room to grow, particularly if they can deliver to consumers the right product at the right price. Music streamers have had to choose between paying nothing (for limited feature sets) and $10 per month (for the premium product) with almost nothing in the middle.
Reaching the middle of the market will require some flexibility on product and price.One approach has been Pandora Plus, a mid-tier, $4.99-per-month product with half the price of a premium on-demand service, unlimited skips and no advertisements. The kicker is a new feature not available to either the free, ad-supported product or the previous incarnation of the ad-free product, Pandora One.