By Sam Smith

Sam Smith explores how the growth in music streaming has impacted the music industry.

The history of the music industry is one of technological developments that have led to substantial transformations in how we have listened to music over the last one hundred and fifty years: from the phonograph in the 1870s, the LP record in the 1940s, the CD in the 1980s, to the digital download in the 1990s. Now, online streaming, the latest in a long line of changes, has shaken the industry like nothing before.

Coming on the heels of the digital download and the rise of tech giants such as Apple and Google, music streaming platforms such as Spotify, Apple Music, and TIDAL have taken over and become the main source for people’s music listening.

With this new-found dominance of streaming has come unprecedented monetary growth in an industry which many deemed was on the way out after the CD boom of the 1990s. In New Zealand alone, streaming now accounts for 69% of all recorded music revenue, a figure which was less than 50% in 2016. This has also led to four straight years of revenue growth in the local market after fifteen straight years of decline.

For a small market like New Zealand’s, this is significant. To put these changes in context: in 2014 the entire New Zealand music industry was worth $66 million. In 2018, streaming alone accounted for around $74 million of all revenue – ahead of live performance and physical sales.

Internationally, the situation is similar. Streaming platforms such as Spotify have become the music industry’s single biggest revenue source overtaking physical sales and digital downloads in 2018. In turn, like New Zealand, global recorded music has enjoyed three straight years of positive revenue growth thanks to streaming, a cash cow that is earning the three major record labels Universal Music Group, Sony Music Entertainment, and Warner Music Group one million dollars every hour from streaming alone.

But what do these changes mean? And is it all good news for both artists and music consumers? Nabeel Zuberi teaches music technologies at the University of Auckland and he says the balance of power has shifted for musicians in the streaming age.

“For the musicians themselves, they can’t rely in the same way anymore on just obtaining income from recorded music alone in terms of being the rights holders. There is a weird contradiction at the heart of these things. On the one hand you have greater access and potential distribution of your music through streaming, but in terms of making a living, generally speaking it is harder for artists to make a living from recorded music.”

“Musicians now depend more on other kinds of sources of income. There is a greater emphasis now on live music, on merchandise, on sync rights for film and TV and video games and so on.”

Ben Howe is a lecturer in the music industry at Massey University. He is making a documentary on the impact of music streaming and agrees with Zuberi in that it has become harder financially for smaller artists in particular.

“Definitely streaming favours companies that have large catalogues and it also favours blockbuster artists, the top one percent. However, for an individual artist that is new and quite niche it does make for a very challenging environment in terms of generating income from recorded music.”

Research into artist pay back up these assertions, with an Australian study finding that the average musician earns just $7200 a year. A MIDiA Research survey of musicians also found that eight out of ten musicians do not earn enough from their music to not worry about their financial situation.

For most musicians the streaming revolution has not translated into more money, something that is largely down to how platforms pay artists. Spotify, for example, take all the money they generate and distribute it to artists by the total streams each artist received in what is called a pro-rata system.

On average an artist is only paid $0.0038 per stream of a song and recent research revealed that one million streams on Spotify would only earn an artist $4370, a figure that is far out of reach for many when you consider the top ten percent most-streamed tracks account for more than ninety-nine percent of all audio streamed.

Zuberi says platforms like Bandcamp are more equitable in terms of their distribution, and there are other fairer models floating around the industry. But for now the Spotify model is dominating: “I know if you get on a Spotify playlist like Discover Weekly you are likely to have your number of streams and income boosted. But it is an incredibly small amount for each play of a song in comparison to the sale of a CD or even an iTunes track.”

Howe agrees. “There is a movement afoot that there should be a different way of calculating royalties. This would be a system where the money is distributed to the artists people are listening to. The hard part is getting big artists and major labels on board with that idea because the current system favours them and not niche artists. For this to happen there would have to be a pretty radical reinvention of streaming as the current methodology of dividing up royalties is favourable to big artists over smaller ones.”

But it is not just money musicians have had to worry about with the rise of streaming. Just getting heard within what is the largest pool of music ever seen is half the problem for many.

In the streaming era, music fans now have around fifty million tracks right at their fingertips, a figure that is growing at over forty thousand tracks per day. This makes it much harder to stand out given the abundance of choice music fans have.

Howe says too much music can be a problem. “It is very hard to stand out because there is just so much music on these streaming platforms, and often when artists do stand out it is for a whole lot of other factors such as what they look like, what their story is, how they engage with social media, in addition to just the quality of the music they release. People become attracted to the character and the person rather than just the music and that is a big change that streaming and social media has bought about.”

Zuberi says it has become harder for both artists and even fans. “Some people have written that abundance leads to too much stuff and it becomes harder to make a decision around what to listen to. I have noticed using Spotify how I will skip things more and go through a lot more songs but they barely registered in many cases.”

Given how quickly streaming has risen to prominence in the music industry it is anyone’s guess as to what the future holds. One thing that is for certain is that industry experts share different views as to what is around the corner.

For Zuberi, the future of streaming is part of a wider societal issue concerned with data collection online. “I worry that there is a lot of data capture and we don’t know where that data is going. The audience and consumers and users become the primary commodity to be sold off to various companies who want that information to then sell us other products. That seems worrying to me and is happening behind all this great access to a huge archive at the end of your fingertips.”

Ben Howe on the other hand worries about how streaming will affect local music scenes. “The big challenge with the globalisation of these platforms is that it makes it quite hard for local scenes like New Zealand. It is a challenge for New Zealand artists because the playlists and algorithms are generally guiding consumers to listen to music from elsewhere. There might be a kickback as a result and people will decide to engage more in their local music scene, but whether that happens who knows.”

As for the streaming giants, Howe says they are here to stay, but what form they take is another question. “I think the thing that might happen in the future with these platforms is that they will start creating their own content in terms of signing artists. Even though they deny it, I think the potential is there for them to become like record labels. The thing that is holding them back is then they won’t have access to the big catalogues of major labels because they will be competing with them.”

Interesting times await then for an industry that has seen it all and continues to evolve 142 years on from Thomas Edison’s invention which set a new path for recorded sound. Now it is streaming setting the path, but it remains to be seen as to what will happen next.

Ben Howe is a Lecturer in the Music Industry at Massey University. He is currently making a documentary on music streaming. 

Nabeel Zuberi is an Associate Professor in Media and Communication at the University of Auckland. He is an expert in communication technologies and music cultures. 

Disclaimer: The ideas expressed in this article reflect the author’s views and not necessarily the views of The Big Q. 

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