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MusicTank streaming music debate: Many supporters, some detractors, and an awful lot of unrealised potential

By | Published on Friday 24 February 2012


In the recent debate on the value of streaming music services like Spotify, during which some artists and smaller labels have expressed concerns about the royalties such platforms pay out, especially if a streaming presence negatively impacts on download sales, the major record companies have generally come to the streaming sector’s defence.

Universal Music’s digital supremo Rob Wells has led the argument that there is no real evidence making music available via Spotify et al cannibalises download sales, while reps for the other majors speaking at MIDEM last month also spoke positively about the potential of subscription and streaming services, and confirmed their commitment in helping make such things work. But what about the indie sector, given some smaller independent labels have already withdrawn from the streaming services?

Well, while the indie community might not think as one on this issue, at MusicTank’s Think Tank on the streaming sector last night, the indie label reps were just as supportive of the Spotifys of this world as their major label counterparts. “The download platforms are still the biggest part of digital of course”, Beggars’ Simon Wheeler observed. “But the streaming sector is now taking off, and two of our top five digital partners worldwide, in terms of revenue, fall into this domain”.

He continued: “And perhaps more importantly, the marketshare for indies on subscription services is generally good, it’s a model that benefits our catalogue. Sure, short term royalty payments are low – and you need to be getting millions of plays for it to really work – but remember, this is the gift that keeps on giving, it’s not a one-off purchase, if fans love a record, then they will keep on playing it, and you will keep on earning. Take a band like The xx – that album’s nearly three years down the line now – and it still performs really well on the subscription platforms, despite initial download sales being impressive also”.

While the indie sector reps spoke positively of most of the streaming platforms, the artists and managers represented at MusicTank’s Think Tank at the University Of Westminster were much more concerned about it all, perhaps unsurprising given the small but significant group of A-list artists who have held back some or all of their catalogue from Spotify et al, despite their labels being supportive of such platforms. Manager Paul Loasby, whose clients include Jools Holland and Pink Floyd, said that while he recognised the streaming platforms were great products, he just felt the labels had undersold music at large when negotiating their deals with the new digital platforms, and that artists simply weren’t receiving the royalties their content deserved.

He was most critical of the ad-funded services, adding that, despite his concerns, Pink Floyd would return their catalogue to Spotify if they could opt to only be available to premium subscribers (which currently they cannot). The labels in the room admitted that the royalties to be got from ad-funded services – whether that be Spotify or YouTube – were negligible, though in Spotify’s case they felt the freemium option was justified, as an up-sell platform that benefited everyone.

Kudos Records’ Danny Ryan, who is convinced ad-funded platforms alone cannot work, is nevertheless a defender of Spotify’s free option. “The free service sells the subscription service”, he said. “And the conversion rates they are achieving are impressive, especially in Scandinavia. I think we all have to see that supporting free Spotify is a way of helping them sell subscriptions and that’s where, in the long term, we can all enjoy the benefits”.

Of course – as analyst Mark Mulligan had confirmed at the start of the Think Tank – the royalties different rights owners receive from the same streaming services can vary dramatically, because when it comes to recording rights most digital platforms negotiate separate deals with each label or distributor. And then, of course, what cut of any royalties the artist receives will depend on their contractual relationship with their label, and quite how that record company chooses to treat different digital revenues.

More transparency on royalties, and the option of licensing more digital platforms collectively with industry standard rates, was touched upon, with Simon Wheeler seeming most open to that latter approach, though only if all rights owners were willing to participate which he reckoned – almost certainly correctly, and with an eye to his major label counterpart down the table – wasn’t going to happen anytime soon.

That said, even if everyone was paid the same standard rate via a collecting society and labels found a more transparent way of declaring and paying artists their share, you sense that Loasby’s key concern still wouldn’t be addressed – he’s convinced his artist’s music is worth more that the streaming platforms will (and arguably can) pay.

Actually, for artists and managers, the mainly as yet untapped potential of Spotify, YouTube etc to up-sell other music-related products is probably going to be of more interest long-term, as tickets, merchandise and premium content packages are always going to earn more for artists that a share of an already tiny royalty. YouTube is already dabbling in this area, and Spotify’s rep at the MusicTank Think Tank touched on that potential too, albeit only briefly, with perhaps the streaming service’s recent move into the in-platform app space providing a powerful outlet for such artist-led up-sell services.

Which fits in with the wider cautiously optimistic conclusion of the entire MusicTank event – streaming platforms are growing, the revenues so far are modest and are arguably uncertain long
term, but nevertheless, the whole space seems to contain an awful lot of so far unrealised potential.

You can read our interview with Kudos Records’ Danny Ryan conducted just before the Think Tank debate here, and download Mark Mulligan’s presentation that kicked off the proceedings here.