Friday, November 13, 2015

Laughable myth, or laughable math?

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So here we have a piece called The 17 Most Laughable Myths Of The Music Industry, by blogger Ari Herstand. It's mostly OK, except for laughable myth number 3, which is about streaming:

3) Streaming Is Bad For Music [to be clear, that's a myth, according to the premise of the piece- tb]
A CD or download sale is treated equally no matter how great the album is. It’s a one time payment never to be earned on again. Contrast that with streaming. If a song is great it will get played over and over again for years and years. Earning MORE than just a single sale ever could. Streaming pays less initially, but much much more in the long run – if the music is good of course.

Laughable myth number 10 is also relevant:

10) Record Sales Matter 

He goes on to say that CD sales are “over”, whatever that means. Since he phrased this as specifically CD sales vs. streaming equation, I want to look at the economics involved, and the style of consumption required for streaming income to replace album sales income. Obviously it's more complex than that, but framing it this way was his idea, not mine.

We'll assume one album purchase per customer; and that a CD has ten songs on it, and they sell for $10 each— the basic reality for independent artists.

First: Hold on, an album purchase is not necessarily a one time payment— there are a number of records of which I've bought multiple copies, either because they got lost or broken, or because I liked it so much I gave it as a gift, or because a new format became available. “If the music is good”, people may well buy multiple copies. But from here on out, we'll assume one CD purchase per release per customer.

Second: Spotify pays around $.007 per play; so to earn our $10 from that customer, we need about 1425 plays, or about 142 plays per track. If they only really like three tracks, they'll have to listen to each track 425 times each. But the author says our compensation will now be amortized over “years and years”; to get our $10 within, say, ten years (while hoping our royalties are indexed to inflation— probably not), the customer will basically have to listen to the album fourteen times a year, every year.

Of course, you have the rest of both of your lives to get 142 complete plays, assuming Spotify still exists, and has not gone to a zero-compensation model. You may never get to 142, meaning you are a net loser for that customer, or you could just as easily get 143 plays from that customer before your death, in which case, cha-ching, streaming has paid off!

Third: Yours is not the only record in the world. Other people need to get paid, too. If an average music fan owns smallish collection of 200 CDs, averaging about 40 minutes long, in order for those artists to get paid, that individual has to listen to over 18,900 hours of music on Spotify— about six hours a day, every day, for eight and a half years. For the new economy to work better than the old one, as advertised, everyone has to do that— this exceptionally committed level of real consumption has to become the norm.

Fourth: We can assume that is an indeterminate number of other people will be streaming our stuff, who never would have bought a CD— they're contributing, too. We can count them as “helping” your committed customers reach their 1425 plays, though in fact they'll still be out there listening even if we don't abandon traditional hard formats. You'll need a lot of them to make up for, say, 500 CDs you won't be selling. The catch is, if you're attracting a whole lot of random listeners, many of them would have gone ahead and bought the CD, so you'll need that many more random listeners to help compensate for all those CDs not purchased. It's not an entirely realistic equation, but it illustrates the core problem, that getting paid places too much of a time burden on your fans, which can't be compensated by random semi-interested listeners.

Fifth: If Spotify becomes the way music is consumed by individuals, everyone, regardless of their commitment, means, and style of consumption, is moved to the same system of just paying nothing, or a very low flat rate, to a streaming service in exchange for unlimited music. The disposable income they were spending on albums is now going someplace else. Maybe they'll spend it on something music-related, maybe not— but now music people have to figure out how to get them to spend it on music again. That's the reality when there are changes in the business, but make no mistake that it is only happening to benefit two or three large, wealthy companies— it's not some impersonal, implacable “the future.” It's just some guys trying to make money by devaluing our end product.

Sixth: About this little barb “if the music is good”— suggesting that if you're not cleaning up in streaming, it must be because your music sucks too badly to deserve compensation: people buy CDs for all kinds of reasons. They liked your other records, they liked it when they previewed it in the store, they're part of your local fan base, they saw you play, liked you, and wanted to support you. Those are all excellent reasons to spend $10-15, and those customers are getting a good value. Probably they don't all listen to your CD 142+ times; very few people listen to anything 142 times. Reducing it to strictly a pay by number of hours listened equation means that all of those people who liked you enough to buy your product now have to put in a whole lot of listening hours for you to get paid. If that doesn't happen to be the way they consume music, we're just sacrificing that income.

Let's end with a lame zinger: The idea that streaming, as it is currently structured, is going to replace hard media purchases for independent artists may be the true laughable myth.

1 comment:

Ari Herstand: Ari's Take said...

Hey Todd, thanks for intelligent discourse. I full heartedly see your point of view. I'd like to point out first and foremost, I'm a musician. Yes, a blogger as well (as you are also a visual artist), but my bread and butter for the past 10 years has been music. I'm a touring singer/songwriter and freelance trumpet player and have made the majority of my income from music for the past 7 years. I want to make that clear so you know this comes from a place of humility. I'm in this with you and every other indie musician.

As I discuss in my blog Ari's Take ad nauseam, to have a successful independent music career you have to get creative and diversify revenue streams. I agree with you that streaming will not make up for sales in the short term for indie artists (it already has for the major labels). That's why we need to look to alternative sources of income like crowdfunding, subscription models (like BandCamp and Patreon's new system), VIP packages, souvenir merchandise, sponsorships (esp on the local level) and of course ticket sales.

I do have to disagree with you on the math. 1 sale is not equivalent to 1 stream. Billboard's new tracking system says 1500 streams = 1 sale.

Artists get paid from Spotify and Pandora where they never got paid from terrestrial radio. So, consumers moving to streaming and away from FM radio is actually overall beneficial to the music community. Every play is earned on in streaming, not so in radio.

But above all, we're in a new reality. Fans have tasted streaming. They're never going back to sales. Personally, as a music fan, I haven't downloaded a song from iTunes since I got my (paid) Spotify subscription back in 2011 when it launched in the US. If I love an album I'll go buy the vinyl (if they have it), go to the concert, buy merch and support their crowdfunding campaigns. I don't buy CDs anymore. I don't have a CD player! But I would argue I spend MORE money on artist's (not recorded music), because of streaming. Streaming gets fans in the door and once they're inside, artists need to present them with purchasing options that makes sense to the fan (not necessarily the artist).

Of course I agree with you that very few individuals actually play an album 142 times, but that math is based on the flawed premise that solely the people who would have purchased the band's music are playing the band's music. With the new streaming model, thousands more (Billboard's number of 1,500 actually), would stream over the single purchase. Personally, I've streamed artists' music where I would have never purchased it. But multiple me by, say, 100 million, and all artist's streaming numbers rise way past the point of where their sales would have ever been - even before the digital era.

Once we reach critical mass of streaming (we're still a ways away with only around 100 million people streaming music worldwide), artists will be abel to earn on streaming, consistently, for years to come. Instead of front-end, opening week sales that matter, it will be crowdfunding numbers plus long-term streaming revenue.

There are ways to monetize fans other than sales of digital files or plastic discs. To survive in this new era, we must utilize these new monetization avenues and understand the realities of the new, digital era. We have to cater to the customer and drop our artist egos.

We're all in this together.