Music streamed to our devices—that is, not downloaded—has been hustling us and buffering on our phones and bothering the music business for years now. But this year marked one of the biggest shifts since Steve Jobs launched his music store in 2003.
Back in November, Taylor Swift pulled her entire catalog from Spotify amidst a debate over royalties. Her indictment of streaming may not have been a lament for the traditional music business, but it may also be futile. The following day, Kobalt, a company that helps collect music royalties on behalf of thousands of artists, reported that in Europe, the streaming service's revenues had overtaken iTunes earnings by 13%. That trend is happening to a larger extent globally too.
Just as iTunes once killed the CD, high profile companies are now in a mortal battle to be the Thing That Killed The Download. Alongside the streaming royalty—Spotify, Pandora, Sonos, Rdio, and Apple's own Beats Music—other startups and streaming services are becoming unlikely bedfellows: apps like Uber, Line, Snapchat have all formed partnerships with or acquired music services this year. Last week, it emerged that speaker maker Bose is is interested in building its own streaming service.
As the medium takes off, artists and the music industry are staring at big declines: a flat $7 billion in 2013, and $3.2 billion for the first half of 2014, says the Recording Industry Association of America (RIAA)—it's lowest numbers since it started keeping track in 1973.
Why is tech fixated on music streaming, given the paltry revenues so far? One reason, suggests David Porter, CEO of 8tracks, is that music "over indexes in mindshare vis-a-vis economics because it adds context to our lives." Music holds great emotional sway, and in a tech world desperate for users' attentions, emotion has never seemed more important.
And The Debate Over Streaming Raged On
For as long as streaming music has been discussed, the conversation typically landed on what Apple would do with iTunes. The music store was, for a brief period, a defining figure—able to push out both Walmart and Best Buy from being the biggest music retailers. Now, ITunes is now less relevant than its ever been in the music space.
Apple's acquisition of Beats Music in May—at $3 billion, the largest the company has ever made—is interesting for a number of reasons. Initially, the music service was labeled as artist-friendly and demonstrated that with reputable figure heads leading the charge. Now Beats' chief creative officer, Nine Inch Nails' Trent Reznor, former record label executive Jimmy Iovine, and Dr. Dre are working for Apple as rumors swirl of integrating some part of Beats into the wider iTunes experience. Cupertino has already said that Beats will be pushed to every iOS user in 2015.
That kind of distribution power and its arsenal of talented music veterans will likely be Apple's way of competing against the streaming Spotify. In early December, the streaming service lowered its three-month subscription price to just just 99¢, amidst a debate over royalties raised by Taylor Swift and other musicians.
In a recent interview with Billboard, Spotify founder Daniel Ek defended how the company pays artists. "There are many artists to whom, through the labels, we're paying out millions a year already," he says. "Those check sizes will just keep increasing. I'm certain that if we can get the billion-people-plus that are consuming music online and move them into a model like Spotify, the industry would be considerably bigger than it is today."
Music industry analyst Mark Mulligan recently mused that streaming services may need to find new revenue flows besides ads and subscriptions. For instance, merchandise. "If streaming is eating into sales then the obvious next step is to drive other spending from streaming music consumers," he wrote.
Pandora is trying to combat artist fatigue with analytics. Pandora AMP was announced in October and features a detailed breakdown of where listeners are originating and meta data about song interaction, among other things.The massive Internet radio company is hoping that huge amounts of data—helping artists locate their fans—will offset some of the other royalty trouble Spotify is walking through.
Swift Punishment And Pro Bono Work
Like Taylor Switft, Radiohead's Thom Yorke is clearly not happy with all of this streaming. A veteran of alternative models, Yorke partnered this year with the file sharing protocol company BitTorrent to experiment once again. With BitTorrent's new media distribution platform called Bundles, artists can use the decentralized sharing protocol to more cheaply sell their music. Yorke put up his new solo album as a $6 Bundle which has reportedly been downloaded over 4 million times—both paid and free.
U2 also dipped their toes into alternative (and arguably terrible) distribution methods when the band partnered with Apple to give away their new album, Songs Of Innocence. As with Apple's plans for Beats, the album was pushed automatically to many iOS users as a way to keep the store and software in the spotlight. Customers were not amused. "I had this beautiful idea and we kind of got carried away with ourselves," he said in an online apology. "Artists are prone to that kind of thing. Drop of megalomania, touch of generosity, dash of self-promotion and deep fear that these songs that we poured our life into over the last few years mightn't be heard."
Though it was never announced, multiple reports put Apple's deal with U2 at $100 million, a figure that could never be achieved by sales or streams in today's music climate. Corporate subsidization isn't new, but since Samsung teamed up with Jay Z last year, it's become another viable option for high profile artists.
Amazon didn't pay any artist to release an album—yet—but it did bring free streaming music to its list of Prime perks. Without launching a full fledged Spotify or Beats Music competitor, Amazon added on-demand streaming to a back catalog of older songs and albums. It still isn't vying for the latest and greatest in streaming with only a million advertised song library available for free consumption, but it is playing up its "expert-programmed Prime Playlists."
Google also beefed up its playlist abilities with the acquisition of Songza. The music startup, known for its mood and activity matching skills, has since been rolled into Google's on-demand service, All Access. Interestingly, Google wasn't satisfied with only one music streaming service and so it also debuted YouTube Music Key, a subscription service.
The streaming video site is actually one of the places people listen to the most music. It only made sense for Google to try and capitalize on that. $10 per-month focuses the service more on music and gets a listener ad-free and background listening. The point of YouTube, however, is its weird side. All the remixes, live bootlegs, and unofficial content make it a fantastic compliment to the current slate of streaming music services; those are not included in Music Key.
SoundCloud is in the same boat. Being the audio version of YouTube with user uploaded content means that the service has some fantastic tracks you can't really find anywhere else. It's also why the service has had trouble over the last year reaching deals with the major record labels to turn it into a legitimate streaming service. That will change in 2015 as SoundCloud has announced a partnership with Warner Music Group for the coming year.
Meanwhile SoundCloud partnered with Twitter to do for audio what Vine did for video. The addition of AudioCards turns Twitter's official client into more of a music player with music or podcasts (or other content) now playing directly in users' feeds.
Even tech companies that would seem to have nothing to do with music are inching into streaming, recognizing how important music is to their users.
"Apart from the technical implications, I think it's about the fact that people love music," says Ghostly International founder and Drip.fm co-founder Sam Valenti IV. "Everyone has their own relationship with it and given how it perpetuates feelings it's similar to Brian Eno's idea of 'art-as-triggers-for-experiences' ideal for creative work. It literally engages everyone."
Uber's hook-up with Spotify, whereby taxi passengers can blast, say, Blink-182 through their drivers's stereos, is one example. Even Snapchat wants music: The company knows it's already a platform for sharing music and, according to recently leaked emails, has sought to capitalize on that through a possible partnership with the YouTube music video service Vevo. The hold up, apparently? The limited revenue available between labels, artists, and Vevo, which balked at Snapchat's demand for a 40% revenue share—normal for tech entrepreneurs but out of step with the standards of the music industry.
Sure, streaming music may not yet be the money-maker that previous forms of distribution were. But the money generated by streaming music and its millions of paid and unpaid subscribers is finally seeming to make up for the losses in digital download sales. And while ITunes might not be the same 800-pound gorilla it once was, when Apple finally puts its seal of approval on streaming music it's going to matter, despite Spotify's current success. Others will continue to enter the fray too, in a feverish fight for dominance that, for now at least, will only grow louder and more discordant.
Of course, before any disruptive new product or technology can fully take hold it must pass through a rigorous gantlet of evaluation—not beta testing, but a sometimes ugly period of public criticism and navel gazing and tech crunching. Twitter was examined and dissected repeatedly before it moved on to acceptance and wide appeal. Uber is sparking its own debate over transportation, regulation, and the taxi industry. This is how we figure out what the future looks like.
That's where streaming music is—finally advancing and ruffling enough feathers that its mainstream moment is coming, if it's not already here. Whether it brings more of a drop in revenue, or jump-starts the music business isn't yet clear, but it's coming nonetheless. It's like the feeling in your throat before vomiting. Not even the strongest willpower can keep it down, but there are still moments you're convinced it won't come. You hope you'll feel better afterwards.