Luke Lewis: “Streaming Will Stop Looking Like The Future – Which Means Piracy Will Flourish.”

image from This grim end-of-the year forecast comes from NME Deputy Editor Luke Lewis. He starts off his article of digital music predictions for 2011 by saying that, "Streaming will stop looking like the future… which means that piracy will flourish."

His reasoning: "Spotify lost £17 million last year, and key albums keep getting yanked from its library. has never turned a profit in eight years," he says. "Last year, Sky Songs died, and We7 scaled back its unlimited on-demand ambitions." 

Sure, he notes, services like Sony's Music Unlimited are being launched, but "it's becoming clear that ad-funded streaming simply doesn't make financial sense."

Also, Spotify failed to launch in the U.S., which suggests that the major labels are losing faith in the concept of ad-supported, free music. In spite of our best attempts to proclaim how the music business model might evolve, they're still making a most of their cash from selling music in physical and digital form, not renting it. To Lewis, this means we have more piracy to look forward to in 2011.

This positions Spotify as the record industry's last best hope in their efforts to wean fans from file-sharing. If Spotify fails and doesn't work as a business model, "frankly nothing will," he says. I hope Lewis is wrong. But he makes great points.

Allowed To Fail

BBC blogger Rory Cellan-Jones summed up this situation the best.

He says that the labels complain off the record about the small revenues they're getting from their licensing deal with Spotify. "But surely," he notes, "they ought to be asking themselves what it will say about their industry's digital future if the service which once excited both music fans and the labels is allowed to fail."

As I've argued before, Spotify has a shot at shifting the way that fans consume music. The problem with this is that the major labels don't want to change music consumption habits, because they're still hurting from the last time this occurred.

Apple's iPod, along with iTunes, already altered fan behavior and unfavorably so.

The major labels don't want to risk this to happening again. Plus, in letting Spotify into the U.S., they risk eroding iTunes sales. Despite their agnostic relationship with Steve Jobs, the major labels aren't looking to take music sales away from the one person that's sending large checks their way on a consistent basis.

They also don't want to deter Google from getting in the music business nor do they want to upset Amazon either. These companies will help them take market share away from Apple while still bringing in sales. Spotify can't promise this.

The Wildest Card

Absent from Lewis's year-end forecast is the possibility of iTunes subscriptions.

Jakomi Mathews and Chris McLellan at The Music Void offer up this prediction: Apple will launch a music streaming service."Motivated by the stagnation and already evident decline of al-la-carte downloads, Apple will enter the cloud music business with a bang," they write. "And it will quite probably dominate the US…"

As a result, they believe there will be a culling of US-based music streaming services as "Apple brings out its big, intimidating launch machine in 2011."

I've seen many tech writers argue that music streaming subscriptions will see a revival the moment that Jobs decides to turn the idea into gold. He doesn't even need to do anything that remarkable. People will eat it up just because Apple offers it, as if they'd never heard of the idea of streaming music online before.

And, we still have Slacker, Rdio, MOG, Rhapsody, and Thumbplay Music too.

In other words, there's still hope for online music streaming. Look at it this way, the major labels are one black turtleneck away from salvation. They're thrilled

Oh, and did I mention, piracy is already flourishing.

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  1. I hope he’s wrong too. The problem with not having any LEGAL streaming is that it opens the door for plenty of ILLEGAL streaming. That won’t benefit anybody.
    At the same time though, doesn’t take much to perceive that the Spotify business model is kinda set up to fail.
    Just for the record, though, I would neither support nor subscribe to an Apple/iTunes streaming system. Not after my account got hacked and I couldn’t even get a live person on the phone.
    I doubt I’m the only consumer who feels this way.

  2. The problem with piracy flourishing Pierre is that assholes like you don’t want to pay for what they’ve got and that mentality is what’s destroying this world.
    If you didn’t earn your paycheck you don’t deserve it, if you didn’t pay for your music collection with money that you earned you don’t deserve it.
    Get a job and pay the musicians what they deserve you greedy asshole.

  3. Piracy exists because the record companies made us pay high prices for a disc with one hit and 11 crappy songs. People don’t trust what the record companies are peddling anymore. BUT studies have shows that people who download for free and actually find a band that they like will become a fan and buy the CD, buy a ticket to the show, and buy their merch (not only at shows but in retail stores). The whole model is changing. Music isn’t the product anymore. Music is the advertisement to get you to become a fan of the band and the band makes money in other areas. Hence why record companies are signing 360 deals as they know the end is near and want a share of every revenue stream. Bottom line is put out a good product and people will still buy it. Which is why Eminem and Taylor Swift (who I’m sure have had millions of stolen downloads) can still sell a ton of CDs as they are a proven product.

  4. You forgot to mention Napster, which also is in the streaming business. They offer an annual plan ($96) cheaper than its competitors, and they have the might of Best Buy (declining sales this xmas, notwithstanding) behind them. I like the service, and will see if it saves me money this year as I just upgraded to the mobile service for my iPod Touch.

  5. Just being picky … but there is a quote early in the piece about major labels “agnostic relationship with Steve Jobs”. Agnostic relates to not quite believing in God … Steve Jobs, while a talented businessman, is not God – whether you believe in him or not!!
    I think the word was meant to be “antagonistic”?
    Anyway, the major labels better pull their head out of the sands quick-smart and help these services rather than blocking them. They can’t stop progress, so they best work out a way to make it all work without putting up all the barriers and old-school arguments that they seem to be persisting with.

  6. Pretty sure I'm on point.
    define:  agnostic
    Someone who is doubtful or noncommittal about something.
    Would you consider the labels to be “doubtful or noncommittal” in regards to their relationship with Steve Jobs?
    I do.
    Thanks for the comment.

  7. I woule like to know how the revenue scheme of an online streaming service works in the background.
    First off, I don’t think Spotify only generates money via advertising. Spotify retributes authors rights and neighboring rights back to the composers and the labels for every song streamed. Sure they’re losing money that way too but in a not so distant future, when there will be dozen upon dozen of million subscribers on these services around the globe paying their 10 dollars a month, with the service itself paying the right holders their tiny (tiny) contribution for every song streamed, online streaming will make lots $$$ and the industry will get its share. And why do I think dozen if not hundred of million of peeps will sign up to spotify related services in a couple of years? Well because the streaming model is just awesome – the perfect music experience – there is absolutely no comparison. Havent tried thumbplay cause i live in France, but spotify represents EXACTLY what many people want in terms of music consumption.

  8. I should’ve probably said that I’m a musician. In any case, I’m sorry that you will live in constant paranoia and fear that your music is being “illegally” transmitted over the web. I on the other hand, would very much appreciate it if my music were being torrented and streamed on YouTube. It means people actually want to listen to my music.
    So are you in it for the money or the music? I make MUSIC, and anyways are you really going to charge money for virtual files? I have no problem with charging money for physical products like CDs (remember those?) and merchandise. In fact, my goal is to one day have my entire music collection on CD (which means I can import them in FLAC – ever heard of that?) so I really don’t see what you’re saying about mentality.
    Finally… anywhere I could listen to your music? I always like discovering new bands and artists.
    Cheers, Pierre.

  9. Band Member, guys like you belong to the stone age-extinct races of animals. The words you uttered simply gives us an idea what kind of specie you are.And you don’t speak like a band member you claim you are. More like Clay Aiken 😛

  10. I think that diction-wise, the jury’s maybe still out on whether a relationship can be “agnostic”; could a relationship be characterized by “Catholic” rather than “catholic”? How ’bout fundie LDS? Ever have a Jewish relationship? I got what you meant, but I don’t ‘believe’ your usage qualifies as Standard English. 😉

  11. I think it’s more accurate to say that Spotify is being set up to fail in the US by the major labels.I believe there will be a streaming paradigm, legal or otherwise, because people who don’t see a need for physical product ALSO don’t see any for carrying a bunch of files around on a drive, no matter how small.

  12. Surely the fact of massive piracy shows that people actually DO like downloading music rather than streaming?

  13. Ever spent any time examining an established artist’s royalty statement? The problem is that streaming and piracy pay about the same.
    Until that is addressed and fixed, Spotify and their peers are going to have a very difficult time persuading content owners to hand over the keys to their catalogs.
    If Spotify and Last FM can’t turn a profit given the pittance they pay out for music, then there must be some critical flaws in their business models.

  14. So the labels got a choice:
    either they try to make streaming offers attractive and earn money, though not the gazillions they used to – or they deny their content to streaming services and earn nothing at all.
    I’m not situated in the heights of music company stardom, where the air is apparently unbreathably thin, but for me it sounds logical to choose earning at least a little, rather than nothing at all.
    or maybe the guys at the top of the music industry skyscraper got a machine to alter reality – from what we’ve seen these last years, they tested it on themselves, seems to work perfectly fine as the continued denial of reality proves.

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