How I Listen

The Music Industry Really Wants To Kill Free Listening

BN-DF456_STREAM_G_20140612162817The debate continues. Does free, or so called freemium music help slow piracy and build an audience that will eventually pay? Or does it devalue music to the point that creators can't make a living?

                                                                                           

Guest Post by Alan Cross on A Journal Of Music Things

You can pay the full fare (usually $9.99 a month) for a version of the service that allows maximum control. Or you can opt for the free (or “freemium” version that doesn’t give you as many features and forces you to listen to commercials.

Artists and rights holders make money from both, although the rates for the paid service are substantially higher than for what they get out of freemium streams. However, the more people who sign up for the freemium tier, the bigger the revenue bucket and (theoretically) will eventually result in larger payouts.  It’s just going to take time for that customer base to build up.

That base is getting larger. Music piracy is way down because streaming services are easier to use and more convenient than stealing. Hey, getting paid something is way better than piracy, which pays nothing. And if they do it right, the streaming services can convert freemium customers into paying subscribers.

Record labels hate the idea of the freemium services, saying that they want it to die. “Everyone should pay!” they say.  That drumbeat is getting louder, too.  From Billboard:

Free streaming is being portrayed, by some, as the end of the music business.

Start with the latest articles to feature anonymous quotes from label sources, yesterday (Mar. 22)in the Financial Times (“Streaming sets off a painful debate in the music industry”) and Friday (Mar. 20) at Rolling Stone (“‘We Need To Limit Free': Major Labels Begin to Question Spotify Model”). A Billboard article earlier in the month had the same comments from industry sources; labels have changed their opinions on unlimited free streaming and have become more vocal about their desire for subscription services to turn free listeners into paying customers.

Payola-1The timing of these articles’ publications isn’t a coincidence. The Financial Times‘ work seemed to suggest Spotify is currently in licensing negotiations and might not renew some contracts. “Now the record companies have weighed in, led by Vivendi’s Universal music label, arguing that the company’s free service is not sufficiently distinct from what customers pay for. They have real clout: their catalogue licenses are up for renegotiation and without permission to use them, Spotify has nothing to sell,” the article says.

That particular calendar comes to an end this summer, when Spotify’s deals with major labels are likely to expire in the United States. Spotify launched in the United States in July of 2011. Whether Spotify and the labels had two-year deals or four-year deals, the contracts would need to be renewed at that time.

Ah. Now it makes sense.  Keep reading.

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3 Comments

  1. The tone of this piece and many others to state Spotify has nothing to sell if no agreements but this must be taken in context of the industry.
    All retailers using the same streaming models as Spotify would be impacted (cannot favourite some service) and hence the labels would lose a big chunk of revenue and drive customers back to piracy.
    So it actually a lose situation for the whole industry.
    All parties need each other to keep the industry going.
    My hunch is still the 9.99 point is too high but Major? labels don’t have the nerve to try a new price point

  2. The music and film industry where very stubborn and tried to fight piracy in court. Personally, I think that giving people more option likes Spotify, Netflix and much more really lowers piracy percentage. Yes it cost money but it’s much more convenient and easier then searching for a movie on a download site and wait till it has been downloaded.

  3. This piracy argument really has no merit. Replacing one bad business for another, even if marginally better is no solution. It has already been proven that alternative forms of compensation have been unable to sustain musicians and songwriters. We have ended up with fewer, less interesting successful artists, because the business no longer supports them.
    Even the title of this post is biased. The industry is not opposed to free listening that supports discovering new talent, it is opposed to interactive music streaming that dumbs down the discovery process for the majority of listeners who aren’t adventurous and leaves no motivation to purchase music.
    Our purpose is not to appease “customers” who have become accustomed to not paying for product, but to create a real business, where real artists, can make real money.

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