Music Business

Streaming Won, But Where’s The Innovation?

4Although music streaming, the most disruptive technologycurrently being used in the industry, is well on its way to becoming the dominant method through which listeners consume music, it has not yet even come close to unlocking its full potential, despite having been around for close to two decades


Guest post by Radical.FM founder Thomas McAlevey

For a while, it looked like illegal file-sharing and iTunes downloads might be the future of a battered music industry. But streaming is already in the process of beating all other forms of music consumption senseless. Barring earth’s collision with a large meteor, streaming’s victory by knockout is a foregone conclusion. And that’s a good thing.

Artists get paid for every stream, as opposed to pirating and terrestrial radio, for which they get paid nothing. And compared to song downloads, which pay once, streaming pays in perpetuity — every single time a song is listened to — eventually profiting artists more than even the venerable CD. And users get unlimited access to pretty much every song ever recorded, not just a static list of songs that must be downloaded one-by-one (how tedious) and not just what the local radio station likes. No, we’re talking about all the music in the world, anytime you want it, anywhere there is Internet, legally and with compensation to artists, whether you choose to pay a subscription fee or not. No wonder streaming is a knockout.

But it could be much better.

Ever wonder why the meteoric rise of social media has been largely unaccompanied by music, even though music was made to be shared? Or why old-school terrestrial radio is still in business, despite limited playlists, absurdly long blocks of advertising, and zero compensation to artists? The answer is simple: legal streaming is hamstrung by the very music industry it is in the process of saving. Major labels have conspired to maintain a status quo that has bored consumers right out of the prolific adoption of streaming that will raise the music industry to unprecedented heights.

In the 90s, a self-satisfied music industry grew fat from force-feeding consumers whole albums, when the reality was that most of us only wanted our favorite hits. Then in 1999, Napster sideswiped the industry; but as a result, lawyers fueled by indignation instead of logic lashed out at everything that moved. The Recording Industry Association of America even sued a 12-year-old and popular opinion for music labels sank faster than revenue.

That same year, my Swedish start-up began streaming tailorable music stations like Pandora and curated playlists like Spotify. But a music industry raging against Napster trusted nothing related to Internet, so despite a respectable user base, we took Tomsradio offline in 2003. After several years I returned to streaming expecting to find services eons ahead of where we’d left them, but what I found instead was the same two basic service types pioneered by Tomsradio ten years earlier: personalized endless streams like Pandora, and on-demand playlist services like Spotify.

In the court of public opinion, the RIAA had learned not to sue children, but restrictive agreements continue to stifle the innovation that will allow the music industry to stream its way to its most lucrative era ever. Both label and SoundExchange (government) agreements have sufficient language and clauses to make any real experimentation of format tantamount to legal suicide. Occasionally, naive upstarts jump into the lawyer-infested streaming waters to try something radical, like, but are swallowed whole before they learn to swim.

5What’s clear is that we must move beyond personalized stations and on-demand playlists. Streaming needs real innovation to attract the audiences required to catapult the music industry into a new golden age, and the public is ready. But among today’s ‘me too’ streaming offerings from the biggest companies in the world, nobody is doing ‘social’ (live synchronous music sharing), nobody is allowing people to speak directly to followers, and nobody is combing these types of features to take on old school radio. just quoted Edison analyst Richard Windsor as saying, “The real target of Apple Music is radio rather than recorded music streaming. Despite grabbing all the headlines, the recorded music industry is currently worth around $16 billion while radio advertising is worth around $44 billion per year.” But if Apple wants to move old school radio into the digital age (and it’s about time) then why just offer Beats1, which is no more innovative than the radio we knew last century?   

1While tech companies like Apple and Pandora scratch around the edges of terrestrial radio’s antiquated empire, one old-school broadcaster is testing the streaming waters. When iHeartRadio bought Spreaker (then a simple Talk Radio app) two years ago, I thought the light bulb had finally lit. But instead of combining their Pandora-like personal radio service with Spreaker’s ability to share streams in real time and live hosting, which would have posed a real threat to the old broadcasting model, iHeart buried Spreaker into yet another podcasting service, which completely misses the live community feeling so compelling in the 44-billion-dollar terrestrial radio market, and already so lacking in today’s music streaming.

This month, Radical.FM released RadCasting, the first step towards true disruption of AM/FM radio, a market nearly three times the size of the entire recorded music industry. RadCasting permits simple real-time synchronous music sharing. The idea is to create social listening environments for any occasion from jogging with friends while listening to the same motivating music, to Beyoncé releasing her latest hit to millions of fans simultaneously. And it works like a charm… but it’s not enough.

What needs to occur is the seamless merging of a synchronous music streaming feature like RadCasting, with the voice-injection ability of Talk Radio apps like the old Spreaker, and with the support of the major labels (who stand to profit the most, as old-school radio in America pays labels and artists nothing). It’s an ambitious goal in a streaming industry all but devoid of innovation. Let’s hope that a decade after that the recording industry is ready to embrace constructive innovation instead of trying to stifle it. Because successfully combining old-school radio’s live community with internet’s reach and interactivity will socialize music and democratize broadcasting in such exciting new ways that even today’s jaded listeners will be compelled to pay attention. And not only is it possible with current advancements in tech and data delivery, it is absolutely necessary if music and streaming are to reach their full potential.

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  1. Interesting thesis but I think you’ve overshot the mark. Instead of putting more thought into how to innovate an already saturated area like music-streaming, I think companies like Spotify, Apple and Pandora should be focused on providing a seamless user experience w/ respect to finding, sharing and connecting with artists. This can easily be done by empowering artists to get to know their fans better (through intelligent data sources), giving them the ability to speak directly to fans within the app (a la FB, Twitter) and finally allowing fans to purchase concert tickets/merch/etc. from directly in the app. People need to stop pontificating on the future of music delivery: it’s already reached the pinnacle. We don’t need an alternative to radio nor to music libraries; no one cares about fan building music… they simply want a fast, efficient and cheap way to access the music they want. That’s already been accomplished. The real success will come when music-streaming services learn how to cut out the middlemen (labels) and build a platform for artists to connect directly w/ fans.

  2. Thanks for the response Music Guy. You’ll be happy to know that what you want is well understood and underway by the industry. Witness Spotify’s recent launch of Fan Insights, a dashboard to provide artists with useful analytics, and Pandora’s recent Ticketfly acquisition to eventually satisfy your desire for direct and relevant in-app ticket purchases.
    As to music delivery having reached a pinnacle, there is no evidence to support such a claim. Streaming is still in its infancy, FM stagnated with The Communications Act of 1996 and the resultant (and unimaginative) super-networks, and CD and download sales continue to tank.
    As to your charge of pontificating on streaming’s future I plead guilty. In my defense Radical.FM is also pioneering actively the subjects I so enjoy pontificating about. Through a very adventurous life I have learned to cut some slack to talkers as long as they are also doers 😉

  3. I agree and have been complaining about this for a decade. Music services have been so safe and boring that it’s sad. I think social radio would be a nice feature but it’s only one piece of the social pie. Buying concert tickets is another piece but it needs to be done *well*. Not a duct taped on ‘feature’ like Spotify recently did with SongKick. Just look at Apple Music’s new ‘Connect’ feature as a prime example on how to be boring and anything but engaging and addictive.
    This is just the most recent time I’ve talked about this:

  4. I would ditch a musicservice in a split-second if the service allowed musicians to contact me just because I listened to a song. Way way too intrusive. Even though music itself is a very social medium most people I know (including myself) dont want to share what they listen to. Its too private, unless I’m in a social gathering is the one to pick or present some new music to my friends.
    Spotify did in the start go full in the social sharing of music, but very rapidly stepped it down, cos its not what people want. They want really really simpel access to music and thats it. And why radio still works? Because its a passive medium that just works (but can be bettered quite a lot IMO). I dont want to decide what to put on everytime I enters the car and sometimes and dont want to spend my working hours deciding what to hear next.

  5. Why do you say “with the support of major labels”? What REALLY needs to happen is for the major labels to die off as they are killing the industry to maintain their profits at all costs while decimating the artists. It’s no co-incidence that today’s “Popular” music is little more than a synthesized beat track with someone singing a forgettable melody on top of it. It takes no musical talent or ability and can be created quickly and in bulk. Just grab the newest best looking Disney star and stand them in front of microphone. Label makes millions, real artists lose and don’t get heard. Labels in the streaming industry is the LAST thing you want.

  6. I agree with all comments. A winning service needs to elegantly combine social listening with private listening features, add artist support and ticket sales simply and intuitively, and achieve all this without compromising user privacy. This is possible and Radical is actively developing in this direction. Syrin’s comment is sensitive because while I sympathize (completely) Radical must negotiate with labels in today’s streaming reality or we will have no service and thereby no ability to help alter the future for the better. Thanks guys, have a great weekend!

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