Streaming Services: The “Saviour” of the Music Industry

Streaming Services: the “saviour” of the music industry

Rick Henriques is a first year public relations student at Humber College. Henriques’ interests include pop culture, music and radio.

The Internet has created a cyberspace in which pirating a song requires nothing more than a couple of clicks and a few keystrokes. In a world where everything is turning digital, it is no surprise that CDs are on the verge of becoming obsolete.

Don’t report me to the authorities, but as a student I’m not necessarily the first person to be legally purchasing my music. If I have an iTunes gift card I have no problem paying for music; otherwise, I’m sticking to SoundCloud and Youtube

According to Nielsen SoundScan, physical album sales in 2014 have marked as the lowest year since 1991 with a 14.9 per cent decline in sales from the previous year. “Sales have been going in the wrong direction all year,” says an anonymous record label executive. “I guess it’s overdue, when you look at the growth of streaming.”

digital  and physical album sales
A chart comparing the decline of both digital and physical album sales within the past seven years. 

Fortunately, streaming services have arrived to save the music industry. In 2014 alone, the total number of streams rose 54 per cent to 164 billion songs. In comparison, CD sales have declined by 47.9 million units. However, CDs account for a larger royalty as opposed to a streamed song; nevertheless, streaming has not even reached its peak yet, with an expected growth of 400 per cent within the next three years.

As someone who aspires to work in the music industry, knowing that streaming services are saving the music business.

Streaming services are separated into three categories:

Statutory: A service with a fixed number of streams; however, statutory services are subject to federal regulations. An example of this is Pandora Radio.

Ad-based: A streaming service that generates its revenue from advertisements. YouTube and VEVO are prime examples.

Subscription: Streaming services which require a monthly subscription; these services are free of federal regulation. Both Spotify and Beats Music are examples of a subscription streaming service.

Pharrel Williams, Happy, Spotify
Pharrel Williams’ single “Happy” received over 10 million streams in one week on Spotify. 

The profits are measured on streaming services via the average revenue per user (ARPU). As of now, digital broadcasters pay differing royalty rates, depending on whether the audience controls the content or not. For an interactive service, such as Spotify, the royalties are contracted privately with the record label. Otherwise, they are considered non-interactive services and the royalties are divided by SoundExchange. Fifty per cent of the streaming profit goes to the record label, 45 per cent to the featured artist and the remaining five percent is the cut that SoundExchange takes for its services.

With the rise of a cheaper, more accessible service to download music, the ARPU of iTunes dropped to $1.90 per month from $4.30. To contrast, Spotify’s ARPU is $3.40 per month.

beats music, dr dre, interscope, jimmy lovine
Beats Music was co-founded by rapper and hip hop producer Dr. Dre and Interscope chairman Jimmy Iovine. 

With this information, it comes as no surprise that Apple has recently closed a $3 billion deal to obtain Beats Music and Beats Electronics in an attempt to remain a key market player in the music industry.

However, not everybody is a fan of streaming. Taylor Swift refuses to have her music published on an “experimental website” like Spotify, due to the insignificant profit she would receive of her “life’s work” compared to physical album sales.

taylor swift, best selling
Taylor Swift remains one of the top female artist in terms of sales.

This decision is understandable for Swift, considering her last three albums have sold over a million in their opening week. As an artist who made history during a 14-year deficit in her respective industry, it is a smart move on her part.

The prominence of streaming services has made record charts such as Billboard and Official UK Charts to count streams, as well as single and album sales towards rankings.

What is your opinion regarding streaming services?

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