#191: Music streaming myths debunked

Many of the things you’ve probably heard about music streaming are wrong, yet those myths persist. Why? In this episode, Kevin and Chris debunk some of the prevalent music streaming myths, try to separate truth from fiction, and talk about the factors that have muddied the discussion within the music industry thus far. Plus, news about Jay-Z, music piracy, SoundCloud woes, and more.

  • Vampire Step-Dad

    While I agree with most of what you said, I think you were a little too “that’s just the way it is” about some things.

    For instance, you came off sounding a little anti-physical media when you spoke about cassettes and vinyl. Yes, you shouldn’t REPLACE Spotify with physical, but I think having physical is very important. And actually cassettes are pretty sought after in the synthwave scene. Obviously that doesn’t apply to everyone, but like you said, know your audience.

    I also think that using Ed Sheeran as an example so many times sort of works against you. Many will write you off immediately when you use the most streamed artist as an example, cause it’s highly unlikely that any of us are ever getting to that level.

    Overall a good episode, though. Gave me a bit to think about. I’ve been trying to get rid of my animosity for Spotify, and now that my monthly listeners is on the uptick, that’s been made easier.

    Thanks for doing what you’re doing!

  • kbreuner

    Well, it’s important to remember the title of the show is “Streaming myths debunked.” So the sentiment you were feeling must be taken in the context of the larger discussion. I was using arguments we hear about the negativities of streaming to make certain points. One is the idea of forcing fans to buy only physical products because there is supposedly no money in streaming. That’s just not a good strategy. And my points weren’t about the validity of physical products in a mix of revenue streams, but the fact that music formats have never been driven by the creators. It’s been driven by those consuming the music. With that in mind, it’s also about being honest about where we’re at. New laptops no longer have CD drives. Cars are no longer coming with CD players. Some of this is dictated to us in an “it’s just the way is” fashion. Every generation of musician comes up into a music business ecosystem that is that is constantly changing and evolving. Streaming is super easy for music fans to enjoy lots of music, so how do we use this to our advantage? That’s the questions we need to ask as indie artists.

    Ed Sheeran was actually the perfect example because it’s not about what the average artist is doing, it’s about establishing a new ceiling and benchmarks for what success looks like in a streaming economy. A success that means serious money. For a really long time we’ve held on to the idea of 1,000,000 of something is a really big deal. So many artists see the 1,000,000 mark next to one of their songs and think that means the same thing as 1,000,000 sales (therefore they should be making tons of money and have tons of fans). I hear it over and over again. 1 Billion is the new 1 Million. But the stat I find interesting is the Average Monthly Listener stat. On almost every artist profile I look at, it’s far more people than they ever would have sold CDs to. Meaning, with streaming, artists really are reaching a larger audience and more people actually listening is good for the artist.

    Glad you enjoyed the show. Thanks for listening!

  • Vampire Step-Dad

    The monthly listener stat was easily the best point in the podcast. Of course, that doesn’t translate directly to $10 worth of value (the price of a theoretical CD) but it’s definitely a new way to look at the previously more unknowable things like name recognition, etc.

  • bodytech

    Dude, I couldn’t get through the first 10 minutes of this podcast to make it to the main point. OK, maybe that’s my own problem for being too impatient, but I do wish you could tighten up the content. Thanks.

  • It’s a difficult balance – 1,000,000 streams does not equal 1,000,000 record sales, as @kbreuner:disqus points out. But I do like streaming because it shows you if your music is actually being listened to – I’d rather have 5,000 streams per month on Spotify, for instance, than have 5,000 sales on itunes* and have my songs just sit in someone’s library totally ignored after 1 week. That’s a disproportionate amount of sales vs interest in the actual music, and can make your popularity/fan calculations way off.

    That said, if you’re consistently getting 5,000+ streams per month ($38/m) on Spotify, it means people actually DO like your music, but you’re not compensated in a way that makes it possible to actually live and continue making music, if streaming was your only revenue source/gauge of interest.

    *(careful what you wish for?! wouldn’t say no to 5,000 sales anywhere tbh…)

    -justine
    justineariel.com

  • Drew Little

    Boy I think you guys are really missing some things here. The biggest one is your repeated assertion that there’s “money in it”. With all due respect, that’s a completely bogus assertion on several levels. First of all, you cited outliers to justify the statement. Outliers by definition can’t support a broad argument like the one you’re making. Market research has shown in the past that most indie artists who pay to get on streaming services never get streamed enough to pay for the cost of the service. That may be a couple of years out of date, you tell me, but it certainly hasn’t flipped to the point of making the total enterprise a financial success for more than a handful of indie artists. Albums and downloads are a different story. As an indie label owner I have to evaluate the cost of producing an album in terms of how many streams are needed to cover the album’s cost. For a moderately well-produced album with basic marketing support the break even is in the neighborhood of 1 million streams. Most indie artists aren’t going to get there. On the other end, Spotify, while I agree a great user experience, is an absolute pig as a business–over $500 million in losses in the last 2 years. The “money in it” is what the VC world calls OPM — Other People’s Money. The subscriptions don’t get remotely near covering their nut–never have, and I don’t think they ever will. And this is not counting the latest $30 something million settlement for not paying songwriters what they’re legally required to. What happens when those investors get tired of getting hammered? The IPO has already been spiked once and I honestly am stunned that the board still hasn’t cleaned house over there. I predict that happens before the end of the year. Jimmy Iovine said in the HBO documentary that just came out that the music business was clueless about technology in the early digital days. I don’t think that’s changed. I think the continued support of Spotify by the big labels is driven by fear and lack of organizational flexibility–the lack of ability to adapt internally to the market, so they’ve farmed it out to this money pit called Spotify. Sooner or later they’re going to wise up and realize that TV is getting streaming right, by controlling their content and the QUALITY of the delivery, and music has it wrong. Streaming isn’t going anywhere but the streaming landscape is going to be radically different in a short period. Soundcloud is in deeper trouble than the numbers might suggest from a casual look. Their losses are even more outsized than Spotify’s if you consider the user base. Their best case is to get bought by someone with more money than understanding of the industry — a sucker. Sooner or later a major label is going to hire a CEO who is young and tech savvy enough to pull all their content to something like a Hulu or HBO Go, owned and controlled by the label. Then the other labels follow suit and bye-bye music streaming services–thank god! Because then the focus will be on putting out the best music and delivering the best listening experience in order to compete label to label, competing in the arena of quality instead of scrambling to stay relevant, instead of this weird semi-collusion that Spotify facilitates. Sorry for the long post but this really is something I’m passionate about because I care about all indie artists, not just the fortunate few and as a William & Mary MBA (you said you weren’t qualified to discuss business but I absolutely am) who doubled in history and econ as an undergrad, these businesses and the undue economic burden, the destruction of capital they’re creating in our economy, their terrible business models, offend me. I’d love to debate this with you at length. Maybe we’ll run into each other in Nashville and can hash it out over a drink. Good show, love what you do, but I think you’re looking at this issue through an overly narrow lens.

  • Drew Little

    BTW, we pulled almost all of our releases from streaming back in April, just using them to hype singles on a short term basis, and sales are through the roof after and all-streaming, abysmal 2016.

  • I do make money from streaming. And I agree that potential royalties are being ‘manuevered’ away from most artists that are in complex publishing / recording contracts. Since I own 100% of it all.. I GET IT ALL.

  • kbreuner

    Thanks for checking out the show! We always do some banter, news, the main topics, and then listener calls and emails. It’s sort of the patern. People who have been listening to the show for a long time have gotten to knwo Chris and myself. Sometimes we blab a little too long, but part of the reason I keep it in as I want people to know we’re in the same boat as all the listeners. We’re indie artists trying to make things happen. It makes the content more relatable. Feel free to use the fast forward button. It won’t hurt my feelings.

  • kbreuner

    A lot of stuff in there, but I will say we’ve seen the money our catalog at CD Baby is making from streaming explode over the last 18 months. Any data about what an average artist makes that’s more than a year old won’t be accurate to current trends. Seeing as we manage a catalog of over 7 million tracks of indie artists of all shapes and sizes, I think we’re looking through a pretty solid lens. There’s definitely room for differing opinions though.

    Yes, TV did enter into the streaming world in a manner that was more pro-active and did some things better.

    Would love to discuss over a drink in Nashville (assuming that means you’ll be at our conference). I’m always interested in what others have to say.

  • Drew Little

    Yep I’ll be there! I don’t question the size of the catalog, but I think it’s in your company’s interest to focus on the success stories right now. To be fair, no company ever says “look at this guy who bought our product and died!”. You’re not likely to kill anyone, but I’d argue that a more deft strategy on the part of the artists would be more beneficial to them and that there are plays to be made by companies like yours to facilitate that and thereby make more money for yourselves and the artists in the short term and secure a post-Spotify future in the event that happens. Which, when you look at their financials, seems certain if they don’t re-tool their business model so radically that, that alone may be the end of them.

  • kbreuner

    You’re suggesting a nefarious hidden agenda, which doesn’t exist for us. We don’t own our catalog like the major labels do, so we can’t partake in the kind of deals you refer to. I would totally agree that those hurt the system.

    The may point of this particular episode is that people need to understand what is going on and make decisions about their participation based on real information and not sensational headlines engineered to induce fear. If someone comes up with strategies that are more beneficial for their music, they should absolutely go that route.

    See you in Nashville!

  • Julius Coxswain

    I agree with you on this. The first 10 minutes of talking was superfluous. That said, this was a very informative episode and I am glad I listened to it. If possible, it would be nice if the hosts added time markers to the episode description so that listeners could fast forward to the meat of the conversation.

  • Jimmy Harris

    So the RIAA says 1 download = 150 streams. Of course that matches up really nicely with the .006 dollar (6/10ths of a penny) payment you typically get for a single stream if you own *everything*, including the publishing and the label. But THIS is the ratio that is waaaay out of whack.

    There’s no analogy to a stream in the history of the record business. The closest analogy might be the old-fashioned jukebox. You are “renting” the music, not buying it. But how long has it been since a single play of a song on a jukebox cost less than a penny? Not in my lifetime. Maybe in your grandparents lifetime. I don’t think anybody is gonna agree that a stream should pay out what a single play on a jukebox costs. Though that’s truly the closest analogy we have.

    So to define what a stream is worth, we have to look at it in terms of the monetary value of “equivalent physical product”. How do you monetarily *translate* the value of listening to a song via stream vs. an LP/CD?

    Let’s round off some basic numbers to make it easy:

    1) Let’s assume an LP or CD costs $10. They actually have long retailed for much more than that, but with discounts, etc…that’s a pretty good guess at an average street price for the decades between 1970 and 2000.

    2) Let’s assume there are 10 songs on a disc. This is a very good assumption because typically record labels would not PAY mechanical royalties for more than 10 songs on a single disc. So most artists never exceeded this number. If they did it was on their own dollar.

    3) This means that the approximate “cost of ownership” to the consumer of a *single* song on a physical LP or CD can be approximated at $10.00 divided by 10 = $1.00 (one dollar). For that, they get to listen to that single song as many times as they want, till the disc wears out.

    4) A stream can also be considered a SINGLE play of a single song that you “own”. Technically you do not own it, you’re only renting or leasing it long enough to hear it. But it’s no different in terms of the goods (i.e..the music) you receive. You don’t buy music for the plastic..i.e…nobody ever bought an LP just to watch it spin around. Well, I guess with proper chemical stimulation, that may have occurred a time or two.

    5) So in terms of “equivalent physical product”, if you actually BOUGHT the disc, *how many times* would you (on average) play a single given song on an average disc you own? You can’t assume every song is your favorite song on the disc, but you can possibly assume it’s ONE of your favorites (since a streamed song was selected individually, it shouldn’t be considered equivalent to album “filler”, which most people skipped right over anyway 😉

    So, how many times is this same average song played before you get sick of it? 5? 10? 50? 100? 500? Based on the ratio at the top of this post, the RIAA is trying to tell us this number is 150. My personal opinion is that the number is much closer to 25 than 150. Possible even lower. This difference makes a MASSIVE difference how we should calculate our streaming royalty rate:

    $1.00 divided by 150 “listens” is .006666666 etc. (6/10ths of a penny per stream)
    $1.00 divided by 25 listens is *six* times greater, or 4 CENTSPER STREAM.

    NO ONE is paying anywhere close to 4 cents per stream. But I would guarantee if the research is done, that’s much closer to the truth than what the RIAA is trying to sell us on.

    One simple way to determine what this number would be to gather data from all the streaming services themselves. How many times does the average SINGLE individual person request to stream the SAME song over an extended period of time…say 10 years? (eventually a music listener will tire of anything. Though there *are* 40 year old records people still listen to, it’s never close to the same frequency as when it was new and fresh)

    Determining THIS number would enable us to arrive at something closer much to the truth as to what a “stream” is worth to the content provider. If artists are ever to be properly compensated, there should be a consolidated industry effort from managers, labels, and publishers to DO this research and determine what this number really is.

    OR….we could just base it on the jukebox.

  • Shudoshi Shu

    BS bottom line is streaming sites need to pay more per stream period!

  • Drew Little

    I don’t mean to suggest that at all and I sincerely apologize if it came off that way! I’m merely saying that it is in CD Baby’s interest to take examples of success and say “hey this works, you should do it too!” Every company makes that argument to some degree and it’s not nefarious, it’s business. What I’m suggesting is that music streaming is broken and that there are better ways to skin that particular cat. CD Baby did a good job of reading the writing on the wall and being adaptable enough to get where it is now and would be well advised to stay flexible and look more at the business and investment side to see where the future threats and opportunities are going to be, because both are there and they’re huge. Music streaming as it is now is a house of cards. The right executive at Sony or Warner could blow it over in a matter of months. That should keep you guys up at night. Your challenge isn’t how to convince people to buy into streaming, it’s how to be prepared if a big player collapses. I’ve been through the angel/vc grist mill and what I can tell you for certain is that most of them hate the music industry as an investment. THEY say there’s no money in it. When losses in the sector get to that tipping point where the current investors hesitate or go broke, there’s nobody else, there’s no financial plan b for Spotify, not with the current model. Half a billion dollars in losses in 2 years and the rate of loss is growing faster than revenue! You can’t lose like that and escape consequences. The rest of the industry might have some real opportunities picking up the pieces or, in the case of the appropriately bold and savvy major, helping humpty fall off the wall. In terms of economics and investment capital we’re just scratching the surface in this conversation, there’s so much more to consider and the opportunities they present make me wish I had a lot more market power to take advantage of them. The opportunity to put more money in artists’ pockets and better quality in fans’ ear holes is so close I can taste it, but I’m not big money enough to do it. If I have a main point I guess it’s that no one should get too attached to any part of the current system because a major disruption on the order of the advent of digital file sharing is soon to be upon is, but it’s not a tech disruption, it’s a disruption in economics and finance so it’s more organic and less forgiving. I really hope we get time to talk next month and I really appreciate you taking the time. And btw, I told my partner about our conversation earlier and I told her, and I meant it, that if I’m wrong I hope you convince me because I don’t want to get this wrong anymore than the next guy.

  • Vampire Step-Dad

    Yeah, it is a way to see if your music has staying power. That’s why I think it’s important to engage fans and get them to support you with things other than music, if you can. Shirts, stickers, etc.

  • Alonso Soriano

    Love the podcast, thank you, keep it up!!

    I have alternate advice for Chris about his abundance of songs. Embrace it.
    Consistent posting is what builds a following on the interwebs. When people know there’s going to be something new every Monday and Thursday they start coming back. Be like the Johnny Cash show, you’re performing instead of painstakingly crafting jewel albums. Pomplamoose and Andrew Huang still do pretty elaborate arrangements, but they don’t have to spend forever making the songs perfect. Good is better than perfect. (especially since a lot of the perfection will go over the heads of non musicians anyway) Build a following, start a patreon.

    It’s a question of priorities; focus on making the best music you can, or focus on getting as much of your decent music out there as you can.

  • George Pappas

    The banter is pretty typical format for all podcasts (not just DIY Musician). It took some getting used to for me, but now I expect it and if I’m in a hurry I know I can skip forward 10 minutes and it’ll all be okay. Agree it would be nice to have some markers.