The Future of Music Revenue: Streaming and Its Implications

Streaming is here to stay, and it's getting close to being equal to downloads and CDs as a revenue stream for the record industry at large. I think it will become the biggest revenue source.

The Status of CDs and Downloads

• CDs aren't going anywhere.
  • In some markets, they have disappeared.
  • However, in others, like the UK, Germany, and Japan, CDs are still selling well.
• Vinyl sales are on the rise.
• Downloads are in significant decline at the moment.
  • It will be interesting to see how long downloads stick around.

I predict that streaming will become the most significant recorded music revenue stream in the next five years, predominantly from subscription services. Currently, about 50 to 60 million people are paying to receive streaming music worldwide. This includes platforms like:

• Spotify's premium subscribers
• Apple Music
• Amazon Prime
• Deezer

Worldwide, that number is relatively small, but Spotify and Apple Music are adding subscribers at a very fast rate.

The Growth of Free Services

I also believe that free services will continue to grow. However, they may become slightly less user-friendly in the next couple of years. There is pressure on Spotify to limit some functionalities for freemium users.

Nevertheless, I see many opportunities in terms of:

• Advertising
• Sponsorship
• Upselling

The free platforms, whether it's YouTube, Spotify Free, or others, have not been utilized to their full potential.

How Streaming Rates Vary

When it comes to streaming, the same product (a song) is available across five different services, and yet the artist receives different payment rates from each platform. This inconsistency is puzzling in today's digital age.

It's crucial for artists to understand their deals:

• For established artists:

  • Check your contracts and avoid publicly condemning streaming services without understanding the terms.

• For up-and-coming artists:

  • Understand that navigating streaming deals can be tricky.
  • If you're not part of a trade organization, you may miss out on better offers negotiated by the majors who often get the majority of the advantageous deals.

Fortunately, rights organizations like Merlin are now advocating for independents, ensuring they receive fair treatment.

Understanding Your Deal

New artists should view streaming as a promotional opportunity, especially in the early stages of their career. Here are some steps to take:

1. Go through your provisional record deals with a fine-tooth comb.

   • Understand the potential streaming income.

2. Seek out the best deals.

   • Research available agreements if you're not signed to a label.
   • Look for organizations that offer fair rates per play.

3. Get legal advice.

   • Even if finances are tight, consulting a lawyer is invaluable.
   • Numerous artists end up in disadvantageous positions due to a lack of understanding of their contracts.

Why Legal Advice Matters

In the new digital economy, understanding your contracts is more important than ever. That initial agreement can impact your career trajectory for decades.

Tip for New Artists: If need be, borrow money to hire a lawyer to review your contracts. It's worth it for your long-term income.

The Role of Streaming in the Industry

Streaming is an integral part of the music industry and the user experience for your fans. You can indeed make money from streaming.

While the per-stream rates are low, and everyone obsesses over them, here's what to remember:

• The music industry needs more people paying for streaming.
• Increased subscribers for services like Spotify and Apple Music benefit everyone.

As an individual artist, you must focus on getting more streams. Streaming services typically pay a minimum per play, though this will vary as revenue-sharing models evolve.

Maximizing Your Streaming Potential

To be successful in streaming:

• Get on playlists.
• Playlists are crucial for navigating the vast catalog of content on services.

Getting onto playlists leads to more streams, which translates to more revenue.

Conclusion: While streaming might appear to yield small sums at first, it will be a key part of your business model as a new artist. Enter the streaming landscape early, you won't regret it!