Feature Articles

Why streaming services should get rid of free music

By Koh Wanzi - 7 Feb 2016

Why streaming services should get rid of free music

You won't find Adele's 25 on any of the music streaming services.

Think of the last time you went to a brick-and-mortar store to buy a music CD. If you can’t remember when that was, you’re most definitely not alone. Two of the most prominent music streaming services – Apple Music and Spotify – both have a combined total of over 90 million users, and we bet that you’re one of them.

With over 75 million users alone, Spotify is one of the most popular services around. As Jim Griffin, a digital media entrepreneur and former record executive puts it, "Spotify and others like it have become the new radio play. In a very real way, not being on Spotify is like not being on radio 10 years ago, and that’s a problem." Yes, a problem – for artists, and in a more convoluted way, for Spotify and its rivals as well.

The rise of streaming services has in fact brought about a seismic shift in the music industry. CD sales have fallen by 80% over the last decade alone, and this in an industry where physical album sales make up the bulk of income for record labels and artists. In the same vein, streaming – which previously comprised a negligible portion – now makes up 32% of the annual revenue of labels, according to the Recording Industry Association of America.

It’s no secret that artists think that streaming services aren’t paying them enough. Taylor Swift, apparently the world’s richest advocate for starving musicians, pulled all her music off Spotify in 2014 because she thought it wasn’t paying musicians and producers enough. As part of the whole debacle, Spotify missed out on 1989, which eventually went on to sell 1.29 million copies in its first week and become 2014’s biggest album. Swift’s music is now available on Apple Music, but not before she managed to compel Apple to pay artists even during the service’s three-month free trial period.

Taylor Swift has leveraged the huge popularity of her music to great success.

When 2015 arrived, yet another wildly popular artist was keeping her album off the online airwaves. In the hours leading up to the release of 25, Adele’s first album since 2011, reports emerged that 25 would not be available for streaming on any service at all (not even Apple Music, which has 1989). And this was after the success of "Hello", the album’s lead single that became the first to sell over a million downloads in the US. One can only imagine the frustration of the streaming services upon learning that they were missing out on the initial release of what was tipped to be one of the best-selling albums in a long while. Billboard even said that 25 could have the highest-selling debut week since Nielsen SoundScan started tracking album sales in 1991.

As it turns out, the predictions were right. 25 broke records by selling a staggering 3.38 million copies in its first week. It wasn't even close either – the previous record was 2.42 million copies, for *NSYNC's album No Strings Attached. And that was set in the year 2000, a time before anyone had a whiff of streaming services, and going out to the store to grab an album was pretty much how people got their music (legally).

*NSYNC's first-week sales record stood for 15 years, until Adele came along.

But Swift and Adele aren’t the only ones who haven’t fully embraced streaming. Back in 2013, Beyoncé delayed the release of her eponymous album on Spotify for months, opting instead for an exclusive iTunes release. Outfits like Coldplay have also engaged in something known in industry parlance as "windowing", where an album’s release on streaming services is delayed in order to avoid denting album sales. Adele’s decision is significant because of her massive clout and following. As one of the most successful artists of her time, her move could potentially set a precedent for other artists to do the same.

The thing with names like Taylor Swift, Beyoncé, and Adele is that they have the financial resources and audience to afford to keep their music off Spotify and other services, a luxury that not all artists enjoy. The growing number of users who stream also means that so-called unfair payments aside, many less popular artists simply need the added exposure. Streaming and other subscriptions related revenue is projected to increase to US$8 billion in 2019, while download and CD sales revenue is expected to fall by 39% and 44% respectively. This means that streaming and subscriptions could eventually comprise 70% of all digital revenue, definitely not a figure to be ignored.

The shift toward streaming has in fact been associated with a fall in revenue, which is a big part of the problem for producers and musicians. A 2014 report by MIDiA Research on how streaming was changing the music industry found that streaming consumers are actually buying fewer albums. 23% of music streamers used to buy more than one album a month but now no longer do so. Furthermore, early adopters of streaming services came largely from the same group of people who used to pay to download music, hurting download sales as a result. The problem is also not quite solved by paying subscribers. Most services cost around US$9.99/month, a fairly steep drop from the US$20 to US$30 spent monthly on album purchases.

Spotify desktop

However, with regard to 25’s shunning of streaming services, Mark Mulligan, a digital media analyst with MIDiA Research is spot on when he says that, "This is a minor issue for Adele, but a major issue for the streaming services." Indeed, when you miss out on both 1989 and 25, two of the biggest albums in recent memory (in addition to delayed releases of myriad other albums), how far can you argue that you deserve to be the music library of choice?

When it comes to artists like Taylor Swift, they may not need the streaming services, but the services most definitely need them. Jonathan Dickins, Adele’s manager, has said that their biggest objection to streaming is the wide availability of ad-supported music for free, a sentiment shared by many who make music for a living.

We said earlier that Spotify’s success was a problem for it as well, and that’s because it’s had to juggle the pressure from artists to cut off free access to their music and the need to avoid alienating its current users. Only 20 million of Spotify’s 75 million users are paying subscribers, and the figure is 6.5 million out of 15 million for Apple Music. Streaming services need artists, but giving in to artists’ demands to make content exclusive to subscribers could end up alienating the majority of their users.

Spotify should take a leaf from Apple Music's book.

The problem may be that many users view streaming as a 21st-century version of radio, an impression that isn’t helped by radio-like services like Pandora and Rhapsody. Radio is free, so they don’t see why they should have to pay for streaming when there are free versions available that work well enough. Unfortunately, that is a misguided perception as streaming represents a massive disruption in the music industry and is far more than just an alternative way to consume music.

Instead of owning copies of albums and songs, consumers are now simply able to access these same tracks online from a common source. CDs seem painfully archaic in comparison, but if streaming services are going to replace them as a viable revenue source, they’re going to have to start charging more, and yes, revoke free access to music. Adele and Taylor Swift are leveraging their popularity to shape ongoing conversations and developments, and the message is clear: Streaming is great, but a free tier should not exist. If you pay to watch content on Netflix and Hulu, why shouldn’t you have to pay to listen to music? Streaming services will have to reevaluate their business strategies, but perhaps the biggest change must come from consumers, who have to accept that paid streaming services might just become the new norm.

Join HWZ's Telegram channel here and catch all the latest tech news!
Our articles may contain affiliate links. If you buy through these links, we may earn a small commission.