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What is the future of music streaming?

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Black headphones in front of a music streaming screen

Music streaming is arguably the hottest topic in the music industry. Eight years ago Spotify was founded, and many other players have since entered the market: Deezer, WiMP and most recently Beats to name a few. And while streaming platforms are made in heaven for the consumer, some artists and labels have struggled to accept it as the future of music listening habits. Thom Yorke famously called it “the last desperate fart of a dying corpse” late last year and much ado has been made about ‘unfair’ royalty payments.

But the numbers don’t lie. Global revenues from subscription and streaming services climbed 51% in 2013, crossing the $1 billion threshold for the first time. Streaming services now account for 27% of all global digital revenues, with IFPI estimating that more than 28 million people worldwide currently pay for a music subscription, up from 20 million in 2012.

In 2012, indie label collective Beggars Group (4AD, Rough Trade Records, Matador Records, and XL Recordings) generated 78% of its global digital revenues from downloads and 22% from streaming. In 2013, that ratio changed from 70% for downloads and 30% for streams. In the last six months, it's been 60-40. The tide is shifting.

“It’s a dream come true that everybody in the world can access every song in the world on their mobile device,” says Epitaph Records owner Brett Gurewitz. “Some of the problems are a little sticky and hard to solve like how do we get people to pay for music instead of consuming it for free. That’s been hard to figure out for everybody but I feel like that’s getting better all the time. It’s moving in the right direction and when that gets sorted it’s going to be a phenomenal time for the music business.” So what’s next? Read on.

For the consumer: curation, convenience and recommendations

Streaming is going to get clever. Beats Music CEO Ian Rogers has promised “the best personalisation technology can deliver,” while WiMP Music’s head of strategy Kjartan Slette predicts “a seamless experience with video, text and music all integrated” for the music fan by the end of this year.

I can rarely find the time to trawl through an entire newspaper these days to find those two or three articles that I really want to read. But create me an online package that personally curates the content that’s interesting and I’ll happily pay a fair fee. It’s exactly the same for music. Show people everything that’s out there and they’ll switch off. Give them what they want immediately and they’ll keep coming back for more. Quality playlists and compilations based on past listening habits are the future.

In order to make those royalties pay, the music industry needs to grow the amount of people paying, rather than increase the amount those people are being charged. £10 a month for a premium subscription has been suggested as too expensive for the average consumer and lots of companies are already offering cheaper options via deals with Telco companies or for students. To get more people streaming, it needs to be made so easy and accessible that the idea of searching through pirate websites for a decent link is not worth the hassle in comparison.

For the streaming services: growth

While there’s still talk of very little money being made by streaming companies at the moment, the business is still in its infancy. Spotify looks headed for an IPO towards the end of this year so that will shine some light on its figures but in the meantime, there’s no need to panic. As Moby explains: “Whether something makes a profit or not is in some ways becoming a less valid criteria for evaluating a company. The world of tech is filled with companies who failed but had an amazing approach to technology and the people who come after them figure out a way to do it remarkably well. Google and Facebook are perfect examples. You can go from being deeply unprofitable to profoundly profitable pretty quickly and in some instances profitability is not a good short-term criteria to apply to evaluating a company.”

The more big brands that launch services means more people will become aware of the option and therefore the bigger the pot will grow. Apple has yet to join the rat race but its long rumoured arrival in streaming could happen this year. And if it does, it’s potentially bringing at least 225.7m more people into the fold (it sold 151.5m iPhones and 74.2m iPads in 2013 – 225.7m new iOS devices). Spotify has around 24m active users. Go figure.

For the industry: a more level playing field

An ideal industry is one that awards those with the most merit, rather than those with the greatest access to money. Historically, the independent labels have generally been seen as the small fish in a big pond dominated by the majors. However, thanks to the internet, everyone has access to a potential worldwide listenership, without the need for big marketing and promotion budgets. Streaming platforms go hand in hand with this. It costs far less to get your music up on Spotify/Deezer/Beats than it does to manufacture a physical CD/vinyl/cassette. Independent labels or artists who self-release can therefore get their music out there for less cash than it used to cost back in the pre-internet era.

Co-founder of Seattle-based label Sub Pop (the one that released Nirvana’s Bleach album) Jonathan Poneman has lived in both eras. He’s got a pretty balanced view of the future.

“I am somebody who believes that the best days of the music industry are yet to come. I think it’s a great time to get involved in music, as a consumer, as a musician or being on the industry side of things,” he explains.

“It’s simple arithmetic. For a long time the music industry was a closed shop. Now you have more and more people becoming involved in the music industry, the potential listenership is broadening. I don’t think there will be a return of the model that existed during the ‘60s and ‘70s and ‘80s and even the early ‘90s, I think that there will be a much more sustainable industry going forward, there's going to be more people participating in it. Music is becoming a much more vital part of people’s lives and as long as that continues to happen the industry at large will thrive. The music industry has always been really good at making a select few people a lot of money so now it’s making a whole lot of people not quite as much money. To me that is a better state of affairs than an oligarchy.”

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