This guest column comes from Chris Wright, co-founder of the Chrysalis Music Group:
Music streaming has changed everything. It’s changed what the record labels release, how they release it and how they market it.
Just as sales of CDs and the hardware that plays them went into decline, streaming came to the rescue. Now, for most record labels, it’s become almost the most important source of revenue.
For some record labels, such as Warner Music Group, streaming is the most important source of revenue: it was in May this year that digital accounted for more than half of the group’s total revenues for the first time.
And the rise of streaming hasn’t only changed the importance of different revenue streams – profitability on the whole has increased. One record label executive told the Financial Times that “we’re looking at a financial profile that recorded music has never had at this scale.”
Even though streaming is lucrative, in part because distribution costs and stock risk have become almost non-existent, the price of individual tracks is very low, which makes piracy less profitable and less common. It still exists, but in most cases for those who used to pirate their music the risk now outweighs the reward.
Streaming has also forced the industry more than once to change how charts are compiled. At first, it was because streaming needed to be included as a contributing factor in top-ten and top-twenty lists. That, however, led to some of the most successful artists – Ed Sheeran, for instance – to occupy almost every place.
Before streaming, an artist would release a song and it would climb the charts, leading to exciting and unpredictable chart battles, whilst in today’s market bingeing is encouraged. That is how 16 of Ed Sheeran’s tracks from his album Divide took up the first 16 places in the streaming charts.
For the artists, streaming has dealt a blow to their individual profits and complicated the way they make money. Taylor Swift was one of the first to call attention to this, and later pulled her music off Spotify and refused to allow Apple to offer music from her latest album.
Artists do get paid, of course, and continue to make money from advertising, but the process by which they receive royalties for streaming has become more complicated. In recent years, the streaming services have become aware of this, and have been looking for ways to appease and alleviate the fears of artists while still offering their tracks cheaply to the consumer.
Historically, the music industry has been receptive and adaptable to advances in technology, but sometimes the industry has done so without really considering what those advances might imply.
If there’s a downside to the rise of streaming in artistic terms it’s that people listen to albums less frequently than they used to because they can stream individual tracks on demand. There are far fewer concept albums, or albums whose tracks have a broader meaning or purpose collectively than they do individually.
If a conscious effort by the record labels and the artist isn’t made to make albums for their own sake, regardless of whether many people will listen to that album all the way through, this element of music is at risk of being lost.
From a commercial standpoint, the reliance – or over-reliance – on streaming represents a risk. Spotify is making greater losses than ever despite its increasing popularity, and artists and record companies still feel that they are being underpaid for the music that is being listened to.
If the Spotify “model” is found not to be sustainable, then the music industry might suddenly end up in a very sorry state indeed.
Chris Wright is the co-founder of Chrysalis Records; a media and sports entrepreneur; and a campaigner