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Music Industry Is Keeping Streaming Services Unprofitable

Soulskill posted about 9 months ago | from the march-of-progress-without-a-drummer dept.

Music 118

Lucas123 writes "Music streaming services, forced to give from 60% to 70% of their revenue to the record industry, will never be profitable in their current state, a new report shows. Unless the services can monetize their user base by entering new product and service categories, or they can sell themselves to a larger company that can sustain them, they're doomed to fail. One method that subscription services might be able to use to achieve profitability is to up sell mobile deals or bundles to subscribers. For example, a select package of mobile services would be sold through the music service provider, the report from Generator Research suggested. 'Services like iTunes Match and Google and Amazon are already heading in this direction,' the report states. Another possibility would be for a larger company to purchase the music service or for the service to begin offering sanitized user behavioral data to advertisers, who could then better target a customer base."

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Morons One And all (4, Insightful)

MightyMartian (840721) | about 9 months ago | (#46251211)

And exactly how profitable are torrents to the music industry?

Re:Morons One And all (5, Insightful)

ackthpt (218170) | about 9 months ago | (#46251275)

And exactly how profitable are torrents to the music industry?

Without driving people to torrents and claiming the world is rife with piracy the record labels have no bogey man to haul out and parade back and forth for more corporate welfare laws. I think Princess Leia said it best: "The more you tighten your grip, Tarkin, the more star systems will slip through your fingers." A pretty good analogy.

Re:Morons One And all (0)

ichthus (72442) | about 9 months ago | (#46251359)

I think Princess Leia said it best: "The more you tighten your grip, Tarkin, the more star systems will slip through your fingers." A pretty good analogy.

Yeah, it is.... Ok, so... wait. Who is the fingers?

Re:Morons One And all (5, Insightful)

icebike (68054) | about 9 months ago | (#46251441)

Without driving people to torrents and claiming the world is rife with piracy the record labels have no bogey man to haul out

Oh its much worse than that.

Here Itunes, Google, Pandora, and World Plus Dog have demonstrated to the music industry EXACTLY how they can reshape their business, both for
streaming and for buying. They have handed them an entirely new business plan, and proven that it works.

Yet still they seem content to press CDs, and let someone else manage the on line sales without lifting a finger, yet all the while moaning about piracy,
and raping the artists.

As soon as the artists decide to go direct to Google and iTunes the Labels are done, and good riddance to them.

Re:Morons One And all (4, Funny)

ackthpt (218170) | about 9 months ago | (#46251549)

But, but, but! The world where they robbed foolish hick kids into signing away their lives for a paltry advance; they made payola to drive out talent and make room in playlists for their brand; they went after people who only wanted to listen to their record or CD when they were in their car or jogging. That's the only world they know!

You can't expect an industry entrenched into that way of thinking is willing to emerge from their bunker.

Re:Morons One And all (-1)

Anonymous Coward | about 9 months ago | (#46251729)

Yet still they seem content to press CDs, and let someone else manage the on line sales without lifting a finger, yet all the while moaning about piracy, and raping the artists.

Selling music without raping the artists is like working as a Catholic priest without abusing the altar boys. It just isn't done.

Re:Morons One And all (1)

Kjella (173770) | about 9 months ago | (#46251865)

As soon as the artists decide to go direct to Google and iTunes the Labels are done, and good riddance to them.

It's a nice theory but in practice I doubt it'll happen, because the labels control many popular artists and have huge back catalogs of popular music. Any streaming service who tried doubling as a label would either see higher prices or get no license at all, and a pure-indie streaming service would go nowhere. It'd be like Microsoft declaring that they're going to build Microsoft PCs themselves, of course Dell and HP and Lenovo would be up in arms about it.

Besides, who says it's be easier to get a good deal with them directly than with a label? I've heard artists claim many times they get utterly shit pay for being on Spotify, but if they aren't on Spotify their fans get angry because they have to be such a special snowflake, many people won't go outside Spotify for music and they don't get concert goers so they feel they "have to" be there no matter how badly they're being exploited. Maybe if it was some sort of non-profit association organizing it, but you're just replacing one corporate master with another.

"Labels" like this already exist (0)

Anonymous Coward | about 9 months ago | (#46251951)

Companies like CDBaby [cdbaby.com] are already acting as middlemen between artists and digital download stores. They focus on delivering the music to the stores without all the promotion, signing bonuses, etc. of an actual record label. In exchange, they take a much smaller cut.

Re:Morons One And all (3, Interesting)

icebike (68054) | about 9 months ago | (#46252053)

Wait, What?

Several companies are already doubling as a label.
Look here: https://play.google.com/artist... [google.com]
And here: https://www.apple.com/itunes/w... [apple.com]
http://www.tunecore.com/index/... [tunecore.com]

And the Music industry isn't in a position to take on Google and Itunes and Amazon. Those three companies decide not to sell your crap-music, at your crap-prices, and you are pretty much dead in the water as a label.

Artists are getting smarter. They are starting to care about the license terms, and while they may release their first hits to a label more and more of them are declining to take long term contracts and trying the indi market.

Buy Direct from the Artists (0)

Anonymous Coward | about 9 months ago | (#46252481)

I discovered a fantastic violin/fiddle player and her band through YouTube. They release their music on an Indie label so without some recording their live Ren Fest performances I would never have stumbled across this musical style. In case anyone is interested search for Circa Paleo and "The Hot Violinist".

Re:Morons One And all (1)

Opportunist (166417) | about 8 months ago | (#46253579)

As soon as the artists decide to go direct to Google and iTunes the Labels are done, and good riddance to them.

And now guess once again why the labels don't want to keep independent streaming and download services from pushing into the market.

Re:Morons One And all (1)

davester666 (731373) | about 9 months ago | (#46252155)

Please, no more Star Trek references!

Re:Morons One And all (1)

Immerman (2627577) | about 8 months ago | (#46253379)

All right, then how about:

“Alia grasps the power firmly now.” She looked back at Idaho. “You understand? One uses power by grasping it lightly. To grasp too strongly is to be taken over by power, and thus to become its victim.”

Re:Morons One And all (2)

LordLimecat (1103839) | about 9 months ago | (#46251399)

Im willing to bet iTunes is pretty profitable, and that the assumption is that Pandora etc all cut directly into iTunes profits.

Re:Morons One And all (1)

Letophoro (1417231) | about 9 months ago | (#46251541)

Sure iTunes is pretty profitable. Then again, iTunes is a bit more than just a streaming service. As it is, iTunes makes more for the RIAA than it makes for itself.

Re:Morons One And all (4, Insightful)

Charliemopps (1157495) | about 9 months ago | (#46251477)

The problem is there is absolutely no need for a record company anymore. The record companies are trying their damnedest to keep that a secret for as long as possible.

Re:Morons One And all (1)

Rinikusu (28164) | about 9 months ago | (#46252243)

I dunno about that. A good label curates a catalog that I can use to discover "new" music, can help with setting up shows, and what not. Distributors, now that's a different story.

Re:Morons One And all (1)

Vermonter (2683811) | about 9 months ago | (#46252301)

With a bit of tweaking, YouTube could also easily help you discover "new" music. It already does it (inefficiently) with suggested videos listed once your video is finished. Combine that with the ability to sell your song on iTunes, and I honestly see no need for record labels anymore.

Re:Morons One And all (1)

Andtalath (1074376) | about 9 months ago | (#46253335)

Most artists aren't salesman.

Re:Morons One And all (0)

Anonymous Coward | about 8 months ago | (#46254997)

Salesmen aren't what people want, they want music. If Youtube-like services can cleanly recommend music to people based on their tastes, instead of what some salesman says they ought to like, then artists would have no need to rely on salesmen, much like there's no real need for physical media beyond archival and showing that extra level of support.

Re:Morons One And all (1)

phantomfive (622387) | about 9 months ago | (#46252841)

Not only that, the art of making records (or generally recording) is worth something as well.

Re:Morons One And all (2)

NoKaOi (1415755) | about 9 months ago | (#46252985)

I dunno about that. A good label curates a catalog that I can use to discover "new" music, can help with setting up shows, and what not. Distributors, now that's a different story.

In other words, the only real purpose most labels serve is as a marketing firm. The big thing with record companies is that the artist only gets something like 10%, and I think that's wholesale, not retail.

Re:Morons One And all (0)

Anonymous Coward | about 8 months ago | (#46253681)

Only really, really, really BIG artists get 10% my friend. There is no way you will get that as "normal" artist.

The most contracts I have seen are between 0,2% to max 3% (if they are extremely lucky), and even then they have to sign away theirs souls to get that. Believe me - the amount of greed in the music industry is unbelievable. They are bloodsuckers that rape their artists..

You can make more money as artist by giving your music away for free and earn money with performances. Once you sold your soul to the music industry you are pretty much sure to live for a few weeks/years in some luxury and endless poverty after that..

Re:Morons One And all (4, Insightful)

jhol13 (1087781) | about 8 months ago | (#46253535)

Yes there is. The record company has "producers".
The producers ensure that the music does not annoy anyone[1], is de-s'd, autotuned, limited, compressed, and what not to sound exactly same as everybody else.

Imagine what music would be without aforementioned professionals! It might sound interesting, for god's sake!

[1] The worst that can happen to a radio station is listeners to change the station. Sounding annoying or being (too) different is sure way to do it.

Cut Out The Middle Men (4, Insightful)

rtb61 (674572) | about 9 months ago | (#46251229)

Music streaming services simply need to form an association so they can publish direct and basically cut out the publishers who do nothing but bring junk music to the scene. So direct from artist to music streaming services and skip those shit head, money sucking, politically corrupting, parasites. There is plenty of money there once the middle men parasites are pushed out of the system.

"Myspace bands" (1)

Animats (122034) | about 9 months ago | (#46251305)

Two words: "Myspace bands".

Re:Cut Out The Middle Men (0)

Anonymous Coward | about 9 months ago | (#46251357)

Except this is a situation where some kind of a middle man is clearly required. Artists have neither the means nor the capacity to negotiate and manage licenses with dozens of different streaming services. And it simply wouldn't be worth it to them, because the per artist payout from a given service isn't significant enough to warrant the hassle of dealing with a licensing agreement. You could argue that a different middle man is needed, but simply eliminating the middle man isn't a valid solution to anything.

Re:Cut Out The Middle Men (1)

icebike (68054) | about 9 months ago | (#46251481)

Except this is a situation where some kind of a middle man is clearly required. Artists have neither the means nor the capacity to negotiate and manage licenses with dozens of different streaming services. And it simply wouldn't be worth it to them, because the per artist payout from a given service isn't significant enough to warrant the hassle of dealing with a licensing agreement. You could argue that a different middle man is needed, but simply eliminating the middle man isn't a valid solution to anything.

You missed the part where he said

Music streaming services simply need to form an association

You sign with an association once and done, and your music is syndicated to all the streamers or resellers.
No long term contract, no signing away your rights forever.

The only problem would then to get access to studio sessions so that it didn't sound like it was recorded in a garage.
There really isn't shortage of them either, (google will find studios in most mid size cities) but they can a bit expensive.
So getting your first single out there may be a problem of money. But you don't have to sell your soul to a label
to do that.

Re:Cut Out The Middle Men (2)

alvinrod (889928) | about 9 months ago | (#46252969)

The problem with an association is once you get a group of established players forming an association they'll have little incentive to let new streaming companies join since it can only hurt the existing players, at which point we're back to square one with having multiple entities to deal with in order to get the music out. The other potential problem is that having a single association to deal with creates a monopsony which hurts the artists ability to get fair value for their work. Any new bands are probably going to get really bad deals as they can either put up with breadcrumbs or not have any of their music available on any of the member streaming services. Even established acts might have problems if there's no competitive pressure.

Personally I don't think it's an issue. There aren't that many different streaming sites out there right now and you'd think that most would want to make it as easy as possible to get new groups signed up. If an artist's manager can't handle dealing with this, what value are they actually providing to earn their pay? Smaller acts are probably used to dealing with dozens of different people when setting up gigs at various venues so I would imagine that anyone with half a brain could come to terms with a streaming site if they wanted to put a bit of effort in to do so.

Re:Cut Out The Middle Men (1)

crutchy (1949900) | about 9 months ago | (#46251365)

...or they just need to set themselves up in china and tell US record companies to fuck off

Cuts both ways (1)

Qzukk (229616) | about 9 months ago | (#46251429)

Or the publishers could start streaming their "junk" direct to the consumer.

Re:Cut Out The Middle Men (4, Insightful)

jd659 (2730387) | about 9 months ago | (#46251933)

Music streaming services simply need to form an association so they can publish direct

This is very true. Recording and editing the music with the decent quality used to be very expensive. The analog consoles used to be hundreds of thousands of dollars producing similar quality what a thousand dollar computer with a decent audio card can do today. The studios nonetheless demand copyright ownership for offering studios (cheap now) and distribution service (also became cheap).

Similar state existed in photography where the equipment had astronomical cost and companies could offer equipment, hire photographers "for hire" and keep the copyright. Nowadays, is is nearly impossible to see contracts where the photographer does not retain the copyright on his/her images. Still, plenty of services are available that remove all the "negotiation" part when selling and advertising the images. The photographer is free to offer images for sale with multiple brokers and some have agreements where if an images available for sale on one service will be offered for sale on the other too. There's no reason the music industry cannot follow the same model. The musician will be in charge of the recordings.

What really is killing the development of this market is the fact that one can sell "the ownership" under the current copyright laws. Once the labels buy the "ownership" of the recording they haven't produced, they can also buy the laws that benefit them and no so much help the musicians or the music industry in general. Kill the labels and let the artists to be the deciders of where the music to be played and it will increase the competition among services too -- bringing the new and innovative distribution channels.

Re:Cut Out Copywrite (FTFY) (0)

Anonymous Coward | about 9 months ago | (#46252901)

What really is killing the development of this market is the fact that one can sell "the ownership" under the current copyright laws.

The market will adjust. The laws have no effect on extemporaneous music performed by unknown, unrepresented musicians. If the streaming services that only offer music that is unprofitable due to copyright fees and restrictions cannot turn a profit, then the streaming services that have instead cleverly hired young, driven, trained and competant talent to improvise popular music and "broadcast" the performances live (or make available many channels of many styles of improvised music performed live), without any copyright restrictions or fees, will be profitable, and will dominate the market.

Re:Cut Out The Middle Men (2)

Wildclaw (15718) | about 8 months ago | (#46253833)

Umm, the middlemen looks to be the music stream services. All they have to do is distribute a product that someone else has produced to the consumer, and for that they are getting to keep a whole 30-40% of the total sale.

Sorry, but if they can't make a profit on that, then they are doing something seriously wrong, or there are too many companies competing for too small of a market.

In other news headlines today: (2)

kheldan (1460303) | about 9 months ago | (#46251245)

"Water Is Still Wet"
"Sky Is Still Blue"
"Politicians Are Still All Lying Crooks"
"Death, Taxes Still A 100% Certainty"

Re:In other news headlines today: (0)

Anonymous Coward | about 9 months ago | (#46251431)

"IT contracting agencies, forced to give 40 to 50 percent of their revenues to the programmers and system administrators they make available for hire..."

Re:In other news headlines today: (1)

mythosaz (572040) | about 9 months ago | (#46251485)

With 7BN living people and 100BN people having ever lived, human death still only at 93%

I'm not going to pay for something I can easily ge (0)

Anonymous Coward | about 9 months ago | (#46251253)

Artists make their money with merchandise and shows. I get free music. Middle men will eventually get nothing,

bollocks (0)

Anonymous Coward | about 9 months ago | (#46251907)

Most small artist are happy to play even on a tour.

Fuck the RIAA (1)

Anonymous Coward | about 9 months ago | (#46251271)

They are destroying their own business. Not that I really care though because most of their music is commercial crap anyway

Re:Fuck the RIAA (1)

nurb432 (527695) | about 9 months ago | (#46251749)

With record profits, and laws being passed in their favor all over the world ( beyond just the RIAA but the entire industry ), it would be hard to convince them they are destroying their business.

Re:Fuck the RIAA (1)

gstoddart (321705) | about 9 months ago | (#46252201)

With record profits, and laws being passed in their favor all over the world ( beyond just the RIAA but the entire industry ), it would be hard to convince them they are destroying their business.

Oh, make no mistake about it. The RIAA has actively funded these initiatives (and in a few cases been the ones to write the laws on behalf of the US government)

The entities pushing this in other countries are so closely affiliated with the RIAA as to make them more or less a cartel which act as if they're not all taking orders from the same place.

And they will do anything it takes to ensure that technology and copyright law are kept closely under their control. Which is why nobody else can make money streaming music.

Re:Fuck the RIAA (1)

nurb432 (527695) | about 9 months ago | (#46252297)

Didn't mean to imply they weren't driving it.. just that the laws are being passed.

Re:Fuck the RIAA (1)

gstoddart (321705) | about 9 months ago | (#46252533)

No, but when you say "beyond the RIAA" you make it sound like independent entities are pushing the same thing.

For purpose of these kinds of laws, there is no 'beyond the RIAA', just the domestic proxies who have standing to lobby for it in the country.

But since they're usually funded by, and essentially fronts for, the RIAA -- essentially we see multinationals promoting laws around the world favorable to them, and occasionally backed up by the US government who does the same thing through trade agreements and threats of retaliation.

people pay for music? (-1)

Anonymous Coward | about 9 months ago | (#46251281)

tsia

The Problem (4, Insightful)

brit74 (831798) | about 9 months ago | (#46251289)

I don't think the problem is that the Music Industry is claiming so much of the profit from music-streaming services. I think the problem is that there isn't much money going around when it's all based on ad-revenue. I mean, if you can make $10/month in music sales from people buying music (via CDs, iTunes, etc), or you can make $1/month from people who stream their music (via ads), and then we complain that music companies are taking 60% or 70% of that $1/month, is the real problem the fact that the music industry is taking 60% or 70% from music-streaming services, or is the real problem the fact that ad-supported music results in low revenue?

I know that "music companies are being stupid and greedy" is implied by the piece, but I'm not sure it's the fault of the music industry that ad-supported music is just a crappy source of revenue.

Re:The Problem (2)

BlazingATrail (3112385) | about 9 months ago | (#46251317)

how many years has free AM/FM radio been around and free?

Re:The Problem (2)

Ralph Wiggam (22354) | about 9 months ago | (#46251527)

AM radio is almost dead, and FM radio is dying because of the amount of commercials they need to air to be profitable.

Re:The Problem (1)

dk20 (914954) | about 9 months ago | (#46252855)

Maybe the artists and middlemen need a pay cut?

As was nicely put in "south Park"

This month he was hoping to have a gold-plated shark tank bar installed right next to the pool, but thanks to people downloading his music for free, he must now wait a few months before he can afford it. Come. There's more. Here's Britney Spears' private jet. Notice anything? Britney used to have a Gulfstream IV. Now she's had to sell it and get a Gulfstream III because people like you chose to download her music for free. The Gulfstream III doesn't even have a remote control for its surround-sound DVD system. Still think downloading music for free is no big deal?

Re:The Problem (1)

icebike (68054) | about 9 months ago | (#46251617)

Some people like to have a choice of music other than what the station manage wants to foist on you.

These streaming services mentioned in this article aren't chock-full-of-ads, and you can tailor your listening to what you want.

Re:The Problem (2)

unrtst (777550) | about 9 months ago | (#46251437)

I know that "music companies are being stupid and greedy" is implied by the piece, but I'm not sure it's the fault of the music industry that ad-supported music is just a crappy source of revenue.

Ad-supported music is not a crappy source of revenue. Ad-supported internet streaming music IS a crappy source of revenue.

Every user you add, adds to the bandwidth, cpu, power, etc requirements for internet based streaming. There's also a very direct and easily tracked log of exactly how many streams to how many distinct devices were happening at the same time, and when.
The old radio broadcast reaches fewer people with one tower, but seems to be doing ok still, even with far fewer listeners these days. That *was* very big business.

IMO, the "fix" is to cut out the middle men, starting with the streaming services. With things like AWS (Amazon Web Services) and the like, there is no reason that a generic streaming software VM couldn't be used individually be all artists, with metadata pushed to distributed lists. IE. why do bands use myspace/facebook/etc for their pages?!?! I think it'll get there someday, but there's way too many people pushing to be middle men, all the while complaining about the middle men.

Re:The Problem (1)

icebike (68054) | about 9 months ago | (#46251573)

Well Streaming services for unlimited music still cost you around $10/mo. (regardless of which of the services you choose).
So its not all ad supported any more.

Most of these services, and there are a boatload of them [cnet.com] are all hovering around the same price. Some offer sales as well as streaming, others don't.

There is still the Free services that are ad supported.

Bypass the Middle Man (4, Interesting)

organgtool (966989) | about 9 months ago | (#46251313)

How about a system that lets the artists themselves opt in (bypassing ASSCAP) for a reasonable set of royalties. The artists would get more money than the record companies give them for their streamed music, the streaming companies would pay less in royalties, and the tyRIAAnosaurus rex can take another step towards its destiny.

Re:Bypass the Middle Man (2)

Ralph Wiggam (22354) | about 9 months ago | (#46251535)

Because musicians are well known for their ability to negotiate complicated contracts with dozens of large companies.

Re:Bypass the Middle Man (1)

Anonymous Coward | about 9 months ago | (#46251835)

How about a system that lets the artists themselves opt in (bypassing ASSCAP) for a reasonable set of royalties. The artists would get more money than the record companies give them for their streamed music, the streaming companies would pay less in royalties, and the tyRIAAnosaurus rex can take another step towards its destiny.

Because musicians are well known for their ability to negotiate complicated contracts with dozens of large companies.

... and because even if musicians got every cent of the revenue from streaming, the amount of money they'd get would still suck. Streaming is a nice way to make steady money off of a long term mega-hit but not a good way to make money off of short term hits and relatively few songs become evergreens.

ASCAP/BMI/SESAC/SOUNDEXCHANGE (2)

t0qer (230538) | about 9 months ago | (#46251323)

These are the 4 agencies you have to pay royaltees to.

I've seen the rates. Altogether it's about $6k per year to stream your standard shoutcast style station. When streamers like spotify, etc have revenues in the millions, that's a drop in the bucket.

The only time there is a sabot in the gears is when it's video. Then your standard mechanical/compositional licenses fees are required, and on top of that a Sync license is required which adds an entire clusterfuck of problems. With non-sync you just pay the 4 agencies, but none of them collect Sync rights. You have to track down every person involved in the production to get permission to stream any music with video in it.

Re:ASCAP/BMI/SESAC/SOUNDEXCHANGE (1)

Anonymous Coward | about 9 months ago | (#46252137)

The rate you are quoting are only for Small Broadcasters who qualify for the flat rate minimum. These rates don't apply once you get past a certain number of Listener Hours (Which Spotify / Pandora / ect are way past to be able to use). For a larger Broadcaster, you pay a certain rate per listener per hour for a non-interactive broadcast (I think it's .006 per listener per hour just for SoundExchange, not including the other THREE licenses you have) . For a interactive broadcast (Which Pandora / Spotify are), it's typically based on a percentage of Net Revenue.. typically about 15 - 20% PER agency for an Internet Radio only broadcast. Note not Net Profit, but Net Revenue.

So 4 agencies * 15-20% = 60-80%

So yeah... that only leaves 20-30% for all your other expenses (Bandwidth, Storage, People). Oh, and don't forget that with that license, you STILL have to purchase a copy of the album for airplay, they don't even provide that to you. And of that percentage, the artist might only see 1-3% of that number...

Sanitized? (1)

c0lo (1497653) | about 9 months ago | (#46251349)

Sanitized user behavioral data?
Because, you know, listening to music streaming is predispose to lewd, perverted and... in any case, highly imoral... behavior?

There's these guys: (2, Interesting)

Anonymous Coward | about 9 months ago | (#46251369)

Old thinking. (1)

grub (11606) | about 9 months ago | (#46251407)

The music industry just doesn't get the 21st century. Their business model worked well enough (they get most of the cash, the artists got peanuts) in the day when the only way to get music was on physical media manufactured and distributed by them.

My empathy is 100% with the artists, not a thing for the non-musical side of the business.

Re:Old thinking. (1)

MightyMartian (840721) | about 9 months ago | (#46251473)

Who needs to get the 21st century when you've got big ass law firms at your beck and call and Congress permanently wrapped around your finger?

Streaming services need to be scouting bands (1)

gatkinso (15975) | about 9 months ago | (#46251453)

Record contracts are out.

Streaming contracts are in.

riaa more concerned about control than money (1)

Dan667 (564390) | about 9 months ago | (#46251457)

There is almost no barrier for entry into the music business and no one knows this better than the music companies. They care more about control than profitability, but their grasp of music has slipped. They don't even realize the internet has given them the mortal blow yet.

Legal streaming or illegal streaming. (1)

infosinger (769408) | about 9 months ago | (#46251459)

Music can be obtained from torrents, purchasing online or it can be obtained from legal streaming services. These are all valid if not legal sources of music. If one or more becomes too expensive or unavailable, the others will fill in the gap. This was quite visible when the music industry refused to embrace mp3 music distribution. The illegal sources flourished during this time. Once Apple, Amazon and other started selling mp3's without DRM, these illegal sources became less attractive. Note that all channels still exist but the usage will change as the pricing (risk vs. $'s) shifts between them.

Causing the streaming services to go offline will only cause customers to go to the other channels and I do not believe there will be an appreciable increase to the mp3 sales channel.

Better idea (1)

Anonymous Coward | about 9 months ago | (#46251501)

They could start promoting artists on their own, without the music industry's help. They could be the new music industry, and put the old music industry out of business.

Youtube video plug. (1)

John Allsup (987) | about 9 months ago | (#46251605)

I produced http://www.youtube.com/watch?v... [youtube.com] from conception to completion within a day (yesterday, Valentines Day if you care about pink fluffy luvviduvvy stuff). This says all I think I can say abou the Music Industry's 'think of our struggling artists when you ponder not giving us more money than we need' attitude.

Cut out the middle man (0)

Anonymous Coward | about 9 months ago | (#46251731)

Of course all that has to happen is for iTunes Match and Google and Amazon to go directly to the talent. Indi bands and even some headliners are alreay doing this. Why deal with the just this side of RICO record companies. What can they do for you now days that you can't either do yourself or directly hire soemone to do for you, instead of cutting record compaines into the deal?

Doomed to fail (1)

nurb432 (527695) | about 9 months ago | (#46251737)

That is the plan. Until the industry finds a way to charge yo for every time you *think* about a song they are not going to give up any thing to new technology or delivery methods.

Considering how music services have no added value (0)

Anonymous Coward | about 9 months ago | (#46251793)

They damn will better pay 60-70% of their revenue to the people who have actually made the music. 30-40% margin really ain't that bad reselling someone else's work. Why should the streaming services get to keep 70% of their money when all they are doing is streaming an audio file over the internet. So simple to do these days. If the streaming services want higher profits they'd should commission their own music being made. If anyone is trying to be a free loaders it's the streaming services.

Re:Considering how music services have no added va (2)

jo_ham (604554) | about 9 months ago | (#46251901)

They damn will better pay 60-70% of their revenue to the people who have actually made the music. 30-40% margin really ain't that bad reselling someone else's work. Why should the streaming services get to keep 70% of their money when all they are doing is streaming an audio file over the internet. So simple to do these days. If the streaming services want higher profits they'd should commission their own music being made. If anyone is trying to be a free loaders it's the streaming services.

Haha, so cute! You think that money goes to the people who made the music!

Man, I needed a laugh today.

Re:Considering how music services have no added va (2)

SydShamino (547793) | about 9 months ago | (#46253257)

I might agree with you for the services where I type in the song I want to play and it plays. But for the service I use, I type in a few songs I like and the service finds hundreds of other songs I might like, plays them, and learns my habits to find more of them. And then I go buy downloads of those songs so I can listen to them all the time, and I go see those artists at clubs when they come to town.

That service deserves more of the money, because they aren't just serving a file, they're deciding which file to serve, which is a marketing service they deserve to get paid for. (In truth, the streaming service should get all of the marketing money that's instead going to some deadbeat label somewhere that conned the artists into signing a contract when they were too young and stupid to know better.)

-- Pandora user who has been refining my work music station, and buying tracks off it, since 2006.

Streaming services are just new middle men (1)

Anonymous Coward | about 9 months ago | (#46251919)

The streaming services are just new middle-men - we don't need them. At least a good label attempts to develop their bands.

OMG! (1)

msobkow (48369) | about 9 months ago | (#46251943)

You mean the fact that a business is on the internet doesn't mean they're entitled to print money?

quite the news flash... (5, Insightful)

RevEngr (565050) | about 9 months ago | (#46251981)

I was the CEO of a company that sold ringtones and MP3s a la carte for mobile devices. When you added up (1) the licenses paid to record labels, (2) the fees paid to mobile operators for payment processing, and (3) publishing royalties, it was something like 120% of the retail price for the content. So, umm, not a really scalable business model[1].

We eventually built out an ad-supported streaming model, under the compulsory licensing model for "internet radio" (a la Pandora), and I actually believed there was a viable business there, even without premium (ad-free) subscriptions. But I'm not so sure now. The music industry, which for so long made money by controlling marketing and distribution, is now too accustomed to making money through venture capital. Not directly, of course -- they extract it via a never-ending stream of venture-backed music startups, who either pay licenses in advance that they'll never be able to recoup with sales, or pay with legal settlements when they try to do something innovative that doesn't fit into the existing (untenable) licensing models.

I do believe that ultimately we will get to more of a free market that escapes the cartel of the legacy music industry, but it's certainly taking longer than I had expected. There are a lot of powerful entrenched interests.

Re:quite the news flash... (1)

ewhac (5844) | about 9 months ago | (#46252107)

I was the CEO of a company that sold ringtones and MP3s a la carte for mobile devices. When you added up (1) the licenses paid to record labels, (2) the fees paid to mobile operators for payment processing, and (3) publishing royalties, it was something like 120% of the retail price for the content. So, umm, not a really scalable business model.

I find this fascinating, especially given that the prices charged for ringtones were pure usury. I wonder if you'd be willing to relate a more detailed story of what you were facing.

Re:quite the news flash... (5, Informative)

RevEngr (565050) | about 9 months ago | (#46252597)

There were basically three types of ringtone companies back in the heyday:

1. Subscription: These were companies who convinced people to sign up for a recurring $9.99/mo charge on their mobile phone bill to receive some number of monthly "credits" for download;
2. A la carte: Companies who provided the implementation of the carrier "decks" that sold ringtones for $1.99-$2.99 a pop;
3. User Generated: services that allowed users to upload content that would be made available for download by other people.

The fundamental problem with the Subscription services was that they could only possibly make money by breakage - that is, if people who signed up for the service failed to download all of the content they were entitled to in a given month. Or, better yet, the subscriber forgot (or never knew in the first place) that they had signed up for the service, and therefore kept paying until Daddy noticed the charge on the phone bill and called the carrier to complain. The royalties they were paying (together with the carrier transaction charges) forced them into this unhealthy operating model that was clearly unsustainable. There were several US companies that reached revenues in excess of $100M without ever turning a profit. Venture capital pumped money into them on the way up, lured by the top-line growth. Crazy.

The a la carte providers didn't fare much better. There is really no possibility of negotiating realistic licensing with the music labels, because there are only four (three now?) of them, and they all refuse to do any licensing deal that doesn't have a "most favored nation" (MFN) clause. Essentially what this says is that if the licensee does a subsequent deal with another record label, and that subsequent deal has better terms than what was negotiated with the first label, then the first label automatically gets those terms. In practice, this means that the company would do a deal first with the smallest and most hungry label (cough, EMI, cough) at terms that seemed viable - making the company think they had a real business -- but then the deals with Warner, Sony, and UMG would progressively make the economics worse to the point where there was no real way to make money. And because the deals are heavy on upfront payments, and annual guarantees, the labels are making money even when the retailer never really hits escape velocity.

The user generated sites, which were attempting to cut out the unnecessary middlemen, allowing artists to connect directly with their fans, were mercilessly sued by the labels. Untold millions of dollars were transferred from venture capitalists who had funded these companies to the labels that sued the companies - along with their directors, their investors, their managers - in settlements and coerced licensing deals specifically designed to ensure that the money going to the labels would stay in their own coffers and would not have to be shared with artists.

The economics of MP3 and streaming sites are not much different. One day I expect it will be taken for granted that a service can operate profitably by providing a useful service that allows artists to sell (or share for free) content with their fans without fear of litigation by major labels. But that's not today.

Ultimately, I still believe that the copyright and legal systems will come to understand that protecting the rights of artists is different than protecting the legacy music labels. I've been amazed and enthralled over the past few years by the incredible amount of beautiful new music being released - no label required.

Re:quite the news flash... (3, Interesting)

phantomfive (622387) | about 9 months ago | (#46252861)

Thing is, there are people who benefit from the industry. I look at Lady Gaga as an example. She signed a rather lousy contract, but in return she got massive promotion. In the end, she ended up a multi-millionaire, so she is happy.

You may not like Lady Gaga, but as long as there are people like her willing to 'sell out' in exchange for promotion, the recording industries will not change drastically. Because they will own all the copyrights.

Re:quite the news flash... (0)

Anonymous Coward | about 8 months ago | (#46254319)

CEO ... sounds serious! Did your momma help out as a VP ?

Well, duh. (3, Insightful)

mbone (558574) | about 9 months ago | (#46252021)

"Music streaming services, forced to give from 60% to 70% of their revenue to the record industry, will never be profitable in their current state, a new report shows."

That has been obvious to anyone associated with this business since about 2002.

I think this is a feature, not a bug, from the point of view of the record labels.

Or ... (1)

gstoddart (321705) | about 9 months ago | (#46252077)

Another possibility would be for a larger company to purchase the music service or for the service to begin offering sanitized user behavioral data to advertisers, who could then better target a customer base.

Or, I will stick with my current strategy -- buy physical CDs, rip them to MP3, and listen to them wherever the hell I want ... and you don't get to sell my sanitized behavior to advertisers.

It's been working quite well for me so far.

Re:Or ... (1)

TrollstonButterbeans (2914995) | about 9 months ago | (#46252373)

"I will stick with my current strategy -- buy physical CDs"

Garth Brooks loves you

Re:Or ... (1)

gstoddart (321705) | about 9 months ago | (#46252509)

Garth Brooks loves you

Hey may not, but there's a bunch of punk bands and the like which probably do. I discovered psychobilly from the cool CD cover art, and subsequently have found several bands I really like because I can tell right away what kind of music it is because of the cover art.

I've discovered more music I've never been exposed to from rooting around in CD stores than I would otherwise, and I've spiraled back and gotten stuff I missed when I was younger.

But when I buy the CD and rip it, I don't need their permission to listen to it, I don't need some crappy app they wrote, I don't have to pay them again, I don't get tracked when I use it ... and the middle-men can pound sand.

Bands like NoFX still put out CDs too. And they're not members of the RIAA, despite the RIAA occasionally forgetting that and claiming otherwise.

Monopolies (2)

Arancaytar (966377) | about 9 months ago | (#46252417)

Record companies can extort huge license fees because they control most of the artists, which is because they control the biggest market, which is because they extort huge license fees to make other industries unprofitable.

Trying to supplant the record industry by licensing its content can't work. If the streaming industry wants to go anywhere, they need to deal with the artists directly. Which popular artists hesitate to do to avoid hurting relations with record companies.

Re:Monopolies (2)

WindBourne (631190) | about 9 months ago | (#46252829)

exactly. Until these media groups really act like the studios and help these groups make it big, they will not make any profits. What is needed is real competition to be restored to the recording industry, in which the artists get the majority of money.

Re:Monopolies (0)

Anonymous Coward | about 8 months ago | (#46254411)

"the artists get the majority of money"

I defy you to point out any industry where the actual creators of product end up with the majority of the money.

Stop trying to defy the economic law of capital gravity. All organizations are top-down, and most benefits must float to the top, not the bottom. This is Human nature.

Re:Monopolies (1)

WindBourne (631190) | about 8 months ago | (#46254687)

the artists are the top. The issue here is that the studios were able to constrain access to the public via radio and then megastores.
Now, with the net, it brings back competition IFF it will step forward.

Re:Monopolies (1)

Doomsought (3407379) | about 8 months ago | (#46255173)

So if you want to have a profitable streaming business, you need to file an anti-trust lawsuit.

Go to the musicians directly (2)

WindBourne (631190) | about 9 months ago | (#46252821)

Seriously, I have seen several good groups who were waiting for the BIG deal with one of the major recording studios. They refused to do their music on-line because they heard that the majors would block them. Yet, if the streaming media groups will start going after these start-up bands and get them deals, and streaming, the media can gut the recording studios. Once they can strip the monopoly from the recording studios, then they will be able to make money. Until then, just those couple of studios control everything.

Try signing your own artists (1)

Karmashock (2415832) | about 9 months ago | (#46252929)

There are a lot of people making music in their garages. And yes... most of it is terrible. But some of it isn't.

Social network it... and sign people that are decent. Then as part of the deal your site would promote those singers.

Add on to that, music coaches, sound studio time, and finding concert venues for top singers.

how is this calculated (1)

Anonymous Coward | about 9 months ago | (#46252933)

Gives 60% of profits to X.
Isn't profitable.
Where does that 40 % go?

Doesn't mention spottify or Deezer (1)

Anonymous Coward | about 9 months ago | (#46252939)

Both Deezer and Spottify have 5 million paying subscribers.

So make your own music (1)

Anonymous Coward | about 9 months ago | (#46252953)

If Spotify isn't happy paying royalties, they're welcome to make their own music.

Seriously though, if your business model can't support paying $0.004 (or less) per play, when you're serving an audio advertisement (and theoretically a well-targeted one) every 3 songs, and have endless display advertising, then you're doing something really, really wrong.

Re:So make your own music (1)

Todd Knarr (15451) | about 8 months ago | (#46253411)

The only problem there is the calculations. For radio, a "spin" is a single broadcast of a song. It may reach a million people, but it's still just one "spin". Services like Pandora, by contrast, pay per stream. That means that on Pandora, if 10 people are listening to a song at a given time it counts as 10 "spins". If Pandora paid the same rates under the same rules as broadcast radio, they'd be paying less than 1% of what they currently are being charged.

I'm too late :( (0)

Anonymous Coward | about 9 months ago | (#46253265)

Damn it and here I was going to get in the music middle man biz so I could kick back and take 80%.

What's wrong with iTunes Match? (1)

SleepyHappyDoc (813919) | about 9 months ago | (#46253349)

I've been very happy with the service so far. I can access my music from a variety of devices, whenever I want, and I only pay a little more than $2 a month. I even had a hard drive failure last summer, and I was able to redownload every single track without any loss. Obviously, the service will never be any good to people who hate Apple, but for non-fanboys who like the right tool for the job, it's fine. If this is the model the industry is moving towards, is that so bad?

Errrrm.... (0)

Anonymous Coward | about 8 months ago | (#46253439)

The music industry is what keeps streaming services alive - those services don't produce music, so they would have no existence without the music industry.

it's the artists, stupid (0)

Anonymous Coward | about 8 months ago | (#46253575)

If the artists formed an association (something like what used to be called a trade union), they would be in a much better situation to: a. get a reasonable offer from the new distributors (streaming services, etc.) b. bypass the greedy, old-fashioned record companies and c. share both resources and revenue.

It's called Wholesale Price Transfer (0)

Anonymous Coward | about 8 months ago | (#46254275)

The problem with any music (or TV/Movie for that matter) subscription or streaming service as a for profit business, is the simple fact that you have no alternative. If your customers want to listen to some artist, say Led Zeppelin, then you have no option but to pay the royalties asked for by the copyright holder. There is no alternative product for you to give your customers. You can't give your customers Lady Gaga, because they want Led Zeppelin. So when the Led Zeppelin copyright holder decides they want to make more money they will charge you in order to get it. And you don't have the option of going to another supplier, because there is no other supplier of that product.
This isn't limited to, or unique to, music streaming services. This happened in the days of radio. And it happens to television, cable, satellite and even OTA broadcasters.
The moral of the story, isn't that the RIAA/Music Industry is evil, it is that you should *never*, ever, ever start a business where you are selling something that only *one* supplier can provide you with. It's a business death sentence, since that supplier can (and will) raise their rates regardless of what it does to your business. And they'll do this, because well they're the *only* supplier of that product.

Nonsense (1)

flyingfsck (986395) | about 8 months ago | (#46254513)

There are hundreds/thousands of internet music streams from all over the world available with simple listening tools such as Streamtuner. If these were not profitable, then they would not be there.
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