Just read this excellent article from General Assembly, the leading for profit educational company on all-things technology, on the history and state of "music as a business" and the technological changes that have driven it. Things we've all heard about but startling perspective on the contrasting economics for creators and consumers.
Enjoy!
Rob Davis
From streaming to stream-ripping, new data signals the death of music sales.
It wasn’t just major music stars who died last year. So did whole ways of consuming music.
By Jim Farber
What do musicians have to do to sell records these days? Die?
Ideally, yes.
The star who sold more albums than anyone else in 2016 left this mortal plane that April — his purpleness, Prince. The Minneapolis-born star was the sole musician who managed to sell more than 1 million albums in both digital and physical forms (i.e., CDs and vinyl) in 2016, according to just-released data from Nielsen, the global media research company. In the very first day after his death, Prince pushed more than 1 million digital songs and over 200,000 digital albums — amazing numbers in a field where hard sales have long been flagging in the face of free, or low-cost, streaming. Those Prince figures don’t involve a single stream.
Of course, the royal one was hardly the only top musician to leave us in 2016. Last year gave us a virtual death-a-palooza in the music world, robbing us of names as looming as David Bowie, George Michael, and Leonard Cohen. Yet, none of those stars have seen sales soar to such Princely heights.
The difference? Prince’s estate severely limits the exposure of his music on the top two streaming services, Apple Music and Spotify. The latter, for instance, only offers one song; the former features just a few of his least popular albums. According to data from the statistics site Statista, those services boast 17 million and 40 million subscribers, respectively. Fans can find more of Prince’s music available on the streaming service Tidal, which still tends to stress the less popular releases. Even so, Tidal has just 4 million subscribers, according to figures reported by Digital Music News. Which means most Prince fans had to shell out for individual albums and tracks if they wanted to salve their mourning with their idol’s music.
Prince’s posthumous triumph doesn’t only speak to his fans’ devotion, or to his estate’s control issues. It strongly contrasts a pivotal turn that has just taken place in the fast-changing world of music consumption. Along with all the musical icons who died last year, so did the last hope of digital music as any sort of sales savior.
TECHNOLOGY & MUSIC SALES: A QUICK RETROSPECTIVE
Starting back in June of 1999, the peer-to-peer file-sharing service Napster began pillaging the compact disc. Users could rip music from CDs to their computers as MP3s, then use Napster to illegally share their libraries with an estimated 60 million global users — all for free. By 2001, the industry’s mighty lobbying arm — the Recording Industry Association of America (RIAA) — managed to put the kibosh on Napster, thanks to a lawsuit filed late in 1999. But fans still found ways to file-share and get their music for nada.
Small wonder, over the last decade, that CD sales have suffered a nearly 90% drop in revenue. Roiling changes in technology played a significant part in this as well. People lost interest in bulky physical discs in favor of smoothly downloading music to computers, devices that had come to define their very lives. An entire industry of bite-sized devices exploded to support the new hunger for byte-sized music; consumers ditched their bulky players — which crudely only played one album at a time — for petite MP3 players loaded with dozens, if not hundreds, of albums to enjoy at any moment.
Adapting to the hard, expensive lessons learned from Napster’s assault, the industry turned to sales via digital download as its new white hope to stave off the death spiral of CD purchases. For a while, purchases through services like iTunes, Amazon, and eMusic handily overtook sales figures of moldy old discs. However, there was a considerable downside. Digital downloads generate far less in profits for both the record companies and for the artists. They tend to cost consumers around $10 per album, while the old CDs could go for nearly twice that price.
Then came streaming, which allows users to listen to music through their web browser or a mobile or desktop application, pulling from a cloud server rather than their own device. New, easy-to-use apps like Pandora and Spotify meant people could continue to shed physical bulk; MP3 players were quickly supplanted by apps that lived in the phones everyone already carried. Streaming also freed up storage space, meaning precious gigabytes could be reserved for selfies and cat videos rather than songs.
These innovations cut down revenue by an even more alarming degree. Companies like Spotify and Apple Music charge their customers a set monthly fee of around 10 bucks, giving the listener access to millions of songs and albums. The streaming companies then funnel pooled, negotiating fees to record labels and distribution companies, that, in turn, distribute parts of that money in micro-payments to the artists.
How micro are we talking? Get ready to weep: According to the data-driven website Information Is Beautiful, artists have to generate 971,323 streams in order to earn the equivalent to a monthly minimum wage of $1,260 from use of their songs on Apple Music. They would need to garner more than 1.1 million plays to generate that piddling sum from Spotify, and a whopping 4.2 million plays to get McDonald’s-cashier-level pay from YouTube. In calculating “sales” figures of streams, it takes 1,500 of them to equal one conventional sale.
That’s the diminished world we’re living in now.
Artists haven’t been quiet about how all this impacts their bottom lines. Pop mega-star Taylor Swift removed her entire catalog from Spotify in 2014 when she released her last album, 1989. In a Wall Street Journal column earlier that year, she noted that piracy, file-sharing, and streaming have decreased sales payouts, arguing that music has a high value and “valuable things should be paid for.”
Artists have to generate 971,323 streams in order to earn the equivalent to a monthly minimum wage of $1,260 from use of their songs on Apple Music. They would need to earn more than 1.1 million plays to generate that piddling sum from Spotify, and a whopping 4.2 million plays to get McDonald’s-cashier-level pay from YouTube.
BILLIONS OF STREAMS SERVED
While the industry has been telegraphing the rapid ascent of such poor-paying streaming over richer digital purchasing for several years now, 2016 marked the first time in history that the former overtook the latter, finally establishing streaming as music’s present rather than its future. The result casts Prince’s achievement as an impressive anomaly — a last valiant gasp from a time when sales still held sway.
<img class=”progressiveMedia-noscript js-progressiveMedia-inner” src=”https://cdn-images-1.medium.com/max/600/1*oTiFNtPyaVVsV6spnOxRAQ.jpeg”>
According to Nielsen’s brand new data-dump, audio streaming now represents 38% of all music consumption, giving it the largest portion of the sonic pie.
Meanwhile, digital ownership of music has dropped so precipitously that it is currently “out-failing” physical sales, long thought to be the most geriatric form of music acquisition. This year, physical album sales (via CDs, vinyl, etc.) actually commanded a larger percentage of total sales than the year before — not because its numbers went up, but because digital purchases went so far down. Digital download sales plunged 20.1% from 2015, in the process shrinking its portion of the sales universe below that of physical purchases, even as those suffered their own 14.1% slide.
Somehow the industry has found a way to put a happy face on all this. “The music industry continues to grow at a healthy rate,” said David Bakula, SVP of Music Industry Insights, in a statement for Nielsen. “Thanks to the rapid emergence of new technologies and channels for discovery and engagement, consumers are finding and listening to more music in new ways.”
Specifically, Bakula is referring to the 76% surge in audio streams this last year over 2015. In all, listeners audio-streamed 250 billion (yes, billion!) songs in 2016. That figure balloons to 431 billion once you figure in both audio and video streams. That was more than enough to offset the downswing in digital purchases and raise overall music consumption a modest 3%. That’s hardly a rousing figure, but it does go a ways toward balancing out the catastrophic plunges the music biz has suffered ever since the start of file sharing (i.e., stealing), via platforms like Napster back in 1999.
In all, listeners audio-streamed 250 billion (yes, billion!) songs in 2016. That figure balloons to 431 billion once you figure in both audio and video streams.
Things begin to get a bit gnarlier once we try to suss out what this means for actual profits. While on-demand audio streams now greatly outperform digital sales, no one can say for sure whether this method generates as much cash. “Because streaming is not a revenue-per-transaction relationship, it’s not possible to say, unequivocally, that the revenue from streaming will exceed (that of) digital sales,” Bakula wrote me in an email interview. He added that it’s simply an “assumption” that that will happen.
Regardless, streaming now generates usage numbers humongous enough to boggle the mind of Carl Sagan. Drake, last year’s streaming king, inspired listeners to stream his most recent album, Views, 245 million times in 2016 (a record for an album). Multiply that number significantly if you want to consider the streams generated by individual songs off that album. Meanwhile, Rihanna’s song “Work” and Desiigner’s “Panda” each streamed more than 700 million times. The latter ranks as the most streamed ditty of 2016, with a combined audio/video on-demand tally of nearly 800 million.
Then there’s the example of Chance the Rapper. Last year, the hip-hop star purified the power of streaming by releasing his album Coloring Book solely via this method. Without a single conventional sale, his album surpassed 500,000 units via “streaming album equivalents.” (Remember, it takes 1,500 streams to equal one sale). Chance amassed enough sales equivalents to shoot his album to No. 8 on the Billboard charts, hang on the Billboard Top 200 list for 33 weeks, and earn the modern answer to a gold album. Nielsen rightly describes all of these achievements as “historic.”
That’s nice for such uber-powerful artists and for their record companies, but what about those artists who fall farther down the food chain (i.e. most of them)?
<img class=”progressiveMedia-noscript js-progressiveMedia-inner” src=”https://cdn-images-1.medium.com/max/800/1*8xcCSgUNa3ZyUndg03wJ4Q.jpeg”>
WE’VE REACHED THE RIPPING POINT
But wait, there’s more bad news: The industry currently faces a powerful new parasite that threatens the very core of its latest business model, as well as profits for ALL artists. It’s called “stream-ripping,” a practice that, essentially, does to streaming what Napster did to CDs by empowering users to download streamed music and transform songs into files that can be saved and shared illegally for free.
According to new data published by Music Business Worldwide, based on information from the piracy audience data specialist MUSO, during the first nine months of 2016, there were 7.2 billion visits to stream-ripping sites worldwide. That’s up 60% from visits to those sites during the same period in 2015. According to the International Federation of the Phonographic Industry (IFPI), which represents the music industry worldwide, nearly half of 16- to 24-year-olds now use stream-ripping software. The practice has overtaken illegal downloading as the most common form of sonic piracy. The music industry has rallied to sue sites like these, including a popular one called YouTube-mp3.org, but it has yet to foil them. At the moment, YouTube-mp3.org has more than 60 million unique users per month.
Stream-ripping does to streaming what Napster did to CDs by empowering users to download streamed music and transform songs into files that can be saved and shared illegally for free.
It’s not a battle the industry can afford to lose — especially because it has already established an all-in strategy that views streaming as its last lifeline. At the same time, the industry has downplayed something significant: those stars who are still beating the odds by finding success via the ancient mode of hard sales. While streaming’s tipping point may deserve the boldest headline from Nielsen’s latest report, buried below are stories of commercial triumph nearly as stirring as the one I referenced about Prince at the beginning of this article. Most of these stories hinge on the secret endurance of rock ’n’ roll.
ROCK DEFIES A HARD PLACE
In the last year, moldy old rock sold more physical albums than any other genre, eating up 41% of the total tally. Meanwhile, today’s most pervasive genres — R&B and hip-hop, combined — took just 15% of physical sales. Rock also beat the collective efforts of R&B and hip-hop in the digital album sales arena, taking 37% to the latter’s 21%. In term of digital track sales, rock tied that two-fer genre. The only area where rock flagged? You guessed it…streaming. There, it lagged 20% to R&B/hip-hop’s 28%.
So, why doesn’t rock get more focus and respect? Much of this has to do with the particular rock music that’s selling. Far more of its sales come from catalogue items than from new recordings. In 2016, sales of older albums accounted for a full 59.9% of total physical purchases. Which means that it’s the collective and continuous sales power of rock touchstones from the likes of Led Zeppelin, Pink Floyd, and David Bowie that’s propping up rock, not some cool wave of spanking-new bands.
The sole rock-esque young act to soar over the last year was Twenty One Pilots. It’s the lone guitar-based band to appear in the Top 10 of physical album sales (at No. 7). It also ranks as the fourth biggest artist of the year, once you figure in streams. Only one other rock act made that Top 10: Metallica, which took the bottom slot of that category. Topping nearly every other list is either Drake or British powerhouse Adele. The latter sold the most copies of a single album in 2016 (1.7 million for her album 25, released in 2015). Yet, her disc got trounced in the total consumption sweepstakes by Drake, given his gargantuan streaming abilities.
With Drake-level streams ballooning into the nine-figure range, physical peaks barely eke out seven figures, and digital purchases seldom approach the eights. It’s a small wonder that sales are seen as an antique measure of success, regardless of the vagueness surrounding the precise revenue that streaming produces. In fact, moving away from the certainty of sales has funneled us into a whole world of hypotheticals based on flitting whims and fracturing attention spans.
By diving full force into the slipstream, we’re seeing a shift in not only the calculation of finances, but also in the way fans relate to the songs they’re hearing. The casual nature of streaming threatens the level of commitment fans make when buying individual songs or albums. In the post-sales world, we’re forever flirting with music rather than marrying it. And this trend undoubtedly has a strong effect on fans’ identification with artists and their art. We’re no longer investors in a star’s art but renters — transients in the experience rather than participants.
In the post-sales world, we’re forever flirting with music rather than marrying it. And this trend undoubtedly has a strong effect on fans’ identification with artists and their art. We’re no longer investors in a star’s art but renters — transients in the experience rather than participants.
On the other hand, there’s a considerable upside to this huge trend. The freedom, and low cost, of streaming has opened audiences up to a far wider range of music than ever before. Fans can sample sounds from any genre with a speed and ease that encourages exponentially more exploration. That, in turn, has had an effect on the music artists feel emboldened to create.
The most talked-about albums of 2016 — Beyoncé’s Lemonade, Frank Ocean’s Blonde, and Kanye West’s The Life of Pablo — honored no pre-ordained genre or commercial edict. They freely screwed with common notions of hooks, beats, and melodies. In so doing, they answered the shake up and threat posed by streaming with their own shock to the system. And the audience benefited in the exchange through the new approaches these stars brought to song craft.
In the end, the opportunities and losses posed by this post-sales world neither canceled each other out nor found a balance. They simply posed a new reality, offering a complex and dynamic view of how we hear music now.
For 25 years, Jim Farber was the chief music critic of the New York Daily News. Currently, he contributes pieces on music and culture to The New York Times, The Guardian, Time Magazine, Mojo, Entertainment Weekly, and many other outlets. His essays have appeared in several anthologies, including The Rolling Stone Book of The ’70s and The Rolling Stone Record Guide. Jim is a two-time winner of the ASCAP-Deems Taylor Award, America’s highest prize in music criticism.
Read article on General Assembly website: https://theindex.generalassemb.ly/music-streaming-data-2016-69bb27f4c2f0#.78a38afav
From Streaming to Stream-Ripping: Death of Music Sales
From Streaming to Stream-Ripping: Death of Music Sales