It’s true. Even with billions of streams being accessed every month, none of the streaming music services–none of them–are making any money. In fact, they’re all losing money. How is this possible? What sort of mad business plan are they pursuing? Or is there something structurally wrong with the way music rights are being administered? Music Think Tank takes a look:
Unlimited music streaming is a new method of commercialising recorded music – and it is a poisoned chalice. As far as users are concerned, it is magical. But, when it comes to profits, it can leave a bitter taste in the mouth of many licensed services and platforms. The forthcoming launch of Apple Music will show that the key to creating a truly viable business model in this arena is simple: coming to terms with the fact that free streaming, where the user is not expected to pay for their listening experience, is a mistake, and the argument that it helps fight against piracy is a trap for the naive.
If Evernote doubles its number of users, that will not result in a doubling of their production costs. When it comes to music (or video), however, paying for periods of free use (“freemium”) or totally free use involves the purchase of expensive rights for the distribution platforms. This is perfectly normal: a baker who decides to sweeten the deal for his customers by handing out free bread will indeed have to pay for the extra flour, as well as his staff’s wages.
Up until now, online music platforms have rarely been focussed on the music; they have been about creating financial barriers to the future entry of competitors. The money they collect pays for endless periods of free trials and allows them to keep smaller and less-supported industry competitors at bay and out of the running. In France, this policy was even employed with the support of the government on the occasion of the vote on the Hadopi Bill, as well as the distortion of competition which came with the 2010 introduction of the Orange-Deezer bundle. Ironically this was rolled out under the aegis of the Minister of Culture at the time, who went on to work (rather conveniently) for Orange. The leading platforms have therefore been able to capture the market everywhere, and everywhere they have clung to the lowest common musical denominator. They have been, and always will be, a dangerous obstacle to unique artistic expression.