Why It’s Tough on Streaming Music Services

If you own a traditional radio station, you have a handle on your fixed costs whether you have one listener or a million listeners.  Things like electricity, staffing costs and royalty payments are all in the budget.  The goal becomes to increase your listenership (your ratings) while keeping your fixed costs in check.  In other words, your profit margin increases the more successful you become.

That’s not the case with streaming music services.  The more popular you become, the more you have to pay in royalties.  Under the current copyright rules, you can never, ever achieve economy of scale, no matter how successful you become.  

Yes, it’s true that artists and rights holders don’t earn much from streaming, but neither do the streaming companies themselves.  And as consumers show more interest being album to access music rather than possess it, streaming is slowly become the way of the future.

In my opinion, this unmovable profit margin issue is a huge threat to innovation and the future health of the music industry.  Look at this graphic published by Digital Music News.  See the issue?

 

Alan Cross

is an internationally known broadcaster, interviewer, writer, consultant, blogger and speaker. In his 30+ years in the music business, Alan has interviewed the biggest names in rock, from David Bowie and U2 to Pearl Jam and the Foo Fighters. He’s also known as a musicologist and documentarian through programs like The Ongoing History of New Music.

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