In the first decade of the century music sales had more than halved as illegal downloading took over. The Pirate Bay came first, a website used to download the latest music and films illegally but today Spotify has changed all. This streaming service that allows listening to music over the internet without owning it makes more money for the industry than CDs or Downloads.
Launched in Stockholm in 2008, Spotify has a library of more than 20 million songs that people can choose from. They either pay for the premium service to stream music without interruption or they listen for free but with adverts between songs.
Spotify in which Universal and other big record labels have minority stakes has saved the music industry. People thought it was right to steal with The Pirate Bay but it came close to killing the music industry. Spotify was superfast, almost everything was on it, and it was free and its reach went beyond its home base.
It has more than 10 million paying subscribers and a total of 40 million active users in 58 countries. Many executives hope that streaming — including other services such as Deezer or Pandora’s internet radio — can demonstrate that record labels can still make money in the digital age. Apple seems to be making the same bet with its acquisition in May of Beats, a smaller streaming service and maker of headphones.
Since the introduction of recording, the fate of music and musicians has been in the hands of the recording companies. But now it seems another tier of streaming has been introduced.
A new level of patronage emerged by the end of the 19th century as the main thrust of a music performance moved from being live to being recorded. It was good in a way because the monopoly of the patronage was challenged and music could be sold off the shelf. More people could afford the gramophone player — compared to the cost of hosting a music programme it was considerably less — while the major running cost was that of the record/disc. But it was minimal consisting of discs which were not very durable and needles which too became blunt very soon. The machine itself was quite reliable and could resist rough handling and inclement weather conditions.
In many ways it democratised music, the only criteria being the ability to pay for a gramophone and disc. In the face of competition the prices had to be kept within affordable reach. Whatever happened was between the recording label and the performer or the artiste, the listener only got to listen to the record or the disc but all this changed with the availability of the tape recorder.
Soon, by the mid 1950s the tape record player was easily available and it was not that expensive. It added another dimension because it could record not only live performances but the pre recorded discs that were already available in the market as well. In simpler words it introduced piracy not only at an organised level but also by the ordinary and common listener.
The organised piracy affected the market, the sale proceeds and obviously what the artistes were getting in terms of royalty. As a reaction the artistes demanded increased payment upfront and with less insistence on royalties because these had started to drop. The record labels were not willing to follow and accept their demands.
With the development of technology and very easy accessibility of the recording devices, the position had only to aggravate in this context. For the general listener it was akin to bonanza because every thing could be recorded and played endlessly without paying a penny, cent or paisa. That increased the volume of the listeners market but made both the recording labels and the artistes worried and poorer.
And with the internet it all became absurdly easy and no amount of barriers and filters could stop this piracy. It really became organised and operated at an international level, helped in no great measure by the surging demand of the music product which was dirt cheap, no matter what its quality.
In this digital and age of the internet the most appealing is Spotify’s democratic side. The more a song is streamed, the more an artist is paid. Not only does it offer a platform where the whole world can be reached, people listen to a good song over and over again.
Despite all this the winners are still the big companies. The major record labels offered their back catalogue to Spotify at a reduced rate in return for their shareholdings in the company. Spotify refuses to say how much the labels own but people close to the company say it is less than 17 per cent or so. Spotify has responded to growing criticism by detailing how artists get paid — it pays out about 70 per cent of its revenues to record labels, who share the pot depending on how often their artists’ songs have been played.
For Spotify to become viable, profitable and fairer it needs to grow from 10 million to 40 million paying subscribers. Then there is the competition and Spotify has done well by bundling its offer with telecoms operators, first in Sweden with Telia (it has announced a similar deal in the US with Sprint). But it has mostly faced rivals with relatively little financial backing such as France’s Deezer.
Experts say it could be a different story if Apple converts iTunes into a streaming service. If Apple does that, there will be a lot of people that have left iTunes to go to Spotify that will come back because they have an iPad or iPhone. Even Netflix could add music to film streaming.