Could Crypto And Blockchain Shake Up The Music Streaming Monopolies?
My old music business friends always say, “Where there is a hit there is a writ,” and streaming music is definitely a hit. Spotify and Apple are the kings, with the internet behemoths Google and Amazon chasing up behind and others coming along in their wake. The $19bn industry […]
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My old music business friends always say, “Where there is a hit there is a writ,” and streaming music is definitely a hit.
Spotify and Apple are the kings, with the internet behemoths Google and Amazon chasing up behind and others coming along in their wake.
The $19bn industry is about 20% of Google’s sales and is for all intents and purposes a monopoly with the Universal Music Group alone having 31% of the pie. Downstream Spotify does $5bln in sales and is therefore by textbook definitions another monopoly. Its 5x sales valuation is in line with unlisted Universal but there is always going to be friction between the two fat layers on intermediation in the music business. Those juicy layers between the artist and your ear are content ‘publishing’ (as opposed to music publishing which is a segment of this activity) and distribution.
This being the music business the drive of the intermediators is to keep as big a slice of the pie to themselves as possible. So it’s no surprise that Amazon and Spotify are fighting in the U.S. court a rear guard action to stop the artists getting a thicker cut of the revenue from their work.
Even if they lose, many ‘artists’ don’t have call on any of that revenue anyway because they have already been parted from their IP rights or have their income diluted away by the magic of third party rights administration. If Hollywood accounting is hard on the income of the artist, its harshest form is in the music business. You can also be assured that whatever is going into the business of the music industry the artists will be the first to be left out of the spoils.
The billionaires at Amazon and Spotify feel hard done by that hundreds of thousands of artists might get a sniff at some more money. A 44% rise in streaming income to the artists whose work is all of their product, is making Amazon and Spotify feel hard done by. The world is not enough for these gatekeepers.
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Well I’ve a secret, I have 12 albums on Spotify and iTunes and they pay me every month. Believe it or not I am a secret popstar. I may be the least successful popstar of all time but I do nonetheless have accurate stats.
I make 0.25c on a stream from what is near enough a direct relationship with Spotify. If I was an artist with a standard record company deal I’d see almost nothing of that, if any at all. But independent as I am, to make a U.S. minimum wage living off $11 an hour from Spotify, I would need to have over 650,000 streams a month. 1,000,000 streams a month will get me out of poverty and around m streams a month will put me on par with the average Spotify programmer. Unless I wanted to leave my studio and busk, I would be the poorest superstar in history.
Music business revenue is a fascinating thing. How is it with a world of independent musicians that 90% of the music sales goes to a handful of record companies? Why don’t people listen to non-record company music? Why aren’t they discovering it? Of course the answer is, you can’t easily discover independent music because the big boys are white listed for discovery and the rest aren’t. But then it's interesting to note the artists who are under the tutelage of record companies end up with only 15% of the pie in a digital work of zero cost of goods. So between your ear and the artists pocket, 85% of the money is siphoned off by the gatekeepers whose main role appears to be freezing everyone else out of the channel.
But the madness doesn’t end there. Spotify is upset with Apple because Apple controls the Appstore and the distribution of all apps, music or otherwise, to its mobile platforms. In effect, it is the retailer of Spotify to the Apple audience. Apple slices a fat slab of cash off the top of all Spotify subscriptions that are bought via the Apple App. It also chokes off all sorts of spammy behavior you would get on a desktop web product and upholds all sorts of uncomfortable standards. Apple Music, Spotify’s direct competitor, is therefore at a big potential advantage. Spotify has therefore banged in a complaint in the EU, claiming the Apple 30% cut of their subscription is unfair. Now you can see their point but they go on to say Apple doesn’t share this cut with the ‘music industry.’ I take it they want to imply that the artists are getting hard done by and not suggesting the fat cat music executives and vulture capitalists that fund them are getting shortchanged.
Hurting artists would be just awful of Apple, if it was not for one thing. Apple pays me, the world’s least successful pop star about 100% more per stream than what Spotify pays me and so does Amazon.
All in all it’s not pretty, that Spotify pays artists half what Apple and Amazon does but then slams Apple for hurting artists.
The internet was meant to break the corporate stranglehold that throttles artists but instead it has tightened it. The music business, be it the new digital distributor/retailers, or the old school publishers and content owners, have locked music down again and are bleeding the artist dry. The promise of the dotcom revolution to allow bands to go directly to fans has proven worse than a mirage, it has left artists worse off than they were before the WWW eviscerated music sales.
What has formed is a set of titanic monopolies, and what monopolies do is maintain their monopolies. The music industry is doing a great job of that.
So it is interesting that the internet is still trying to break the ever-tightening stranglehold and it’s the crypto upstarts that are taking up the children’s crusade. The two that stand out, and there will be more, are Choon and Feedbands. Choon pays artists in worthless Choon coins pumped out by its own crypto token system, while Feedbands is planning to pay listeners and artists in Bitcoin to participate in their community.
Choon is a failed to launch ICO but its site is live and as the world’s least successful popstar I’ve tracks on there and I’ve got a wallet of Choon tokens waiting to be, eh, counted up every now and then. Feedbands is an older, ‘change the music business’ attempt, which funds vinyl releases. Their idea now is to pay everyone in Bitcoin, the artists for their content, and the listeners for referring new listeners.
As the least successful popstar of all time these new crypto ideas are tempting, but the harsh facts are, people don’t want to pay for music and they want to be passive and have it pushed to them. A subscription music service is just like a streaming internet radio service but one where you can decide exactly what you listen to, if you can be bothered to decide. Most do not. Instead they listen to curated playlists which in effect are like niche radio stations. People are way more likely to say “Alexa play me Christmas songs” than make their own list. So, for the mass market any music product that relies on the users leaning in to interact rather than sitting back to chill out to a suggested playlist that’s pushed to them, is doomed to be small fry.
On the flip side, crypto might just be the disrupter that the monopolists fear, because blockchain is the technology to turn the music biz upside down. Imagine artists watching their royalties in real time on the blockchain. Hollywood accounting would just fail with such immutability. Imagine record contracts becoming smart contracts; how would slick lawyers and accountants slither past that transparency? Blockchain promises to be the great disinter-mediator and that is what music needs. The internet was going to do that, but it did the opposite; maybe the internet plus blockchain can do it.
There is the strange force in crypto that seemingly reverses the flow of money from its established route up the economic and political hierarchy downwards to the masses. This might be just what new technology does and it is perhaps just a phenomenon of the first wave of the Bitcoin revolution. However, I have a strange feeling that this financial dynamic can be an embedded attribute of blockchain. People pay to have their attention distracted. Middlemen skim the revenue of this trade, be it through advertising or by intermediation, and I am sure blockchain can pass this monetization or short circuit the gatekeepers, rewarding the artist with more of the revenue stream.
So just when the music business has scrambled back from years of online disruption to lock up their industry once again, blockchain and cryptocurrency could turn their world upside down once more. More likely at least for many years to come my 0.26c a stream from Spotify, 0.68c from Amazon and 0.61c a stream from Apple Music will be the crummy deal artists will have to rely on.
At least the next wave of the music revolution that never was is trying to spark into life and the blockchain is its best hope.
Clem Chambers is the CEO of leading private investors Web siteADVFN.com and author of Be Rich, The Game in Wall Street and Trading Cryptocurrencies: A Beginner’s Guide, out now in paperback and on the Kindle. In November 2018, Clem won Journalist of the Year in the Business Market Commentary category in the State Street UK Institutional Press Awards. The awards recognise outstanding performance in institutional financial services reporting in the UK.