A Tangled and Melodious Web

by Edward Boice

Since the turn of the century, the Internet has threatened to destabilize the music industry and take away artists’ revenues.

For once, Taylor Swift actually has something legitimate to complain about. And no, it is not about one of her boyfriends.

Music streaming services have been a controversial topic since their inception, launching a battle between artists, record labels, and the services themselves. Swift and other music creators believe that because these services offer their music for free with few restrictions, they are losing money. Now, Swift might not be the best person to push this issue; she’s rolling in dough. However, her point is valid for smaller name bands and those beginning to emerge into the industry. If people can listen to music for free, even if royalties are being paid out, they will not be buying albums or downloads and ultimately artists lose money.

Services owners and some critics, however, say that these services give people a legal way to listen to an abundance of music, while giving artists some compensation. Streaming services combat the use of illegal download websites, such as the original Napster.

Both arguments contain some validity, but to choose which is more accurate is almost impossible.

So far the 21st century has been the most financially unstable time period not only for artists but for the rest of the music industry. Michael DeGusta, a writer for the website Business Insider, gathered music-industry financial statistics from 1973 through 2011, and charted the industry’s income.

By one measure, up until 2011, peak revenue was at millennium’s turn: about $19 billion came in during 2000. The haul in 2011? $8 billion.

The reason for the huge drop off in revenue is the Internet.

The Internet first got tangled up with music in the 1990s when several music file formats were developed, including MP3. This opened the door in the early 2000s for users of file-sharing programs, such as Napster, to easily upload a song for the rest of the world to download. These peer-to-peer programs were a huge hit with users and went to number one with a bullet. According to Tom Lamont from The Guardian, Napster alone had 57 million users at its peak.

This glut of free music files from sites such as Napster started draining the music industry’s revenue. Why buy music when the same music was free from a computer at home?

Eventually the industry caught on, suing the peer-to-peer sites and many of their users. Later, iTunes emerged and became the Internet’s free and legal jukebox. iTunes succeeded due to its accessibility in three areas. First, the hits could be cherry picked from the album. Second, these songs could be carried on an iPod and listened to with Apple’s signature white earbuds, turning a vast collection of tunes into a daily soundtrack and making a fashion statement. Last, the price for each song was a bargain at the time, just 99 cents compared to being forced to buy a $20 CD for just one song.

According to Brandon Griggs and Todd Leopold of CNN, the pricing caused some grumbling, however, among record labels and artists. While people were clinging to this new business, revenue dropped due to the decreased price per song.

Since iTunes’ release, other music software programs are competing with Apple by combining the positive qualities of iTunes, with elements of other music-related businesses.

Today, music streaming services mix aspects of illegal download sites, online music selling options, and radio stations. They provide the convenience of playing music wherever, if the subscription has been paid. Most services provide a subscription for ad-free listening, similar to the satellite radio provider SiriusXM. For one renewable subscription (e.g., $10 for one month of Spotify Premium), a seemingly endless library of music is accessible, like Napster’s endless music sharing and download system. iTunes offers a different kind of convenience by offering songs which the user owns for a lifetime after paying a one-time fee. For those unwilling to pay a subscription fee, ad placement provides a source of money for these services. Even without subscribing, that impossibly large library is at a consumer’s fingertips, only with the aforementioned ads and a limit on play skips.

This mashup of delivery systems and resulting tiered royalties system are why artists like Swift are protesting that these services are taking away from their income.

Do music streaming services take away from artist’s income? Crunching the numbers doesn’t determine whether they do or not. When trying to determine the answer, royalties, song streams and downloads, and people’s spending habits need to be combined together. As is the case with much big data, there are too many variables to provide a solid answer.

Royalties themselves are paid out according to different laws, many of which reflect the way that music was listened to in the past. Spotify claims to pay around $0.005 per song, but taxes and manner of consumption influence the formula that determines this payout. iTunes has not even released their average royalty. So in order to calculate music artists’ true income, one must have connections to those who know the royalty numbers and research royalty laws.

In 2010, data journalist and information designer David McCandless did an analysis of streaming-service compensation. He addressed royalties, the number of song downloads that would produce a minimum wage for the artist, average number of users per service, and the difference between signed and unsigned artists. According to McCandless, the average royalty to a signed artist that Spotify hands out is $0.0011, which equals to 1,117,021 song plays a year that would be required to reach minimum wage. iTunes pays $0.23, meaning 5,478 downloads would pay out minimum wage. So looking at these numbers, artists make much more from iTunes than Spotify.

However, that comparison is flawed by missing data: Spotify users number 75 million; Apple does not release user numbers. Since iTunes was released in 2001 while Spotify began in 2008, one could assume iTunes would have the superior number of followers. But even if iTunes has more loyal listeners than Spotify, a combination of Spotify and all other streaming services might have double the members iTunes has. There is also the possibility that some consumers use all three music services, or just two, or any other combination of selected music services. Determining what company is making the most and what company is paying artists the most overall is almost impossible. It’s like trying to figure out why “Who Let the Dogs Out” was ever a craze.

One argument Taylor Swift and other artists make is that because people listen to Spotify and Pandora (who pay less than iTunes) they lose money from those people who transition from album purchases and iTunes downloads to free streaming services.

However, an opposing argument could be that because people have an option to listen to music for free and maybe some are reluctant to buy, they listen to a lot more music through Spotify and Pandora, producing more income for artists.

Another case can be made that free streaming services provide a legal way to listen to free music rather than using illegal music download sites, so people might be more inclined to listen to the legal website than illegal website.

Unfortunately, the diversity and sheer number of music listeners’ habits makes it difficult to see concrete statistics of people’s music listening preferences and how they affect artists’ income. The debacle that the music industry faces is a tangled web of countless possibilities, outcomes and variables.

So how does this apply to the rest of us? Is it the public’s fault that we could possibly be hurting the artists we love so much?

Everyone likes some kind of music genre. I personally have never met someone who hated music. Because of our love for these collaborations of harmonic sounds, people take advantage of it at all opportunities. We do not mean to harm our favorite bands by taking advantage of music streaming services; these are great resources to share and discover music. Services still pay royalties to artists, so artists do still gain some type of income. There is no shame in using Spotify, Pandora, or any other streaming service. Spotify is probably the most used app on my iPod.

So my recommendation is to use the cover of the law and of your enthusiasm. If you’re using a legal streaming service, your use compensates the artists