The music industry may be streaming towards a cliff

As legitimate publishing shrinks down to a fight between downloads and streaming, another wave of disruption is on the horizon.

Last week Thom Yorke, leader of the rock bands Radiohead and Atoms for Peace, described the music streaming service Spotify as the “last fart of a dying corpse”. The corpse he was referring to was the music industry.

The interview was in Spanish, on a Mexican website called Sopitas, and Google Translate garbled it a bit, but Yorke is one of the most influential people in the music business and his remarks have rekindled a debate about music streaming services like Spotify. They also have wider implications for all digital businesses.

In a way, music is the canary in the digital coalmine because it was the first to be attacked by the corrosive culture of free-ness initiated by Napster in 1999. For years the industry played Whack-a-Mole trying to close down one download site after another until it was eventually overrun like Custer at Little Bighorn.

Now the industry, in relief, has embraced iTunes and, more recently, Spotify and the other streamers, because sales of CDs have dried up.

But the musicians are starting to fight back. Thom Yorke: “…the exciting thing was that we could have a direct connection between the musician and audience. Now, all these damn people get involved, like Spotify, who try to be gatekeepers of this whole process, when we do not need that. No artist needs it: we can do all that shit ourselves.

“So I feel that Spotify is wrong because it is about the future of all music and whether we believe that there is any future for music. Same with movies and books.”

Legitimate music publishing is narrowing down to a battle between two alternatives: downloads or streaming. Apple iTunes dominates downloads and Spotify, the five-year-old Scandinavian operation, seems to be the market leader in streaming, although there are dozens of competitors, including Rdio, Deezer, Grooveshark, Nokia Music, Rara, and in Australia JB Hi-Fi Now and Guvera, among others.

There are a variety of subscription models on offer, but they mostly charge about $12 a month for full access to the library and often have a free version with ads.

I downloaded an album on iTunes yesterday called In Blood Memory by Jen Cloher for $10 because I knew I’d be talking to her later (it’s very good, by the way). I asked her how much of that she got. Answer: “about $6”. But that’s only because she owns her own label. Normally for a $9.99 download, the artist gets 94 cents, the record label $5.35 and iTunes gets $3.70.

On a streaming service? It’s about 0.015 cents per stream, or 15 cents per thousand.

In August the cellist Zoe Keating published a spreadsheet of her earnings from various streaming sites. In the first half of 2013 she scored 232,000 streams, for which she was paid $906.41.

I used the word “legitimate” above because by far the biggest “publisher” of music is BitTorrent, which is simply the internet protocol for enabling peer to peer sharing of files, and the foundation of Napster’s many successors. Some people I know have zettabytes of music and movies they have downloaded; BitTorrent has been estimated to account for as much as 70 per cent of all global internet traffic.

At least Spotify and the streaming services pay the musicians something, even if it’s a fraction of a cent per stream.

In a way, the battle between iTunes and Spotify, between legitimate downloads and streaming, is a metaphor for the industrial consequences of the digital revolution more broadly.

The operators themselves argue that it’s not a battle at all. It’s a bit like renting or buying a home: some people will always want to own it, others are happy to rent. Also, they say, there will always be a place for both because streaming allows customers to try before they buy.

Some musicians, like Thom Yorke, are taking their music off Spotify because it simply doesn’t pay enough, but they are so far in the minority: these businesses have tens of millions of songs on them from music labels happy to just get something.

And let’s face it; musicians have always been ripped off, first by the promoters and record companies and now by the new digital overlords.

The real question being asked by Thom Yorke and many others, apart from whether they can make a living any more, is whether the internet will eventually enable the disintermediation of their business – that is, whether they can “do all that shit” themselves.

And indeed, there is now an industry developing to help artists do it – that is, to run a website, publicise the music and get it played on radio and organise tours.

Jen Cloher is doing it herself – self-publishing and then selling the album on her website, and organising her own tour. She also runs day-long symposiums for musicians to teach them what to do, called “I Manage My Music”. But it all has a long way to go.

Is it the same for movies and books? Well, not exactly. Each movie is a major enterprise rather than a single artist writing a song and playing guitar, and there aren’t a lot of illegal book downloads going on, or streaming of them for that matter.

But anything that can be converted into ones and zeroes is undergoing some kind of revolution, including newspapers.

That revolution has two main characteristics: a collapse in revenue and the potential, at least, for disintermediation. And the music industry is further down this road than others because it started earlier.

Musicians I’ve been speaking to say they can still make a living, but it’s harder and there’s less money, and the main thing nowadays is live tours.

For other industries like movies, books and newspapers, the same thing applies – without the option of live tours.

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