Spotify, YouTube pay musicians with ever-shrinking buttons

With CD and downloads crashing, is this the end?

Digital music is a loss leader for tech giants, driving traffic to other parts of the plantation as they harvest personal data. But it’s creators who are carrying the loss.

“Leaked” Spotify numbers suggest its maintaining an audience lead over Apple in the digital streaming business - but only by giving the music away for buttons. Buttons so small you need an electron microscope to see them.

Meanwhile YouTube has halved the per stream rate it returns, one analyst calculates.

Although streams on YouTube and Vevo grew 132 per cent to a phenomenal 751 billion, the rate effectively fell in half. Midia Research calculates that the stream fell from a measly $0.002 per stream in 2014 to a minuscule $0.001 in 2015. Midia’s Mark Mulligan bases his calculation on IFPI trade data, YouTube announcements and other information.

His numbers suggest Spotify made more signups than Apple or other rivals but did so at a steeply discounted rate. The headline monthly subscription rate to Spotify is $9.99 per month for full access (or£9.99 in the UK), the real pot of money is much lower

“The average spend of Spotify’s 7 million net new subscribers in Q2 2016 was $3.09 a month,” Mulligan writes.

In response to Apple Music, Spotify began to discount subscriptions heavily, offering $1 a month for a limited period. It’s running one again Stateside, with $1 a month for three months if you sign up to the main tier over the summer. Google has been bundling its YouTube streaming subscription with some devices for free for six months.

Apple also has a free trial period - but pays the creators during this period - a decision it was obliged to make after Taylor Swift intervened.

Companies representing musicians have several beefs with streaming music, some general, some specific. One complaint is that YouTube’s UGC (or user generated content) loophole allows it to drive down the price of music for everyone else, who must negotiate a licence. That’s because Google can exploit weak copyright law - ensuring it can maintain an unlicensed music supply chain provided by uploaders. This forces rights-holders to play whack-a-mole, a game heavily loaded in the tech platform’s favour. Nine Inch Nails main man Trent Reznor characterises this as “very disingenuous” and other artists have agreed: calling on Congress and the European Commission to plug the advantage.

The other beef is with ad-supported tiers, which they argue undervalues the music. Spotify is one of many which offers an advertisement-interrupted basic service, as well as a paid tier. Spotify argues that the free tier monetises users who wouldn't otherwise pay a subscription, and that it is a funnel for converting free to paid users. Spotify’s “leaked” numbers hint at an impressive conversion rate: somewhere between 35 and 37 per cent.

In 2013, Radiohead’s Thom Yorke made the point that wealthy artists like himself are rich enough: he maintained that if Spotify et al are the future, it’s a future that can’t support emerging artists, who simply can’t afford to “emerge” on the paltry royalties the tech platforms pay out.

Nielsen has reported that US sales of digital song downloads (that you can keep forever) continue to crash - down 18.4 per cent year on year, while Stateside, CD sales tumbled 11.6 per cent in the first half of 2016. ®

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