The way people consume music has changed and streaming media has a lot to do with it. Physical album and digital download sales are down and yet more people are listening to more music than ever.
Believe it or not, this presents amazing opportunities for musicians who know how to connect with their fans.
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A mere 5 years ago Spotify was only months removed from its U.S. launch. Alphabet Inc. (NASDAQ:GOOGC) subsidiary, YouTube, had just begun pushing original programming and Netflix Inc. (NASDAQ:NFLXD) was a year away from doing the same. Almost without warning streaming became the dominant platform for music consumption.
It has grown rapidly and is up 76% year-over-year according to Nielsen. YouTube is firmly set to be a celebrity launch platform and Netflix leads a virtual army of streaming providers set to spend hundreds of millions of dollars on original content.
A New Income Stream
At the current going rate of less than a penny per on-demand stream, you would think musicians would not be getting rich anytime soon. Don’t tell that to the 14 performers last year who topped 1 billion spins. Those folks each received 8-figure checks for their trouble.
Some have become impresarios and created their own video and audio ventures. These include Ellen DeGeneres and Dwayne "the Rock" Johnson. Before them came Dr. Dre and his Apple Inc. (NASDAQ:AAPLB) owned Beats Music as well as Jay Z and his Sprint Corp. (NYSE:SB) owned Tidal on the audio side.
Millions, even billions of streams represent not just an opportunity to monetize, it represents advertising that leads to revenue on the road – when musicians go on tour. According to one artist, "We live in a world where artists don't really make the money off the music like we did in the Golden Age. It's not really coming in until you hit the stage."
The business model of making music available cheaply in order to cash in on touring and endorsements has helped Chance the Rapper sock away a cool $33 million. All that without ever selling a physical album or signing a record deal. All of his work has been freely distributed via streaming services.
Taylor Swift Returns To Streaming
Following a highly publicized spat with Spotify, Taylor Swift has decided to allow her music back on the streaming service. Swift’s feud had to do with her perception that the streaming industry failed to properly value musicians’ art. She pulled her music in 2014.
Swift’s fans felt the sting of her music’s absence from Spotify. And Swift felt the sting of that lost revenue. All this highlights another aspect of streaming – nothing is permanent. If a service removes an artist or the artist leaves, the music goes with them. Renting music as opposed to owning it does have a downside.
Top Of The Heap
Among the most highly rated music streaming services, additional revenue streams are being created all the time. Pandora (NYSE:PB), for example, recently rolled out Pandora Premium with a $10 per month price tag. Tidal also has Hi-Res audio files, which it calls Master Quality Authenticated, or MQA files. Customers pay $20 per month for that service.
Others that seem solidly positioned for the long term include Amazon.com Inc.’s (NASDAQ:AMZND) Amazon Music Unlimited and Prime Music, Apple Music, Slacker as well as previously mentioned Spotify and Tidal.