This article is part of the On Tech newsletter. You can sign up here to receive it weekdays.
Streaming services like Spotify and Apple Music rescued the music industry. They’re also tearing it apart.
My colleague Ben Sisario says that musicians complain about streaming economics that can translate millions of clicks on their songs into pennies for them. Last week, a group of musicians protested outside Spotify offices for changes in how they are paid from streaming.
Ben spoke with me about why streaming music has been a letdown for many musicians. The challenges reflect a larger question: What happens when the promise of making a living online from music, writing or building apps doesn’t match the reality?
Shira: How has streaming changed the music industry?
Ben: It’s been the industry’s salvation. Largely because of Spotify and other subscriptions, streaming provided the industry something it never had before: regular monthly revenue.
To oversimplify, the big winners are the streaming services and the large record companies. The losers are the 99 percent of artists who aren’t at Beyoncé’s level of fame. And they’re angry about not sharing in the music industry’s success.
If more people are paying for music, why isn’t that money trickling down?
There’s a complicated and opaque formula that determines how the $10 monthly subscription for Spotify or Apple Music makes its way to artists. After those services take their cut, about $7 goes into a pot of money that gets split a bunch of ways — for the record labels, songwriters, music publishers, artists and others.
The more people listen to music, the less each song is worth because it cuts the pie into smaller and smaller slices. I’ve seen financial statements from some fairly popular independent musicians that suggest they’re making a pretty good living from streaming. But often, unless musicians have blockbuster numbers, they aren’t making a great deal.
Who is to blame for this?
The streaming services and the record labels both bear responsibility.
Spotify pays a big chunk of its sales to the record labels, and then it’s up to those labels to distribute the money to musicians. The music industry doesn’t have a great track record of paying artists fairly.
But Spotify is also nowhere close to its stated mission of “giving a million creative artists the opportunity to live off their art.” It likely has around seven million artists on its platform, and Spotify’s figures show that only about 13,000 of them generated $50,000 or more in payments last year. How can that number possibly get to a million?
Haven’t many musicians always felt exploited and underpaid?
Yes, but the streaming model has exacerbated the divide between superstars and everybody else. It’s also a fallacy to dismiss musicians’ complaints. Economic inequality has been around a long time, but it still should be addressed.
What’s the solution? Can streaming ever work for everyone?
There is talk of changing the payments systems to a “user-centric model” that would allocate payments based on what people listen to. If I listen only to Herbie Hancock on Spotify, my subscription fee goes only to him, after the service takes its cut. Proponents say this system would be more fair, especially to artists in niche genres. But there have been studies that say it’s not that simple. And I wonder if it’s too late to change.
Are any companies doing it differently?
There’s a smaller music service, Bandcamp, that musicians tend to like. It lets artists limit how often their music is streamed and takes a relatively small commission on sales of song downloads, T-shirts and things like that. It’s proof that Spotify isn’t the only way it can be done.
I’m also interested to see what Square might do with Tidal, the streaming service it bought last month. It’s not going to change the economics of what a streaming song is worth, but Square is deeply integrated with things like merchandise sales. It could come up with new ways to help artists make more money or connect and market to fans.
Where Big Tech is challenged
In China, upstart technology companies are doing something that can feel impossible. They’re challenging the tech kings.
The Wall Street Journal reported recently that a five-year-old Chinese e-commerce site, Pinduoduo, became the country’s most widely used shopping website. More people made purchases last year on Pinduoduo — which is a combination of Costco, a video game, QVC and Amazon — than shopped on Alibaba, China’s version of Amazon.
By the way, do you want to feel small and insignificant? Chinese shoppers spend more than $2 trillion each year on online purchases — and it’s nearing half of all retail sales in the country. Americans spent about $800 billion on e-commerce in 2020, or about 14 percent of retail sales.
One of the big questions about technology is whether America’s current tech giants like Google, Facebook and Amazon will stay powerful forever. In China, the answer is maybe not. (But we’ll see.)
In the last few years ByteDance, the company that makes the Douyin app and its international version TikTok, has also challenged China’s all-powerful Tencent.
I don’t want to go overboard. Alibaba and Tencent remain supremely powerful, and it’s hard to imagine that changing. ByteDance and Pinduoduo could have trouble staying popular and making money. It’s also difficult to know if China is a glimpse at what could happen to tech powers elsewhere in the world. China is unusual.
But it is intriguing to see technology superpowers confronted with newcomers bringing fresh ideas.
Before we go …
Online hate as a precursor of real-world violence: Anti-Asian hate speech has spiked in fringe corners of the internet, my colleague Davey Alba reported. Researchers told Davey that a surge in online vitriol toward ethnic groups showed an increased risk of violence against them.
A novel but potentially abusive way to get more people online: Rest of World wrote about loans for people who couldn’t otherwise afford smartphones, but they come with a catch. Pop-up messages take over the phone screen to nudge people to make payments, and the phone might lock if people miss too many.
TikTok is the opposite of reading books but … TikTok videos are selling a lot of books. My colleague Elizabeth A. Harris wrote about “BookTok,” or short videos of people recommending titles, recording time lapse videos of themselves reading or weeping after an emotionally crushing ending. “I wish I could send them all chocolates!” one author told Elizabeth.
Hugs to this
We want to hear from you. Tell us what you think of this newsletter and what else you’d like us to explore. You can reach us at [email protected]
If you don’t already get this newsletter in your inbox, please sign up here.