How Streaming is Changing both the Consumption and Production of Music

According to a 2016 report from Goldman Sachs, the music industry is on pace to grow at an astronomical rate in the next few years. With the help of streaming services, the music industry’s revenue could double to reach $104 billion by 2030. After years of underwhelming performance, label executives thank streaming services for the resurgence of annual bonuses.  

There is a reason for the recent surge in music consumption. While kids will grow up only knowing about Spotify, Apple Music or Deezer, people like me will remember the time when you had to risk it all on LimeWire (not me of course, that would have been illegal). But things have changed - and for the best. For $9.99/month, or $4.99 if you’re a student enrolled in literally any university, except McGill, for some reason (can we fix that, please), you get to enjoy the entire discography of almost any artist on the planet, except Jay-Z (can we also fix that, please).   

Streaming has changed the way we consume music. The Spotify model has led people to increase their consumption of music by 49%, (Bronnenberg, Datta, Knox, 2018) and to discover on average 27 artists per month. (Kissel, 2015) This number might seem high, but so many of the tools offered by streaming services facilitate the discovery of new artists. Spotify’s algorithm is capable of finding 30 songs per week that you may enjoy, and that is only one of the many tools based on the unique preferences of each user. It has also led to the popularization of certain genres that were in the past very niche. Almost a million people follow Lush Lofi, one of Spotify’s most celebrated playlists. There has never been a better time to be a lo-fi beatmaker. This generates an enormous amount of traffic for artists that, in the past, would have more than likely struggled to be recognized. 

Sure, some people truly enjoy Lofi, but many people use this playlist to study or relax. This very passive consumption of music would not be possible if you had to pay $1.29 for each song. Streaming platforms also encourage the consumption of a wider variety of genres. I would have never bought Otis Redding’s The Soul Album, but I have downloaded it and have listened to it on numerous occasions. As a matter of fact, Spotify users report an increase of 62% in unique artists heard, and a 43% increase in unique genres heard. (Bronnenberg et al., 2018) Not only do streaming services offer access to a plethora of artists and genres, but there is nothing easier than adding a song you like. You don’t have to ask yourself if it is worth spending $1.29 for the new catchy Ariana Grande song, you just click on the save button and let your future self explain to your friends why it just played at the party you’re hosting.  

Spotify pays about $0.006 to $0.0084 for each stream. Let’s say you played this new Ariana Grande song precisely 50 times. That’s around $0.36, which might seem low for consuming someone’s lifelong achievement (and it is), but that’s $0.36 that the singer would not have pocketed if it weren’t for Spotify.  

Here’s the thing: many artists have spoken out against the streaming business model. Jay-Z was so worked up he created his own streaming service. Taylor Swift also pulled her music out of Spotify for a while. She explained her decision in an interview saying that she thought that “there should be an inherent value placed on art.” Let’s say you use Spotify instead of buying Swift’s new album. For Swift to make as much money as she would have made by selling you her album on iTunes, you’d have to stream songs from the album a total of around 1,500 times. That’s a lot.  

Artists, and especially the labels that have invested millions of dollars in them, look like they’re trying to make the most out of this new system. Songs on the Billboard Hot 100 chart are around 10% shorter on average than they were in 2013. (Morris, 2019) Drake’s new album Scorpion is a great example of the streaming economics. It is awfully long in terms of number of songs, even though the songs are now 20% shorter than his breakout album Thank Me Later. It is also at time incredibly boring, and full of filler songs. Either the Torontonian has never been more uninspired, or he’s being really smart about this whole streaming ‘ting’.  

Take More Life as an example. The world’s most famous hip-hop artist has called it a mixtape, and not an album. Let me translate it for you: “I took 22 songs that never made it to my previous albums and will put them all in a file that I will call “mixtape” to lower everyone’s expectations, while maximizing my streaming numbers.” There’s no real need to create a great album anymore. As long as some of your songs go viral, you rack up the profits. Scorpion’s sales could have been disastrous (by Drake’s standards) in the old days. People would have been way less inclined to consume a 25-song album, half of which are fillers to increase streaming numbers. 

The question is: Does everyone benefit from it? If the revenues of the industry as a whole are increasing, we can assume the big names are benefiting from it. There are also a lot of smaller artists that benefit: lo-fi beatmakers, or even jazz artists that get most of their revenues from Spotify playlists are definite winners, but what about everyone in between?  

Looking at a Montreal-based artist gives a good indication of how streaming can hurt the pocket of some artists. FouKi, a trendy French speaking rapper, has racked up less than $40,000 from royalties on Spotify from his last album released in April 2018. Not bad, but considering how FouKi is one of Quebec’s most prominent artist, and how short-lived can music careers be, the rapper might have benefited from the old system.  

Streaming is not the perfect business model, but it does seem like it has invigorated the music industry, and reduced illegal downloads. If your favorite, less-known artist releases an album, it might be a good idea to buy it rather than stream it; or don’t - most artists signed to labels make very little from album sales. Go to their shows, that’s a bit more profitable for them. 

Note: All figures are in United States Dollars (USD), unless stated otherwise.