Can the music industry survive the streaming revolution?

February 4, 2015 at 6:30 PM EDT
Do streaming services like Spotify and Pandora hurt musicians? Artists, established and aspiring, can flow both ways on the debate, but there’s no denying that the new model has had a dramatic impact on the industry and its profits. Hari Sreenivasan reports.

JUDY WOODRUFF: One recent spike in broadband usage is music. When you want to listen to a song today, you don’t have to buy a copy or even download it anymore. Increasingly, you stream it. And that has led to a profound shift in the industry that is disrupting how music is made, distributed, consumed, and how artists can make a living.

Hari Sreenivasan takes a look at the new emerging model. It’s a topic we will be coming back to again and again in a series we’re calling Music on Demand.

HARI SREENIVASAN: Music has been part of Rosanne Cash’s entire life, from the career of her father, Johnny Cash, to her own. She has 11 number one country singled and a new album with three Grammy nominations.

For most of her career, Cash has made a good living from traditional album sales and live concerts, but, today, it’s a very different world for Cash and other artists. It’s a world where listeners stream music over the Internet at their computers, through their phones, in their cars, all instead of owning it.

ROSANNE CASH: It’s changed how we artists and musicians make a living. And, in 1999, the music industry was a $14 billion industry. Today, it’s half that. It’s valued at half that.

There’s a feeling now, a concept that music should be free, that it’s like oxygen, everyone should have access to it. Everyone should have access, but should it be free?

HARI SREENIVASAN: That’s the question artists are grappling with as they place their catalogue on streaming services, such as Spotify, Google Play, and YouTube, as well as radio-like services Pandora and Rdio, Songza and others.

These services offer a free version or premium accounts without ads for about $10 a month. What many consumers may not know is that every time an artist’s song is streamed, just a tiny fraction of a cent is paid out to the record company, and then divided between the songwriters, publishers, and performers.

So how much does that translate to? If your work is played a few hundred thousand times, what’s the check that you get in the mail?

ROSANNE CASH: OK. For an 18-month period, I had 600,000 streams, and I was paid $104.

HARI SREENIVASAN: One hundred and four dollars…


HARI SREENIVASAN: … for 600,000 streams?


HARI SREENIVASAN: Aloe Blacc co-wrote the 2013 hit song “Wake Me Up.”  It quickly became one of the most streamed songs in Pandora’s history, but in an article for “Wired” magazine, Blacc wrote — quote — “It takes roughly one million spins on Pandora for a songwriter to earn just $90. In return for co-writing a major hit song, I have earned less than $4,000 domestically from the largest digital music service.”

The issue came to a head in November, when pop star Taylor Swift, the industry’s biggest moneymaker, pulled her entire catalog from Spotify, shortly after the release of her platinum album “1989.”  While superstars like Taylor Swift can still sell albums, the battle over the role of streaming comes at a brutally painful moment for the industry.

Last year, album sales fell 9 percent. Individual track downloads on iTunes, Google, and Amazon also fell by 12 percent. Streaming is the only part of the music industry seeing revenue growth. In 2014, it grew by 54 percent, and it now accounts for 27 percent of the entire industry’s revenue.

Spotify is one of these streaming services seeing exponential growth. Unlike Internet radio services, it allows users to stream any song on their service at any time. It currently has 60 million users.

I met Ken Parks, the chief content manager and managing director of Spotify for the U.S., at their New York offices. I asked him what his pitch was to record companies, how he got them to put their artists’ work into the service.

KEN PARKS, Chief Content Officer, Spotify: And we said, look, this is a generation that you have lost. What needs to be done in order to rebuild this industry and restore it to its former glory and to make it even bigger is to reengage this lost generation.

HARI SREENIVASAN: Just a few avenues away is Elias Roman, the co-founder of the streaming app Songza, which Google bought last July. He is now a content manager at Google Play Music, that company’s streaming service.

ELIAS ROMAN, Co-Founder, Songza: There’s an NPD study that found a digital music buyer will spend about $55 a year on music. It’s not a bad number. A subscriber to Google Play Music, they’re going to pay $120 a year. So, question, if we can get people through the funnel to be a subscriber to a great music service, they’re a really high-value customer, a really high-value customer.

HARI SREENIVASAN: From the paying customer, Spotify and Google pay about 70 percent of that $120 a year to record labels. They also point to a new generation of artists, like the Norwegian pop duo Nico & Vinz.

Their summer hit “Am I Wrong’ was at the top of the Billboard charts for weeks and has more than 200 million streams on the Spotify service alone.

KAHOULY NICOLAY SEREBA, Nico & Vinz: Streaming to me is — you know, to an artist right now, it’s a blessing, because you’re able to reach so many people with just you putting a song out on the Internet and it can go from there. “Am I Wrong” is one of those songs that just flew by itself. It just went on by itself. People started sharing it, and that’s because of streaming.

VINCENT DERY, Nico & Vinz: I think it’s a perfect way for new artists, too, to get their music out.

HARI SREENIVASAN: While Nico and Vinz have seen success through streaming, some artists say streaming services could be the new snake oil salesman.

LARRY KIRWAN, Black 47: It used to be it was the fat guys in suits and the pinkie rings blowing cigar smoke at you up on 57th Street. But those guys were invested, in a way, because they wanted a piece of your action. They wanted a piece of your intellectual property.

HARI SREENIVASAN: Larry Kirwan the lead singer for Black 47, an Irish rock band that played live shows throughout New York City for 25 years, until calling it quits this past November.

LARRY KIRWAN: The new streaming services, they — they don’t care about your intellectual property. They just want to give it away. They want to make money out of giving a service that they will make money out of. And it doesn’t work for the musician. For the — for the regular musician, it’s not working.

HARI SREENIVASAN: So these are — this is sort of your, what, wall of fame?

Daniel Glass is the founder of Glassnote Records, an indie record label that represents Grammy Award winners Mumford & Sons and Phoenix, among others. He says streaming is now crucial for fans to discover his artists.

DANIEL GLASS, Glassnote Records: So, we have a new artist, for example, who released a record a few weeks ago named Robert DeLong, put a song out called “Long Way Down.”  As soon as Spotify put it on their big playlist, their worldwide — the amount of streams quadrupled. We have been up 214 percent three weeks in a row in streams because it’s been highlighted, it’s been curated, then playlisted.

HARI SREENIVASAN: And the more his artists’ songs are streamed, the more ticket they say buy to concerts, which Glass says is exactly what happened with Robert DeLong.

DANIEL GLASS: His live sales, the tickets went on sale, as soon as streaming services got involved and radio got involved, tickets sold — tickets to every show sold out.

HARI SREENIVASAN: Ken Parks of Spotify says that streaming can reinvigorate sales for established artists as well.

KEN PARKS: You take older artists as well with amazing catalogues — Pink Floyd would be a good example — they’re using this platform to reconnect with generations that maybe never heard of them and haven’t experienced the magic of those catalogues.

HARI SREENIVASAN: But the digital folks will say, listen, now if you’re in a garage with your laptop, you could make a track that a million people see, and that will get you the support and the audience that will support you and buy your tickets and go to your shows.

ROSANNE CASH: OK, that’s the exposure argument, which I have heard a million times. I just don’t buy it. What about artists who don’t need exposure? I found my audience. I’m not going to be Madonna. Don’t want to be, you know, but I still want my music to get out there and have people purchase it, so that I can continue making it.

Streaming is here to stay. We’re not Luddites. We don’t want to turn back the clock.

HARI SREENIVASAN: In fact, the industry will clearly continue to wrestle with fundamental questions about its business model in the digital aid. Last year, Americans streamed 164 million songs, and streaming services say the number paying for that music will only go up.

Hari Sreenivasan, in New York City, for the PBS NewsHour.