Wesley Verhoeve

I was a Spotify US beta tester about a year ago and have to admit that I didn’t really “get” it. The ugly design was (and still is) distracting, the search was (and is) broken, and I just fled back to my nice clean iTunes experience, comforted by a gigantic hard drive of music. A few months later I later tried Rdio and streaming finally clicked for me. My first thought as a consumer was: “Wow! This is awesome. I can have access to almost everything I have, plus everything else released, anytime? No more bulky hard drives and organizing my music!”. My first thought as an artist manager and label person was: “Oh crap, why would anyone ever want to buy a digital download again? We better think of something quick!”.

From a consumer’s point of view, having access to all this music for a cheap monthly fee is a winning value proposition. Beyond increasing your library to near infinity, it’s also much more convenient and easy to consume. No waiting, no cataloging, just search and click play. As high speed wi-fi access grows, and smart phones become the norm, it’s hard to deny that streaming will be the dominant way in which mainstream casual music fans will consume music. (Hardcore fans will follow an alternate consumption pattern, and more on this difference here: “The New Way Of Consuming Music”.)

From an artist and manager’s point of view, streaming represents a scary and radical shift in consumption. It includes a massive loss of income on a per customer basis. This shift changes all the financial aspects of releasing music. (For details on the difference in income between streaming vs downloads check out “Digital Retailers, Revenue Per Song”.) Rather than the typical music industry doom talk, I’d like to suggest that we look at how this shift could actually benefit artists. Once we get past our knee-jerk fear-based reaction, we see that streaming could actually be seen as a much needed breakthrough technology and shift to lead to industry growth after a decade of imploding. Benefits include the simplification of income tracking and accounting, lower overhead, the enormous amounts of new customer data and improved metrics, increased access for a larger audience, distribution efficiencies, and more.

The loss in income from digital downloads is very real of course, but we can look for ways to offset this loss, at least in part. This can happen through the benefits that come from improved metrics and properly measuring an artist’s influence and audience. This will be easier in the near future than it ever has been. It will be very similar to how a newspaper measures their circulation, and a TV show it’s ratings. With the right team and model, the modern artist becomes a multidisciplinary creator and curator, with an audience that rewards them by giving dedicated moments of attention, permission to market, and the purchase of tickets, merch and music. This attention is valuable to others who may want to partner with the artist on a project.

A second benefit is the artist’s ability to expand their audience faster and more easily through streaming services. The lower the effective monetary price to check out a new artist based on a friend’s recommendation, the more it will happen. In streaming this perceived cost is $0. We also see that streaming services have integrated all the easiest ways to stimulate people’s natural inclination to share what they love with friends. If an artist and her team capitalizes on this increased level of attention by providing more quality content and opportunities to see the artist perform live, the income will follow, often times faster than from the aged royalties on record sales model. Great examples of watching this in action at The Weeknd, Mac Miller and Drake during the lead up to his first album before he signed with Universal Motown.

Most established artists and companies would rather stop the audience’s move to streaming than adjust for it. Adjusting to this new consumption pattern takes a lot more grind and guts than the old way. Being an incumbent will be less and less beneficial as the gatekeeper roles change as well. Seeing that we can guarantee that consumer progress is impossible to stop, we shouldn’t waste any time complaining about it. Instead we should look to improve our business models to be more in line with our customer’s wishes and needs. Living through this evolution will certainly prove challenging for most of us, but much more so for those who insist on holding onto the old model. Those of us that embrace the challenge will also see better positioned to identify the opportunities it brings. That’s how we see it at Family Records at least.

Related Reading:

• The New Way Of Consuming Music (Or A Dollar Less To Rihanna Means A Dollar More To Tegan And Sara) (read)
• The Best Does Not Always Win (Or Why Spotify Will Beat Rdio) (read)
• Music On The Move (Or How We Listen) (read)
• The Importance Of Free Music (Or Give ‘Em A Taste First) (read)
• Digital Retailers, Revenue Per Song (read)

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