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Penny Fractions: A Correct History of Music Streaming

Penny Fractions
Penny Fractions: A Correct History of Music Streaming
By David Turner • Issue #112 • View online
Hello, welcome back from the holidays! This year a number of industries (art workers, illustrators, baristas) started Google Docs or websites to disclose salaries. Last month, two new spreadsheets emerged within the fields of journalism and advertising. Salary transparency is a small way of showing worker solidarity, so thanks to the thousands of people who’ve contributed to these latest sheets. 
In my last newsletter, I mentioned I was working on an essay (NuMusic: A Gig Economy Solution) and was going to have a small get together for its release. It’ll be held at Molasses Books in Brooklyn, New York, on December 11th at 8pm. A few of y’all reached out to say you can make it, so looking forward to that. Leading up to next week’s event, the following two newsletters will feature essay excerpts. Today’s portion attempts to give a brief, very brief, history of digital music streaming, so hope y’all enjoy it. 

In the 2016 book Platform Capitalism, the author Nick Srnicek identified five different types of platforms that have emerged in the last two decades to become the leading ways that capitalism situates itself. He coined the phrase “Product Platform” to describe renting out products to people, where he cites an example of Zipcar compared to Uber: consumers use the former to rent a car while the latter is used to purchase a single ride, with the vehicle’s cost and additional risks all shouldered by the driver. Srnicek identifies that other examples of product platforms would be Pandora and Spotify, two companies that rent out music catalogs without any ownership. These platforms license from record labels, who in return take a substantial share of the company’s revenue. This shift to a product platform is what can be credited for the record industry’s late 2010s return to growth after a decade-plus decline since the post-90s CD crash. Where companies like Spotify are often credited for reviving the industry, the desire for a platform-based system is an outgrowth from the record industry’s initial reaction to the popularity of Napster and file-sharing two decades ago. 
The internet’s earliest days in the context of music lacked these centralized, dominant platforms. This allowed for a wide range of experimentation in early digital album sales (see: David Bowie’s hours…), releasing songs for free and helping establish online fan communities. It opened up the ability for fans to communicate with one another on message boards, thus introducing entirely new ways of conceptualizing one’s fandom beyond buying a record, attending a show, or making a radio call-in request. The realm of possibility that the internet granted, though limited to those with internet access, was valuable. Yet, the alarmist narrative pushed by the Record Industry Association of America (RIAA) around Napster and file-sharing wedged a split between musicians and this new form of technology. This echoed the 1980s fear that cassette tapes would undermine the industry, as the blank tapes sold were thought to lead to rampant bootlegging. Still, many artists chose not to parrot disgruntled major label talking points against the internet’s distribution of music and instead understood the potential value of this new medium. 
Ironically, prior to any Napster hysteria, Sony started exploring ways for fans to make digital payments to stream music back in 1997. The label-controlled product platform, even if not implemented until after Napster’s emergence, was an idea kicking around major label office meetings. What Napster (and subsequent file-sharing sites) created was an anti-capitalist platform that effectively undermined music copyright, which is where its value is held. The RIAA fought incredibly hard against Napster and others because of the creation of a product platform that did not attempt to seek rent via paid subscriptions or advertisements. The website gave music away for free, which undermined the entire major label structure of sitting on valuable copyrighted materials. Thus, after successfully drowning out the company in legal tape, major labels introduced two new music platforms in late 2001: Musicnet, which was backed by BMG, EMI, and Warner Music Group, and Pressplay, backed by Universal Music Group and Sony Entertainment. Both services offered a limited ability to stream and download music to one’s own personal device. 
Neither platform lasted very long but they did help establish some norms around music platforms, which would remain relevant in subsequent decades. The first being that each service was about $9.95, which, despite endless balking by record executives about declining average revenue per use (ARPU), holds as the standard rate for unlimited (yet legal) access to music. The second was that musicians suddenly saw their music appear on a platform where record labels were effectively giving away their work for free. Pressplay’s top-tier subscription ($19.95) only paid out $0.0023 per stream, which is less than half of both Apple Music or Spotify’s current payouts. There was a collective uproar from musicians claiming that they did not agree to the terms by which the service was being pushed onto them by record labels. Lawyers representing Dixie Chicks, Dr. Dre, No Doubt, and others threatened to sue and ultimately pulled their music off MusicNet and Pressplay. The lack of sustained energy put towards fighting record labels over proper payment helped eventually bring about the contemporary streaming record industry, which many artists view as simply not working. 
A brief respite from the post-ownership streaming model was the introduction of the Apple iTunes store. Although iTunes dominated the popular imagination of how to consume music and offered a slight reprieve to dramatically declining record sales in the 2000s and into the 2010s, it was an ineffective stopgap for major labels. Where iTunes and legalized for-pay download stores like Bandcamp provided an acceptable (even if not always ideal) platform for smaller labels, that would’ve never found a real home in record stores, which were on the decline during these years. Major labels only saw declining profits and iTunes did not provide the revenue to offset what was being lost from the CD bubble burst. That’s when the emergence of Spotify, YouTube, and many others in the second half of the 2000s provided another chance to retry the product platform, now financed by venture capital-backed tech firms. 
Product platforms for artists kept reintroducing the issue of mediocre pay for their labor. Artists understood this with MusicNet and Pressplay, but when working through tech platforms, major labels were able to distance themselves from such accusations. Major labels made deals with tech platforms and therefore any frustrations with low payments, felt by both artists and labels, were pointed towards the tech platforms rather than the label deals. An outgrowth of this odd tango was Vevo, a music video platform created by major labels in 2009 to explicitly gain better advertisements for their content. No matter the product platform, this system continued to result in the same winners and losers with smaller artists not being compensated enough, major artists reaping the rewards, and record labels collecting most of the money regardless. 
In 2018, music industry research company BuzzAngle Music, now owned by the Penske Media Corporation (which also owns Rolling Stone), published a report examining music consumption habits in the United States. The report showed that the top 10% of albums consumed accounted for 95.1% of total sales, a stat that was even more skewed as the bottom 90% of albums only accounted for 0.8% of total streams. The immense inequality gap within music is what inspired the late author Alan B. Krueger to write his book Rockonomics, which showed that the music industry magnified broader American trends where the most successful became more successful to the detriment of others. Kruger notably critiques former Wired contributor Chris Anderson, who wrote the book The Long Tail, in which he theorized that the internet would allow for a great equalization for creators. The research of Krueger and many others shows that in fact the internet’s only further reproduced massive inequality, particularly within the record industry. 
An artist’s income per stream varies across streaming services but one consistent pattern that was first seen with Pandora and YouTube, then repeated with Spotify, is that as these companies grow, the amount of money paid out to artists decreases. That a majority of streaming profits are only funneling back towards music’s top performers offers little reason to obsess over reforming new digital systems, since such platforms only further reinforce musician inequality. The product platform in music finally won the battle against musicians. The start of the decade opened up with artists fighting over music streaming platforms that refused to pay out enough money and, a couple of decades later, the problem is unchanged. The problematic players simply switched uniforms. 
Unheard Labor
Last week a number of artists (Speedy Ortiz, Downtown Boys) pulled their catalog from Amazon Music as part of the No Music For ICE campaign. Obviously, this is good; Amazon’s continued work with ICE and poor working conditions have seen increased resistance from various workers and activists across the world over the last year, and hopefully protests will be sustained. Also, the American Federation of Musicians arrived at a two year deal with the Alliance of Motion Picture and Television Producers, which didn’t achieve the important goal of increased compensation from streaming royalties. Hopefully, the union can be better prepared to continue the fight for increased royalties for its members in the coming years.
6 Links 2 Read
I disagree with the premise of this article, because Spotify’s problem isn’t TikTok; it’s simply that Spotify continues to be surrounded by massive companies that can treat streaming music as a massive loss leader without blinking. The prospect of a TikTok streaming service eating at Spotify’s global reach is interesting (and totally in line with historical trends), but the real reason for concern is the fact that the Swedish company can’t just bleed money. 
The amount of paranoia around TikTok is truly maddening but the music industry appears to desperately want more of the TikTok pie, so this should be a fun trend to watch. 
Last year for Slate, I wrote about Taylor Swift in regards to her then-recent signing to Universal Music Group and how it provided a slight uplift to artists on the label. The piece was done with a slight wink, but I’ll admit that seeing Taylor Swift fans dig up dirt on a private equity firm is hard not to relish. 
Just so we’re clear: Tencent owning part of Universal Music Group, while Tencent Music itself is owned by Sony/ATV, is comically absurd. So, I would certainly welcome any rocks thrown to potentially interrupt this deal. 
I spent quite a bit of time last year hypothesizing that Spotify’s business would struggle in India. I can’t say I don’t feel a bit better about that prediction right now. 
Platforms Don’t Exist - Metal Machine Music 
Not explicitly about music, but a nice opportunity to think about the implications of platforms and reconsider how we might better approach issues within tech.
My name is David Turner and I started Penny Fractions back in November 2017, as a way to think through various topics within the world of music streaming. Since then, the newsletter, which is delivered every Wednesday morning (EST), has grown to reach over twenty-four hundred subscribers with an archive that can be found right here. I’m currently a Curation Analyst at SoundCloud, so all thoughts here represent me, not my employer. Prior to this I wrote for Music Business Worldwide, Pitchfork, the New Yorker, Noisey, Rolling Stone, and Spin. I also create content on Patreon to help cover email billing costs and to compensate my copy editors, Mariana Carvalho and Taylor Curry. The artwork is by graphic designer Kurt Woerpel whose work can be found here. My personal website is davidturner.work. Any comments or concerns can be sent to pennyfractions@gmail.com.
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