There are only a few major western cell phone providers and only a handful of music streaming companies. What is one of the most basic things that people do with a smartphone? Play music
. Instead of letting your consumers choose what platform they wanna stream music make that choice for them. The market for music streaming instead of pushing into wildly different and unique services, nearly all of them followed the Spotify model. A model built from a company that received early investment from the major labels and its been heavily reported still hold a fairly strong grip on what music is and isn’t promoted on the platform—occasional moments of drama aside
. The differences between these platforms is mostly observed by music obsessives. If a music service is folded into a phone bill will average consumers care about what service gives them the latest Migos track? I’d guess no.
Sprint buying Tidal, at this point feels like a when not an if. Last year Pandora introduced the ability to play individual songs
instead of their beloved radio feature, which appeared to be less of a play for consumer rather than adding another feature for a potential suitor to show “We (Pandora) can also play the Spotify game.” Rumors swirled around Samsung and Tidal a couple years back
, but if you’re Samsung the clear winner in this market is Spotify.
This potential outcome is what I started to wrestle with in my Music Business Worldwide piece where the companies in the end who benefit the least from this consolidation are the music labels themselves. When cell phone companies and music streamings services are potentially one and the same labels will hold almost no leverage at the negotiation table. That’s why I was intrigued these two quotes from a recent MBW story
on current label relationships with Spotify (emphasis mine):
“We’re always, always looking at Spotify’s free tier,” one major label source tells MBW. “If we pulled it completely, we might lose [a nine-figure sum] each year. But would that mean that subscription revenue would actually grow at a stronger rate? It’s an ongoing debate.”
“We’ve re-thought the charts [to give better weighting to premium streams] and we may do so again; there is a strong argument to eradicate ‘free’ from the charts entirely. It’s not just about volume of streams anymore – per-stream [royalty] rates are considerably better on Apple Music.”
Let’s make a little jump and say within five years every music streaming platform is either owned by a cell phone company or major tech company. How will labels measure success? Certainly not subscribers but simply by how much money is being generated by the platform. My hunch is that subscribers served to be a strong placeholder for how success this for pay model of music streaming might work and the result appear to be fairly clear in the United States/western countries its working and so labels are shifting priorities. Once a Spotify payment is just tucked into a phone plan then what will labels raise ire over: royalty rates.
I’ll step back out of music for a second, because this scenario is playing out in a different manner with film and television. Massive consolidation is happening across that industry, while at the same time a company like Netflix is spending billions to keep pumping out new content. The number of companies feels similar to music with Amazon, Apple, Disney, Hulu, Netflix, and a couple other more niche companies in the mix. This can work in television where consumers are used to paying for blocks of content but doesn’t smoothly translate to catalog music.
Music streaming works partly because of abundance, not niches. Bandcamp, SoundCloud, MixCloud, and other services cater to markets who might be okay with catalog gaps but phone companies aren’t partnering up with music streaming to service SoundCloud rappers. Instead these companies are attempting to become one-stop shops that provide the technical means for content consumption and also the providers of that content. The only issue is that while these major phone and tech companies can attempt to spend billions of dollars to produce television and film content that isn’t an option within music. They must rely on major labels and thus they must reply on the relatively few music streaming platforms that hold deals with major labels. The most popular music streaming services are morphing into awkward buffers for these larger companies to simply gain access to music. Do any of these massive shifts in wealth meaningfully trickle down to the average musician? I’m sure you know the answer.