Which kinds of music are encouraged by streaming vs. downloads?

by on January 22, 2014 at 1:59 am in Economics, Music | Permalink

Let’s compare iTunes downloads to a mythical perfect streaming service which lets you listen to everything for a fixed fee each month or sometimes even for free. In the interests of analytical clarity, I will oversimplify some of the actual pricing schemes associated with streaming and consider them in their purest form.

Streaming seems to encourage the demand for variety, so the website vendor wants to make browsing seem really fun, perhaps more fun than the songs themselves.  (An alternative view is that the information produced by streaming services, and the recommendations, allow for in-depth exploration of genres and that outweighs the “greater ease of sampling of variety” effect.  Perhaps both effects can be true for varying groups of listeners with somehow the “middle level of variety-seeking left in the lurch, relatively speaking.)

The music creators are incentivized to create music which sounds very good on first approach.  Otherwise the listener just moves on to further browsing and doesn’t think about going to your concert or buying your album.

Streaming, with its extremely large menu, also means commonly consumed pieces will tend to be shorter or more easily broken into excerpts.  This will favor pop music and I think also opera, because of its arias.

Advertising is a more important revenue source for streaming than it is for downloads.  The music promoted by streaming services thus should contribute to the overall ambience and coolness of the site, and musicians who can meet that demand will find that their work is given more upfront attention.  It encourages music whose description evokes a response of “Oh, I’ve never had that before, I’d like to try it.”  Even if you don’t really care about it.

People who purchase advertised products are, on average, older than the people who purchase music.  Streaming services thus should slant product and product accessibility on the site toward the musical tastes of older people.

Since streaming divides up revenues among a greater number of artists, that should encourage solo performers with low capital costs, who can keep their (tiny) share all for themselves.  It also may require that the artists on streaming services can make a living or partial living giving concerts, even more so than under the previous world order.

This music industry source suggests that streaming boosts album sales in a way that downloads do not.  It also questions whether that boost will be long-lived, as streaming services take over more of the market.

When the marginal cost of more music is truly zero, does that make musical choices more or less socially influenced?

Hannah Karp shows that in the new world of streaming, mainstream radio stations are responding by playing the biggest hits over and over again.  Ad-supported media require the familiar song to grab and keep the attention of the listener.  Risk-aversion is increasing, which probably pushes some marginal listeners, who are interested in at least some degree of exploration, into further reliance on streaming.

The top 10 songs last year were played close to twice as much on the radio than they were 10 years ago, according to Mediabase, a division of Clear Channel Communications Inc. that tracks radio spins for all broadcasters. The most-played song last year, Robin Thicke’s “Blurred Lines,” aired 749,633 times in the 180 markets monitored by Mediabase. That is 2,053 times a day on average. The top song in 2003, “When I’m Gone” by 3 Doors Down, was played 442,160 times that year.

So the differing parts of the market are interdependent here.

What do you think?

Ray Lopez January 22, 2014 at 4:11 am

Didn’t somebody unkindly say TC makes the old look new again? Well this to me, an old boomer geezer, seems like “Payola” : TC: “Hannah Karp shows that in the new world of streaming, mainstream radio stations are responding by playing the biggest hits over and over again. ” One word: MADONNA.

But in fairness the survey is saying there’s even more rotation of new hits than before. That’s interesting. I think more interesting is that pop music is played so LOUD Apparently the youth like it that way. Including my 20 year old gf!

Check out on Youtube the BartBaker parody of “Blurred Lines” by R. Thicke, as well as Thicke’s X-rated version of the song, both recommended by amusical me.

OzAnon January 22, 2014 at 9:25 am

Me too. Enjoyed both – and I’ll add Lily Allen’s parody.

prior_approval January 22, 2014 at 4:21 am

Shouldn’t playlists from Youtube et al. be in the mix too? Not to mention a wide variety of other sources, where the music is not often (or at all – thanks, wfmu.org) inrterrupted by commercials?

Not to mention those who use technologies such as Bittorrent or USB sticks to acquire and distribute music, with their music player either going into random mode for ‘streaming’ their ‘libraries’ or playing ‘albums.’

‘When the marginal cost of more music is truly zero, does that make musical choices more or less socially influenced?’

See the point above about Youtube – ranking through views for pure influence in terms of mass popularity (Gangnam Style being a fine global example), or through playlists in terms of ‘YJ’ popularity – since ‘VJ’ was already taken back in the cable era at the dawn of MTV. Or through the dreaded viral channels, which so many sources are eager to create or manipulate.

‘Hannah Karp shows that in the new world of streaming, mainstream radio stations are responding by playing the biggest hits over and over again.’

Top 40 never went away, did it? Especially when you include that format’s always on permanent repeat cousin, the boomer rock station. And look, Top 40 is making a Clear Channel comeback, though it seems like the boomers are beginning to lose their grip.

But this point from the article, was strange – ‘that lets smartphone users listen to FM radio without draining their batteries or data plans.’ Don’t most (if maybe not all) American smart phones have a built in FM receiver for listening to the radio? This seems a basic feature for pretty much all but the most basic phones in Germany, much like how a large number of the better MP3 players also had a radio built in.

MP3 players – how is their market share doing these days? Strange how the recording industry has no desire to pay attention to whether a basic piece of music technology is expanding or declining in market share. Makes one wonder how they plan to get ahead of the curve when it comes to the smart phone, which just happens to be your MP3 player and your streaming device – and capable of copying and distributing files. At least in places where smartphones are used with Wifi instead of cell towers on a routine basis – Europe comes to mind (most smartphones are perfectly capable of acting like a laptop connected to a LAN here). Not to mention that such Wifi Internet data speeds are dramatically higher, even if the small screen doesn’t bring out the full HD experience.

agm January 23, 2014 at 5:00 am

Wifi yes. FM, no, not much so. It’s just not a big deal on phones in the US.

prior_approval January 22, 2014 at 4:43 am

I should add, where does one place something like the ‘Harlem Shake,’ which generated significant user participation and outpaced Gangnam style at Youtube. After all, the music industry in the broad sense made essentially no profit at all from it –

‘The Harlem Shake is an Internet meme in the form of a video in which a group of people perform a comedy sketch accompanied by a short excerpt from the song “Harlem Shake”. As a meme, the video was replicated by many people, using the same concept, and this rapidly led to it becoming viral in early February 2013,[2] with thousands of “Harlem Shake” videos being made and uploaded to YouTube every day at the height of its popularity.’

That is output which actually make the entertainment industry look a lot less significant in terms of volume. Including the fact a few of uploaded of those videos became hits, while others sank into insignificance.

‘On February 10, the upload rate of Harlem Shake videos reached 4,000 per day.[22] As of February 11, about 12,000 versions of the popular Internet meme had been uploaded to YouTube, garnering over 44 million unique views. By February 15, about 40,000 Harlem Shake videos had been uploaded, totalling 175 million views.[3]

Harlem Shake hit the 1 billion view mark on March 24, 2013, just 40 days after its first upload, according to Visible Measures. From the day when the first video was uploaded until it hit 1 billion views, the videos were accumulating an average of more than 20 million views a day. The time it took for Harlem Shake to hit 1 billion views is half the time “Gangnam Style” took hit 1 billion views and almost a sixth of the time that it took “Call Me Maybe”.[dubious – discuss][clarification needed] On April 4, Harlem Shake had 1.21 billion views.’

Not that commerce won’t adapt –

‘The success of Harlem Shake also highlights a change of direction for music rights holders. With the exception of a takedown notice issued when “established” artist Azealia Banks tried to upload her own version of the track,[37] Baauer and his label, Mad Decent records, instead made use of YouTube’s Content ID database to assert copyright over the fan-made videos and claim a proportion of advertising revenue in respect of each one.[9][37]

Gangnam Style, like other videos that preceded it, was a corporate, top-down traditional campaign. By contrast, the grassroots, bottom-up Harlem Shake has been described as a symbiotic viral meme,[19] where open culture and business coexist.[37] The short length of the video, 31 seconds in most cases, impacts directly on the duration of advertisement that can precede it, which in turn limits advertising revenue’

http://en.wikipedia.org/wiki/Harlem_Shake_(meme)

Cloudyip January 22, 2014 at 7:36 am

I guess streaming would also encourage foreign language songs as well

Z January 22, 2014 at 7:37 am

I like the thought experiment, but we’re missing some bits. If we are looking at how the profit motive impacts commercial radio and the content creators, we also have to look at the profit motives of the streaming services. To date, no one is making money streaming. A company cannot keep burning through cash forever. These services must address their losses and one easy way to do that is limit the selection of songs they offer.

Then there is the other piece. The popular creators are not making the same money as they used to in the bad old days. The downstream guys have seen a boost as it is easier for customers to get their product, but it has come out of the pockets of the top sellers. History says that won’t last. At some point, the big acts will try to choke off the pipe to claw back profits.

Corey January 22, 2014 at 7:48 am

You forgot to mention Grooveshark.

You search for songs you like, queue up a few that match your mood that day, and then start a “radio” station from those picks. Grooveshark automatically queues up more songs based on some algorithm and your existing choices. It really works. They show suggestions when you start up the home page the next time too, based on your history. I never waste time with any other site.

Two things: 1) Grooveshark is under attack by the record labels because they use uploaded music. 2) Sometimes a song is labeled as though it were the original song (IE: A Hard Day’s Night by the Beatles) but is actually some amateur version.

Every time I go to Grooveshark to listen to what I want to listen to I think to myself “if I could pay $10 a month or $20 a month to have this legally I would so totally do that”. Legal would mean a full library and also would mean I could trust the songs were the originals. The volume level of the songs would be uniform as well, which can sometimes be jarring.

But of course you cannot have that. As usual the labels are so busy taking grandmothers to court they didn’t bother making a pretty straightforward service people would buy.

So I continue to wait for that and enjoy Grooveshark in spite of its imperfections for now.

Nate January 22, 2014 at 8:17 am

>“if I could pay $10 a month or $20 a month to have this legally I would so totally do that”. Legal would mean a full library and also would mean I could trust the songs were the originals. The volume level of the songs would be uniform as well, which can sometimes be jarring.

That is available, pandora.com. Of course there are limitations, ie, limited to 6 song skips per hour, and you can’t pick a specific song, but it’s damn good for mood/taste streaming. Spotify is best for specific album/song streaming, as well as youtube.

Z January 22, 2014 at 9:09 am

I’ve been on Pandora since the beginning. Their algorithm works amazingly well. I pat the $50 a year for it so I don’t have to listen to commercials. Too bad they will probably fold soon.

Turkey Vulture January 22, 2014 at 10:12 am

Pandora has been great for introducing me to new bands that I have ended up liking. I had been stuck listening to the same stuff for years. Now I’m back to having some new sounds added to the mix – both new to me and actually new. I hope they find a way to survive.

LemmusLemmus January 22, 2014 at 8:32 am

Spotify offers the same service (in collaboration with last.fm, at least here in Germany).

Turkey Vulture January 22, 2014 at 10:15 am

But also with the ability to entirely pick the specific songs you want to hear, which is great. I’ve mostly used Pandora to find new music, and Spotify to listen to music I already know I like.

Rahul January 22, 2014 at 8:39 am

There’s a limit to the richness of valid conclusions that may be drawn from a purely qualitative, non-empirical, thought experiment. The analysis in this blog post probably comes close to or transcends that limit.

Sam January 22, 2014 at 8:49 am

I do a lot of streaming using soundcloud and I don’t think you could be more wrong about the medium favouring shorter pop songs. I see those songs as the product of radio days when a hook had to grab you hard because once the song disappeared you couldn’t retrieve it.

When I stream I almost always end up playing jazz, blues and classical, whereas most of my downloading is alt rock (FYI I’m 22). Streaming let’s long genres thrive because you’re not burdened by the large file size and because a stream gives a continuous quality to your listening, as if all the music blends together into a personalized symphony. So I see those genres making a come back from demand pull. On the supply side, soundcloud makes it abundantly clear that streaming services generate high volumes of independent hip hop and electronic — music that is relatively quick and easy to produce. Thus until you learn sound clouds layout you’ll be hearing a hip hop remix every other track. There’s a big community aspect behind this music creation as well.

Finally, I don’t think the advertising will be targeted at particular demographics. The data of what music you like will be enough for highly personalized ads that work on any age group. Nonetheless I see ad revenues as being minimal. Most revenue will come from offline sources like merch and touring. Online revenues will come from voluntary donations that a-have signal value and b-make you feel personally connected to the artist. I’m thinking of something like patreon.com where you can pledge a dollar or more for every new track your favourite artist releases and the artist can give kickstarter like prizes based on the donation size. That’s my hope at least.

Albigensian January 23, 2014 at 2:57 pm

Streaming could encourage a “long tail” effect, just as Amazon has compared with brick-and-mortar record and book stores. Less popular types of music (e.g. jazz, blues and classical) should become more available than ever, and at some who try them out will find they like what they hear.

Although in the end the survival of streaming all depends on the copyright owners willingness to license content to the streaming services at a price they can afford. If customers can’t find what they want to hear they’ll think again about using the service.

Dan Weber January 22, 2014 at 9:03 am

Some of my favorite music is stuff that I didn’t like at all the first few times I heard them. I hope we don’t lose that.

Matt January 22, 2014 at 11:47 am

I agree, and was going to post something similar.

The digitization of music seems to almost uniformly disfavor subtlety and depth. The most obvious example is that it has killed the concept of an album, which previously allowed multiple songs to complement each other and work as parts of a more complex whole. Also, as Tyler points out, shorter songs with instant, superficial appeal benefit from the new formats. It’s somewhat snobbish to make these points, and digital music also brings lots of benefits, but there are definitely some drawbacks.

J. Bang January 22, 2014 at 9:40 am

So what?
Substitute “streaming” with “radio” and “downloads” with “albums” and this same thing could have been (has been?) observed for the last several decades!

Tom N. January 22, 2014 at 11:06 am

For $9.99/mo I have unlimited streaming and downloading to mobile devices/tablets (albeit no ripping, but who does that these days anyway) via Spotify. Spotify offers tiered plans: ad-supported, desktop and radio-style for Free, $4.99/mo no-ad desktop and radio-style, $9.99/mo premium with no ads, unlimited downloads and playlist creation on all devices for offline play.

I would wonder about the diversity in song choices by consumers when looking at pay-per-download services like iTunes vs flat-rate streaming like Spotify. I can get all the songs I could obtain through iTunes and listen to them on my laptop and phone, like I would iTunes. However, there is no risk in me ‘trying’ new songs and genres. I am not charged anything additional to experience new music. I feel like iTunes may pigeon-hole consumers into ‘safe’ choices because they are charged for each song. Services like Spotify allows for branching out with no penalty, potentially exposing consumers to new artists.

While experimenting via Spotify does not directly pay the artists very much, it seems as though record sales are not the cash cow everyone thinks they are, from ABC NEWS: “Performers frequently moan about never seeing a royalty check from their record label, no matter how many discs they sell. But a top concert draw can take home 35 percent of the night’s gate and up to 50 percent of the dollar flow from merchandise sold at the show. The labels get none of it. ‘The top 10 percent of artists make money selling records. The rest go on tour,’ says Scott Welch, who manages singers Alanis Morissette and LeAnn Rimes.”
http://abcnews.go.com/Business/story?id=86535&page=2

In closing, I think streaming has a promising future. Subscription services, coupled with ad revenue provides money for the service to pay royalties to the record labels AND it creates a lower barrier to entry for more obscure acts, potentially increasing the breadth of artists a listening community may be exposed to.

Sean P. January 22, 2014 at 11:07 am

I don’t think the people who run streaming services really care if I discover any new music through them. I’ve given Spotify a huge amount of information about the music I like and all I get in return is untargeted advertising and vaguely-targeted recommendations (often overlapping with the music already in my library) based on the last five or six songs I played. Is it really that hard?

Dan January 22, 2014 at 1:44 pm

Yes, it is really that hard. Not being facetious, getting a computer program to do anything close to what you want it to do, recognise what semi-abstract thing it is you want, is brutally, frustratingly difficult.

uffs January 22, 2014 at 2:46 pm

It can’t be all that difficult as Bandisintown does a fairly excellent job of it.

Daniel Couper January 22, 2014 at 5:28 pm

Ah, I assume you’re talking about that the tiny one-man ran-out-of a rickety garage Bandisintown, rather than the one with the multi-million-dollar value that uses its access to larger sets of specific data than Spotify to give recommendations for sets of things that are, by their geographic nature, extremely limited in quantity and specificity?

Come to think of it, how come Spotify search isn’t as good as Google? Jeez

Sean P. January 22, 2014 at 7:42 pm

Developing a good recommendation algorithm is difficult, but I have no sympathy for a company that finds it useful to recommend Miley Cyrus and the Notorious B.I.G. to me despite the complete lack of top 40 pop or 90s hip-hop in my streaming history or music library

(Admittedly, they probably get a huge amount of junk data given how many people just use the service to listen to stuff they specifically wouldn’t want to own or even hear more than once. That still doesn’t excuse Miley Cyrus, though.).

Matt January 22, 2014 at 11:44 am

Surely Spotify has contributed to nostalgia binges. Go to artist, listen to top hit (usually only one they had), go to “related artists”, find other One Hit Wonder band you remember, repeat. I can’t be the only one that does this. The idea of actually buying all of these silly songs is completely absurd, but streaming them? I can do that.

Doug January 22, 2014 at 1:43 pm

“Since streaming divides up revenues among a greater number of artists, that should encourage solo performers with low capital costs, who can keep their (tiny) share all for themselves.”

Isn’t this just a way of increasing music-labor productivity. Pushing musicians to create the same output with one person (and probably a generous helping of computer software and mixing) that used to take three to five people. Average Is Over applied to musicians.

Max January 23, 2014 at 10:05 am

“The music creators are incentivized to create music which sounds very good on first approach.”
-Silly. No music creator is trying to make music that sounds average or bad on first approach. Nothing to do with streaming vs download.

I’m the co-founder of UndergroundMusic.fm. I believe the downloading paradigm will be completely gone in 5 years. It simply no longer makes sense for every individual to manage duplicative libraries of the same music given the capabilities of the cloud. The downloading model is being unnaturally perpetuated by Apple / iTunes for obvious reasons.

ZJSimon January 23, 2014 at 12:40 pm

Thank you for trying to inject some science into the music industry debate, a solipsistic quagmire between heartless pimps and hipsters for a generation now.

The horror, the terror, the obstacle to encouraging musicians to make a living as such, is and has always been the hipsters, not the pimps. Pimps cannot be taught, only discouraged, but every hipster is just a lazy or burnt out intellectual. They can be encouraged to share their joy, risk exposing it, rather than posture at the unfeeling punching bag of ‘corporate music’. Streaming can do that because streaming will give them the world in a big enough bite that they won’t be able to whine through the mouthful. It will give them the novel and the sublime that they need to stave off the existential dread that comes from being outbred by the laborers and pimps for millennia.

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