Apple just announced they’ll be launching spatial and lossless audio, at no extra cost, to all Apple Music subscribers starting in June. Seemingly in response, Amazon announced that they’ll be folding their lossless quality tier into the standard Amazon Music subscription tier. Lossless quality music is $9.99 now.
Amazon & Apple are not music companies
Neither Amazon nor Apple need to make money with their music businesses. They utilize these aspects for greater ecosystem tie-in and can afford to use music as a loss leader. Not even considering Apple’s iPhone, App Store or MacBook business… Apple’s revenue for their Airpods equals the revenue of Spotify, Twitter, Snap, and Shopify combined (2019).
Another analyst puts the 2019 revenue for Airpods at $7.5 billion, rather than $12 billion. Still enormous. Airpods are becoming a platform. With its iTunes Store it sought to get more people on the iPod, which created a consumer lock-in that extended to the iPhone and the App Store. Steve Jobs‘ deal terms for iTunes also had a profound effect on the economics of music – laying the foundation for many of today’s discussions.
Lossless as a loss leader
Unless Apple and Amazon signed some very unique deals with labels, lossless streaming comes at a higher price than standard quality. That means that for now, Apple and Amazon are deciding to eat the cost in order to tie more people into their ecosystems. Amazon was previously criticized for this in 2011, subsidizingLady Gaga‘s album sales of Born This Way by discounting it to $0.99:
“The digital retailer used the album as a loss leader to promote their Cloud Drive storage service and paid Gaga’s label full wholesale price for each album sold.”
Apple has been taking aim at Spotify since the launch of Apple Music. That started with rhetoric around how human curation is better than algorithms. More recently it took the form of a letter to artists about Apple Music’s royalty rates. Spotify’s antitrust complaints in the EU about Apple’s App Store practices means Apple faces fines as high as $27 billion. Spotify announced they have a lossless tier coming up later this year. Most people assumed this would come at an extra cost. Apple’s decision to use their $200B war chest to eat the cost of lossless quality audio is very much a move against Spotify.
Growing the pie – undermined?
Spotify had the courage to move first and start increasing prices of its existing tiers. Streaming subscription prices have long been stuck at the same price, losing 26% of value due to inflation. The market has become mature enough to raise prices and that’s something that needs to be normalized in a way similar to Netflix’ price hikes.
Apple & Amazon’s strategy puts that at risk. Two questions to ponder: is music currently sustainable with so many companies relying on revenues from streaming services that are making a loss and are subsidized by tech giants or investors? Can this digital music landscape be sustainable without asking consumers for a fairer price?
“Perhaps hi-res music’s true value in streaming will be to enable the big DSPs to charge all their subscribers another dollar or two a month, rather than just to persuade a small fraction of them to pay five dollars more a month. If that strategy pays off, today’s news will have been a positive moment indeed.”
I’m less optimistic and think that if this was the strategy, they would have paired the news with a price hike. This is about ecosystem tie-in and hitting Spotify where it hurts in a way that’s likely to impair efforts to normalize fairer subscription pricing.
Sachetization comes from the fast-moving consumer goods industry and refers to the bite-size packaging – e.g. one biscuit, or 15ml shampoo – of goods that used to be available only in bigger, and thus more expensive, packages. Music consumption has seen a little bit of sachetization, but there is significant growth to be had if platforms and services will pick up this strategy more broadly. Two things triggered me to think about sachetization and music consumption:
The continuing battle between Apple and Spotify. On the one hand, there’s the message from the former about their one penny per stream rate. On the other hand there’s the direct podcast subscriptions. While both deserve analysis and provide learnings for musicians, labels, and platforms alike a focus on either of these isn’t going to help grow ‘the pie’ of music revenues.
In Spotify’s latest quarterly results we see ARPU (average revenue per user) dropping again. Mark Mulliganreckons that even with the proposed price increased Spotify’s ARPU will still go down in 2021. More broadly, MBW recently calculated that overall ARPU for all music streaming services dropped 8.8% in 2020. In other words, subscription revenue is dropping due to things such as family plans and marketing combinations (FortniteCrew with 3 months of Spotify anyone?). Another big reason, however, is the lowering of prices in new markets, including the sachetized India. Instead of lowering overall subscription prices, music streaming services – and others – need to consider sachetizing their products.
From India to Nigeria: lessons in sachetization
The thinking behind sachetization often revolves around creating something that offers people who can’t afford something that very thing in a small dose. As such, the discourse surrounding sachetization veers towards talking about countries where the mechanism is popular as poor economies. While I won’t argue against it, I do think that focus misses out on the opportunities. Two examples will help me illustrate this.
Micro-credit in India
India is a big country with a lot of inhabitants. Many of these people are not formally employed. This does not mean they don’t have an income, but it does mean that the banking and credit system does not recognize their earnings. It’s for this reason that Viral Acharya, professor of economics at NYU-Stern, has argued for the sachetization of finance in India. One example he offered to explain its necessity in the FT article is that of a farmer. Instead of demanding a loan to this farmer to be repaid in regular monthly installments misses the point of them only earning money during the harvest. The example is meant to show that each person has its own cash-flow situation and requires a credit that reflects this specific circumstance.
The Reserve Bank of India has set out regulations to support this. In a talk Acharya delivered at Bombay Tech Fest in 2018 he argued that the public credit registry allows people to build up a reputation and the trust of lenders. Sachetizing credit thus means to create a specific set of circumstances that allows people to enter who would normally sit outside the formal credit market. In a way, it allows people to get a leg up, a first step onto a ladder, or a way to finance what they aspire to.
There’s a lot to be said by the argument put forward in this tweet. Nairametrics, for example, see sachetization as innovation around poverty. And yet, there’s a lot of people to be reached by offering sachets instead of fullblown products. The examples in Nigeria are plenty and move from FMCGs to fin-tech and entertainment. When it works, it’s because it deletes what Efosa Ojomo calls nonconsumption.
Nonconsumption is the inability of an entity (person or organization) to purchase and use (consume) a product or service required to fulfill an important Job to Be Done. This inability to purchase can arise from the product’s cost, inconvenience and complexity, along with a host of other factors—none of which tend to be limitations for the rich, skilled, and powerful in society.
There’s a different reason to tackle nonconsumption: aspiration. M-KOPA in a Kenyan company that offers smartphones, and other products, by letting people pay in installments. The smartphone is then used by the company to track the financials of the user and, for example, unlock or lock certain URLs or payments. In the end, all of these types of services of sachetization in terms of pay-as-you-go and repay-as-you-can.
The opportunity for music
The whole idea of sachetization is to grow the number of people that can afford your product or service. There are different ways to do this for music businesses and they all don’t involve simply lowering your price for the full offer. Some of these will look like strategies used more widely around the world while others will hark back to old methods.
pay-as-you-go in the form of opening a music streaming service and paying only when you use it. For example, per minute, per song, etc.
pay-as-you-go in the form of passes. For example for a day, an hour, an album, etc.
there’s a lot to learn from gaming (the idea of the pass in the previous bullet point harks back to Bas’ 2016 article about gaming industry lessons). One of them is to work together with payment structures that gamers are used to. Razer Gold is one such option. A popular method for gamers to buy both games and in-game content. It’s not difficult to imagine a streaming service stepping into a partnership and offering limited access to certain playlists in-game.
The tactics of sachetization aren’t just for music streaming services. It’s also possible to step in at artist level through, for example, tipping. Centipenny is one example where people can work with micropayments that can go as low as, you guessed it, a penny. Users can top-up their account with small amounts and artists can include a widget, poll, mini paywall, etc. to receive funds.
Sachetization of music consumption is more than innovation for the poor. It’s real opportunity to increase the total number of people paying for music directly. Moreover, it does so on their terms instead of on those set by the major platforms.
Spotify often gets contrasted with Bandcamp in order to explain the challenges of the music streaming landscape: low per-stream royalties versus much larger commissions on sales. The intensity of that discussion has moved all eyes from the actual one-to-watch, which is not Spotify, but YouTube – a service with a billion monthly active music listeners and 30 million subscribers.
Always has been
YouTube has of course long been on everyone’s radar due to the so-called ‘value gap’: the disparity between what YouTube was willing to pay for music & its perceived real market value. As the biggest music platform, YouTube was infamous for its low per-stream rates which, on average, are significantly lower than Spotify’s for music identified through its ContentID system (source). I chose to phrase things in past tense due to attention shifting to Spotify, but that does not mean rightsholders have found these issues to have been resolved.
Another concern is the power of YouTube and its mother companies Google and Alphabet, which is a common reason for complaints from music industry lobbyists about having imbalanced negotiations. Before I go into why I think YouTube is making all the right moves: the concentration of power towards tech monopolies is of big concern for me too (it’s why I deleted or deactivated my accounts on Facebook, Instagram, and WhatsApp). Keep this in mind when developing a strategy: always diversify, never put your eggs in one basket, and make sure you create ways to go direct-to-fan (e.g. collect phone numbers, email addresses, build communities).
YouTube’s evolution as a creator service
Google’s video service has long had something of great strategic value: not music. I mean that literally: it’s had content and creators that were not doing music. This has meant less complexities around licensing (but also poorer representation for creatives) and has allowed YouTube to experiment with new models.
The same is happening now with podcasts at Spotify and user-centric streaming payments at SoundCloud. Having ‘user-generated content’ from unsigned artists allowed SoundCloud to start trialing its ‘fan-powered royalty‘ model without every rightsholder having to opt-in through contract negotiations. Meanwhile Spotify is exploring new monetization models around podcasts, like paid podcast subscriptions. As a relatively new medium, podcasts don’t yet have the legal and political complexities associated with intellectual property in music.
YouTube & the next layer
Streaming is a base layer for music monetization. It’s shallow in that it leverages nothing but the relation between listener and catalogue. Monetization is driven by factors like accessibility (e.g. all devices, price), portability (e.g. offline) and convenience (e.g. catalogue size, search, recommendations). It’s absolutely basic: it’s not about the relation between fan and artist, it’s not about the quality of the art or music, it’s just about having the largest and most convenient store where you can access everything by paying from a magic wallet with your costs predictably capped at $10 per month. It’s a subscription business, not a music business – as Tim Westergren (founder of Pandora and now livestreaming service Sessions) also pointed out in my recent interview with him during Karajan Music Tech.
This base layer has advantages: it generates a huge amount of money for rightsholders and creates a foundational data layer which can be used to connect listeners to new artists and music or could be leveraged to learn more about existing fans and get new music to them. But streaming was never supposed to be the future of the music economy. It needs additional layers on top.
One of these layers is the Interaction Layer. This layer has been thriving during the pandemic thanks to a particular medium: livestreams. Livestreams encourage interactivity: fans can be exposed to each other in chats and the chat functionality can make fans feel like they’re seen by the artist(s) they care about so much. That means there’s value being created beyond simple music access. Value means opportunity to monetize and YouTube has seized that opportunity.
Through its Super Sticker and Super Chat features, YouTube allows creators to monetize their livestreams. Super Stickers are big, fun and quirky custom emoji that appear in the chat in exchange for a small fee. Super Chat allows viewers to highlight and pin a message for a certain duration of time, depending on how much they pay. In the first months of the pandemic lockdowns, from March to June 2020, over 2 million new users spent money on these features.
The second feature that provides an additional layer is channel memberships. This allows creators to created limited edition content, similar to what they might offer on Patreon or a SFW OnlyFans. At smaller numbers, it even allows them to create semi-bespoke content.
Layer integration
These features allow creators to monetize and connect with fans where they already are: YouTube (as opposed to onboarding them to Patreon or OnlyFans). This is the important distinction. These monetization options are not novel in and of themselves – many of them have been around for years or even decades. The important development is that these experience and monetization layers are integrating. Moving fans around various platforms causes friction, which means you won’t be able to convert everyone down the funnel from the streaming layer. It also keeps the data in one place instead of fracturing it.
Over the next years we’re going to see many examples of artists successfully building models on layers that sit on top of streaming. YouTube is going to play a significant role in that. The conversation will move from leveraging streaming (still essential for discovery & connection to wider audience) to interaction & bespoke options.
Another service to watch in this space is Amazon Music, which is slowly expanding their integration of livestreams from Twitch (another Amazon company, which also allows micropayments and memberships like YouTube).
Livestreams mean original content and a different set of rights than what you negotiate for on-demand streaming. This has given YouTube and Amazon the flexibility to experiment with these new layers. Spotify’s business strategy has introduced similar functionality to podcasts, but will they be able to do the same for music given the complexities of licensing and the various rightsholders that will want a piece of the pie?
The music streaming landscape is in flux and it’s not about Apple Music vs Spotify or Spotify vs Bandcamp anymore.
A special thanks to Vickie Nauman for some of the inspiration for this piece and to c/o pop and Germany’s association for independent music (VUT) for having us on a panel last week.
Scams, fraud, bots and theft: the ugly side of streaming provides a stark contrast to that beautiful feeling of having the world’s recorded music at your fingertips.
What is Two-Factor Authentication (2FA)
You are already using 2FA. Certain accounts, like Google, Facebook, or Apple, require multiple forms of authentication in order to sign in from a new device. This often works by verifying it’s you from another device, or by entering a code sent to your phone number, email address, or generated in an authenticator app.
It adds a layer of security to accounts that makes it hard to get in with just the username and password.
Why don’t streaming services use 2FA?
Popular streaming services like Spotify and Netflix famously don’t use 2FA, although the latter has recently started running tests with it, presumably to tackle account sharing. The reason for not implementing 2FA? Likely because it doesn’t help growth and in fact may hamper conversion rates.
Jorge Castro on developer community dev.to sums it up well through this fictional conversation:
Developers: We want to implement 2FA in our platform.
Netflix executes: Ok, and how much will it cost us?
Developers: Around two months.
Netflix executives: Ok, and it will increase the number of viewers?
Developers: Well, not really. It is about security.
Netflix executives: So, it will not increase the number of viewers but it could be a burden for some customers and it could decrease the number of viewers.
Developers: Yes, but it could be optional.
Netflix executives: So optional, an option that it plays against the number of viewers and it will cost us time (and money). Sorry but no.
Developers: But the security.
Netflix executives: We already invested in our security. If our customers have trouble then we could reset its password. It’s their responsibility, not ours.
However building in a little more friction could be beneficial to all… and tackle certain types of fraud more efficiently than a switch to user-centric streaming payments might.
Black market for streaming service accounts
For years, there has been a thriving market for streaming service accounts, with Spotify accounts selling for under a dollar. Many though not all of these are hacked. It’s so common that people commenting on their hackers’ music tastes has become somewhat of a meme and a quick search on Twitter pulls up countless examples.
This is not an issue that is exclusive to Spotify and Netflix, but there’s a high availability of examples since they are two of the most popular entertainment services without 2FA.
Fake plays, scams, and fraud
Just like it’s possible to buy ‘fake followers’ on social media, it’s possible to buy fake plays for streaming services. Jacking up the numbers can help to game the recommendation algorithm and build fake legitimacy for those looking closely at big numbers (but perhaps not closely enough).
Who cares if that is what someone wants to do? Well, everyone should, because it eats away at the pool of money distributed to all artists. Hackers have been gaming this system openly since at least 2013 in order to generate revenue.
An article by William Bedell from 2015 explains how he was able to do the same. At the time, not only did Spotify not use 2FA:
“There wasn’t even a CAPTCHA or email verification when creating accounts.”
Image by William Bedell.
The lack of better security leads to these types of fraud having to be traced & fixed retroactively, which often leads to streaming services taking music with fake plays down. That sounds good, but there are two issues: 1) we don’t know what percentage of fraud goes undetected, and 2) this opens up an attack vector (want your competitor’s music taken down? Just boost it with fake streams).
Audius (primer article), a new streaming platform and protocol that awards people tokens (called $AUDIO) based on their participation, is also running into this issue. Bots are used on the platform to game the system and get music into the charts. This messes with the platform’s weekly reward system, as WeirdCityRecords on Reddit points out:
“Curators have been robbed by bot users almost every week since the rewards inception (not only in terms of $audio but engagement being buried below bots), and now with a song being clearly botted to #1, it seems like this week 1 artist or possibly more will be deprived as well.”
The track accused of being ‘botted’ to the top outperforms the #2 by over 14 times, despite the artist and account being new to the platform and seemingly not having a significant presence on other music platforms.
Two-factor authentication would make it a lot harder to create loads of accounts like in the examples above, especially if you limit to 1 account per phone number.
Report fraud
Recently, I became familiar with another scam. Unfortunately that was due to falling victim to it on Spotify, though it may also exist on other platforms.
Botnets get employed to report people’s playlists for inappropriate content. This results in the playlist title and description being taken down. Bada-bing bada-boom: it is now easier to be the #1 search result for those same terms on Spotify.
Hi Bas! Your playlists are targets of botted attacks that report your playlists with false motives to keep them from appearing in search results. These atracks are going on for many months now and Spotify still has not implemented a solution.
As soon as I reported the erroneous report to Spotify and had them restore the playlist title and description, the botnet took it down again. This repeated half a dozen times over 2 weeks with my playlist existing without a title or description for the majority of the time.
I’m not alone in this and have found various playlists that also seem to be suffering from this issue (click here for an example if you’re curious about Romanian Manele music and here for GTA’s excellent soundtrack). This thread in Spotify’s support forums has other users reporting the issue.
The attack seems to have ended, but I almost gave up restoring my playlist every time it got taken down (I did consider writing a script that would auto-reply to Spotify’s takedown emails, though).
Since playlists are user-generated content, Spotify needs some type of system to deal with reports and make sure content that goes against the terms & conditions is taken down. After the 5th time my playlist got taken down and I asked if they could protect my playlist from the next auto-takedown, I got this answer:
“All user-created content can be reported, and while it may be possible that a report is invalid, all such reports need to go through our official report channel so we can handle them properly.”
So that’s a no. This means that anyone building playlists on Spotify with an unverified account can fall victim to this. Sure, the reporting account may get banned, but if it’s a botnet targeting you that doesn’t matter. That’s problematic, because unlike my hobbyist playlist with 100 followers, there are curation brands and artists with playlists that depend heavily on Spotify. They’re all exposed to this type of attack that seems to rely on either hacked accounts or easily-created free accounts.
Investment without security
People around the world are putting hours of effort into their streaming accounts: building playlists, followings, brands and in some cases companies using their presence. They’re exposed to insecurity.
Even accounts on platforms with better security get hacked, e.g. to misuse the trust someone has built up and run a cryptocurrency scam on followers (as fellow music-tech writer Cherie Hurecently became a victim of on Twitter, which besides Audius and the report fraud above was my third prompt for writing this piece).
Even if a streaming service can reinstate an account after a hack: the hack can damage your brand, e.g. if the hacker changes playlist titles and imagery to something offensive or scams, or just makes it impossible for you to keep running your playlist brand due to repeated reporting. If you enjoy services’ algorithmic recommendations, a hacker’s temporary account takeover can mess that up for you also.
Two-factor authentication is a basic standard for security. Maybe it’s time for streaming services to give it some priority and prevent fraud, scams, and theft.
Breathe in for 4 seconds, hold for 4 seconds, exhale for 4, pause for 4… Repeat.
When we think success, we tend to think big numbers. Most familiar examples of success have big numbers in common, especially those examples discussed around the world in newsletters and blogs like this one. The logical conclusion: success = big numbers.
Yet, when discussing success with musicians, I’ve found most would just be happy to make a difference to some people & be able to make a living off of it. If the goal is to make a living, then why does success necessarily involve racking up small amounts of royalties through thousands of plays until you finally have enough to make a living when combined with live gigs?
Our success maps are lousy. They’re based on highly visible examples of success which leads to a biased map. It also models strategy after something that worked in the past, but may not work as well now. If an artist achieved scale by cleverly playing the game of early-SoundCloud & the iTunes charts (Yellow Claw comes to mind) it’s impossible to copy that exact foundation since the context for the methodology has changed.
Breathe in, breathe out, think small
If the goal is to make a living, why bother playing the game of big numbers? Pitching playlists, building various social media profiles, gaming algorithms and spending countless hours on all that in the hope that the thousands of followers will translate into sufficient streams and bookings. It’s considered ‘the way’ to do it, but what if the goal can be achieved more efficiently on your own terms?
What does making a living mean for you? How much would you need monthly?
What do you enjoy doing? What would you like to have more time for?
How much time do you want to spend on your craft?
What do you dislike doing?
Take a moment (actually, take a week, or a month: this is your life we’re talking about). Breathe. Reflect. Define your goals by what you want, not by what you think is needed. Is having hundreds of thousands of fans a fun goal or is it actually methodology masquerading as as a goal? Achieving massive scale as an artist may look like success, but it’s often just a symptom of the methodology to achieve goals and not the goal itself.
Question your goals. Carefully & deliberately choose the game you play.
Why scale matters / mattered
Scale is a game. For companies that make money exploiting catalogues, scale is required in order to turn low margins into a big business. The same is true for ad-funded business: each individual ad serving isn’t worth much, but if you manage to get lots of people to constantly pay attention to your platform and your ads, you have a business. These dynamics underpin a lot of the modern music landscape: labels, social networks, music services – they generally all play a game of scale.
In the past, the range of available business models for musicians was quite limited, so musicians often opted to play the game of scale in order to sell lots of low margin products to make a living.
Thinking small(er)
Imagine you could only ever have 1,000 fans (not necessarily ‘1,000 true fans‘). How would you turn that into a business? Your livelihood would depend on the patronage of these people: how would you win that patronage?
But a fanbase is not actually the starting point of either your strategy or the ‘user journey’ to becoming a paid fan. Thinking small requires you to question how people discover you and your music. What do you need to convey in order for people to understand that being a fan of your music is different?
Inhale, hold, exhale, wait, repeat.
Ask: What are you leading your fans towards? What can you ‘sell’ to them and at what price? Remember: the higher the price, the smaller you can keep your numbers. Small scale has considerable advantages: the communication overhead is smaller, signal to noise ratio is better, you personally feel much more connected to your fans and so will they, plus it will be easier to reach them. A common trap is that people focus on ‘how to get heard’ by new people without thinking carefully about ‘how will they hear me again?’ In the case of small scale, you could potentially drop everyone a personal note or even a call.
Be brave in imagining scenarios. What if 90% of your art was only available to your Patreon, Substack or OnlyFans subscribers?
Create scarcity early
Figure out what’s the smallest number of fans you could monetize in order to make a living. Making abundant what’s easy to replicate is typically a good idea, as it helps with word of mouth & leverages the network effect of platforms & organisations that play the game of scale. But pause there.
Hold your breathe for 4 seconds, breathe out for 4 seconds, wait, and breathe again.
Now consider the fan journey: if people discover you through word of mouth or a playlist, what do you want their first impressions to be? What type of relation do you want them to have with you & your music? Through what tools and platforms? How do you bring them there when they’re first introduced to you? What does this introduction look like?
Reward fans with scarcity and do so early on. Scarcity is everything that can’t be easily made abundant: a one-on-one call, limited edition items, an NFT, playing a video game with you online, etc. Align it with what you like & what your fans like. Consider how you reward: perhaps you reward everyone who completes certain steps in the fan journey with something scarce, which can be as simple as a personalized message or a public shout-out. Of course, in order to build a business model, you will also reward people with scarce items in exchange for currency.
You can’t start early enough. Set your goals. Think about scarcity. Think about your fan experience, even if nobody has heard your music yet. Build it out together with your community.
We don’t talk a lot about piracy in the music industry anymore, but it still exists. In 2018, more than a third of music consumers still pirated music. In 2020, INCOPRO, on behalf of the UK’s PRS for Music, showed that piracy in the form of stream-ripping grew by almost 1400% between 2016 and 2019. The question is how to analyse this activity, how to analyse the pirates, and how to determine the effect and impact of piracy on the current state of the music industry.
How piracy has changed
Back in 1999, when everybody I knew used Napster and Kazaa, piracy involved quite elaborate peer-to-peer networks. The music I hosted, for example, would be shared and downloaded by others through those networks and vice versa. Nowadays, the main act of piracy comes through ‘stream-ripping’ which is most common from YouTube streams, but also happens from streaming services such as Spotify or Deezer. In 2019 MusicWatch published researched into ‘stream-ripping’ showcasing growth of the phenomenon. The two main reasons provided are: 1) being able to listen to songs offline; 2) liking a certain song, but not enough to buy it.
Both of those main reasons are exactly why streaming services displaced widespread illegal sharing and downloading of music. They provide ease-of-access and in paid tiers offline listening is available. Moreover, back around 2014, just before recorded music growth kicked back in, MBW wrote how amazing it was that piracy had dropped almost completely, giving the example of Norway as a country with an early high adoption rate of streaming services.
That third reason highlighted on the infographic is actually the more interesting one: random searches for music lead people to apps and websites that allow them to rip streams illegally into MP3 files. This signals a broader issue then a simple narrative of ‘bad pirates.’
The Ethnographic approach
Considering the financial impact of piracy on the recorded music industry it’s no surprise there is a vast body of empirical, academic research into it. A paper from Steven Caldwell Brown from 2016 aimed to make sense of how people engaged with and defined music piracy. This built on the work of many others who had previously shown how illegal downloaders also spent the most money on music. One example comes from a cross-cultural research by Joe Karaganis and Lennart Renkema and published in 2011. In their ‘Copy Culture in the US and Germany‘ they showed that those who spend more on music were also those who downloaded the most illegal music files. There’s a question whether that value that these file-sharing pirates placed on music is now captured by the likes of Spotify. If you previously downloaded illegal music files but also spent $100 on recorded music each month but switched to a Spotify paid account right when they launched it’s only now, after 12 years, that you will have matched your previous yearly spend on music.
It’s not just music
Outside of the music industry, piracy also played its role. Again, streaming services, such as Netflix or Amazon Prime Video, provided an ease-of-access and affordable way to access lots of content bringing piracy numbers down. However, the competitive model in video is much stronger than in music. There’s more focus on originals, differentiation of content, and exclusive deals. Take, for example, BatmanBegins & The Dark Knight and imagine that happening to a major artist’s records.
The difficult thing is that with our audio streaming services we expect everything to be available. If that’s not the case, there’s a fear listeners will start downloading again. But that’s not necessarily a bad thing when those who pirate are also those who consume the most. Recent research by Omdia shows that even now pirates are just ‘content hungry.’
So why do these pirates pirate? Because they have reached a maximum they can spend on various streaming services per month or because they cannot find a specific title through legal services. In the video world, both of these reasons are fair enough. In music, they don’t hold up. Basically all music is available on each major streaming service. With a subscription to one of these you get access to all of that music.
The future back thinking we need
The problem with piracy isn’t a problem with pirates. In the music industry, those who traditionally pirate the most music files are those who, in terms of spend, value music the most. What we see in the video business is a big phase of unbundling: multiple subscription-video-on-demand services, cable TV operators, free-ad-supported-streaming TV, etc. In the music business, we have an era of the bundle: buy-one-get-all-music-ever. Those artists who lean into the creator and passion economies try to differentiate their income streams and escape the bundle. This differentiation is necessary because for the vast majority of artists the bundled streaming service system doesn’t offer a good valuation of their art. Due to the increased competition surrounding video, creators are better valued. Perhaps, then, piracy is a necessary evil in a system that better values the art created?
