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Bella Hatch
Ms. Wood
AP Literature
17 October 2016
Digital Streaming: A Consumers Dream, An Artists Nightmare
Accompanying todays rapidly increasing reliance on technology are major shifts in
almost every industry. A notable result from these shifts is the concept of digital streaming
evolving in the music industry. Streaming provides an alternative to downloading where
basically consumers can just listen to music through the site. Spotify, much like many of todays
popular streaming services, bases its design around the online involvement of consumers and the
enthusiasm for virtually free music. Providing a vast library of songs, artists, and unique
playlists, these services allow for a diverse selection of on-demand music for little to no cost. In
most cases, consumers are gifted with the choice to participate in a paid subscription based
service, or to rely on the free ad-funded version. Its efficient, cost-effective, easy to use, and
appears to be a major advancement for the industry that suits consumers needs and wants.
However, though digital streaming seems like a viable solution to todays fast-paced online
society, multiple challenges and controversies surround the process of providing this music.
Streaming heavily emerged from the public becoming more digitally centered. Unlike
past days of records and CDs, the majority of music is listened to through streaming online. Sites
like Youtube and Spotify even allow for almost any song to be accessed for free. But as the
transition from physical to digital music has proved to benefit consumers with cheaper options, it
consequentially affects the music industrys profits. Prior to current technological advancements,

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much profit was generated from CD sales. Additionally, the price of a CD didnt seem all that
overwhelming because of the effort put into creating each song on that album. However in
comparison to more modern methods of digital downloading and streaming, CDs are much more
expensive. A Spotify Premium account will cost you 10 bucks a month, less than a single CD
(Mejia). Conclusively its shown that even though CDs might generate more profit for the music
industry, the consumer is left paying a larger price than they would have had they opted for these
other ways of getting music. This proves to exhibit dangerous potential for the music industry
thats prominent in todays deal seeking society. As low-priced alternatives to CDs emerge,
consumers are heavily drawn to them, cutting profits for the music industry greatly (Mejia). One
of the first low-priced alternatives to CDs was digital downloading. Digital downloading was in
essence the music industrys initial steps into online generation of sales. The revenue generated
from it soon outstripped physical sales (Peoples). Understandably, because it provided a
cheaper and more efficient method for getting music to consumers. At the same time, digital
downloading granted label companies opportunities to cut down on costs by eliminating the need
to invest in manufacturing and distribution (Luckerson). Also, the consumer now had the ability
to purchase single tracks instead of entire albums. This system seemed to be all around pleasing
for both the consumer, and the industry. Surprisingly enough though the industry managed to
shift again, and US digital track sales decreased for the first time ever in 2013. (Luckerson).
The seemingly perfect concept of digital downloading was beginning to fade, and meanwhile
the number of songs streamed through services like Spotify, Youtube and Rhapsody increased 32
percent to 118.1 billion (Luckerson). Shifting away from the concept of downloading, the
introduction of streaming services has captivated consumers. When you stream music, you

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dont download anything, you listen through the site (Billboard Magazine). Conclusively,
revenue records have shown obvious and direct indications of losses in digital music sales as
streaming revenues rocket (Luckerson). Continuously rising, streaming now accounts for 27%
of U.S. music industry revenues (Mejia). This however introduces several problems,
considering consumers who previously contributed to the thriving sales of digital music have
shifted to streaming, a service that allows virtually no payment unless choosing to opt for
subscriptions that charge.
Similar to several other servers, Spotify offers a premium membership with a fixed
monthly fee. Basic, ad-funded services are offered to users free of charge, and premium features
are offered at a cost (Richardson). This model is referred to as the Freemium Model
(Richardson). Its been shown however that only about 30 million of the 100+ million users
engage in the charged membership (Weiss). Though the 30 million subscribers are the most of
any music streaming company (Weiss), this leaves over 70 million users with free ad-supported
accounts and access to virtually any song for free. These 70 million users are capable of
streaming the same amount of songs as the paying users however dont contribute anything to
the revenues of the service. We dont need the industry as much as it needs us has become the
ironic modern motto for millennials specifically (Billboard Magazine). The entitlement
stemming from not having to pay for music has crafted a design where consumers truly have
power over the industry. The foundation of streaming is built off of an empowerment of users,
allowing them to make a decision as to if its worth paying for or not. While the consumer is
benefited greatly by this choice, this system is very taxing on the services providing the music.
Spotifys business model requires that the company take massive losses while providing free

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content in an attempt to attract users (Richardson). These losses stem from the basis that
according to the Freemium model, royalties must be distributed whether or not the user is
subscribed and paying (Richardson). With the 70 million users mentioned above who dont
engage in a paid subscription, its clear that these losses are in fact monumental, even though the
royalties are less than a cent per play. Though it seems unfair to musicians, Spotify really cant
increase the royalties by much more if they hope to continue their streaming service. In turn, the
music industry is left gathering these tiny royalties.
Understandably, one of the main controversies surrounding streaming is how fair the rate
at which artists and label companies are paid actually is. Artists earn on average less than one
cent per play, between $0.006 and $0.0084, to be exact (Linshi). A rate that is arguably too
small to be considered reasonable payment for the artists work. Spotifys argument is that it
will be able to increase royalties to artists over time. The service says it pays almost 70 percent
of revenue back to artists (Lendino). Spotify must become more established and generate more
revenue in order to increase these royalties and maintain enough profit to keep the streaming
service running. From this conclusion comes questions about how realistic free streaming really
is if the conditions to keep it operating end up having such minimal pay for artists work.
However, some artists dont have an issue with the current state of royalties. Its contested that
well known artists make the majority of their money in ways aside from album sales, so cutting
the revenue from digital downloads and physical sales doesnt carry that much effect. A good
number of artists agree and are unopposed to streaming considering the substantial amount of
profit they receive from a variety of things, including concerts, appearances and products
(Billboard Magazine). Similar standpoints also conclude that with matters concerning

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small-scale musicians hoping to make it big, the exposure provided through streaming raises the
possibility of listeners buying songs, albums and attending concerts (Lendino). However those
countering these arguments go on to say that exposure doesnt put food on the table (Billboard
Magazine). Though exposure has potential to encourage future sales there are no guarantees,
which leaves the situation seemingly unfair to these musicians. Claims have also been made that
this system with low royalties puts diversity at risk. A song has to get a lot of plays if an artist is
going to make a significant amount of money on it (Billboard Magazine). Many listeners are
afraid that this play-dependent pay that gives artists barely anything per listen will discourage
musicians from experimenting with new sounds. Instead of trying something new, its feared that
musicians will stick with what they know and what has been shown to generate profit in the past.
Attempts to absolve the issues surrounding royalty amounts are in constant discussion and are
believed to increase even more as Spotify becomes more established.
Spotify and services similar to it have in short become the center of the music industry
today. Spotify has undergone huge growth and now is a multinational distributor (Richardson),
and the influence that large streaming services like Spotify carry is multiplying exponentially.
Understandably, the industry is intrigued with the effects of this shift on the public. Spotify
users are twice as likely to purchase songs from iTunes or Amazon than other consumers
(Richardson), and with the 100+ million users that Spotify is engaged with, this statistic is
particularly pleasing to the music industry. However, disputing this is the argument proposing
that there is a substantial risk of cannibalization of users who would other purchase content in
album format, or as a single (Richardson). If you could access music freely why should you pay
for it? Though it could be true that Spotify users are twice as likely to purchase songs in

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comparison to other listeners, the overall enthusiasm for the purchase of music has been heavily
affected and is plummeting. Spotify has been shown to lead to a 13 percent decline in
propensity to purchase new music (Richardson). These clashing statistics lead to an
understandable confusion and fear within the industry. Combined with the constantly evolving
negotiations of the process, streaming is debatably one of the most tedious and complicated
concepts that the music industry has faced.
Being a service that uses content belonging to other people, Spotify is constantly
engaged in licensing negotiations with content owners, across numerous labels, in multiple
countries (Richardson). Establishing agreements between streaming services and artists to
benefit both parties has been shown to not be an easy task to achieve. Shadowing the eruption of
streamings popularity are constant debates over issues pertaining to copyright (Richardson).
Several legislative acts have been introduced however to mediate some of the problems. The
Digital Performance Right in Sound Recordings Act (DPRA) introduced a law granting
copyright holders a right to play the copyrighted work (Richardson). This introduced the idea
that not just anyone could stream the content, only those granted the right to. This was later
modified by the Digital Millennium Copyright Act (DMCA) which criminalized any attempt to
go against the digital rights previously enacted in the DPRA (Richardson). It also further
protected services that met the copyright conditions (Richardson). These legislative acts help to
provide consequences for those who try to exploit copyrighted content through means of piracy.
Piracy is not a new problem for the music industry. The massive underlying profits draw
many music pirates, heavily impacting content owners and copyright holders. Playing off of
the consumers natural tendency to favor the cheapest options, organized crime has stemmed

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from music production in many ways. For example, more than one in three of all music discs
purchased around the world is an illegal copy (Janssens). This proportion of music piracy is not
only alarmingly large, but also incredibly harmful to to the industry. Even though legislation is
enacted to try to prevent detrimental circumstances like this, its hard to locate the sources of
music piracy. Now, digital piracy, more popular than physical piracy, is seen as one of the
biggest threats to the music industry today (Janssens). By introducing concepts like streaming
that are founded on the idea of the free sharing of music, the prominence of piracy is predicted
to increase by an even larger proportion (Janssens). Others disagree with this argument, claiming
that streaming can absolve the issues piracy has created instead of further them. Streaming
provides a simple and virus free option for free music that many consumers see as preferable
(Luckerson). Its also believed that piracy is discouraged as it is forced to become more digital,
because everything on the Internet can be tracked. This creates much easier and more efficient
ways to locate sources of mass distribution of pirated content. Either way, streaming has
transformed the ways content is distributed, and the way music pirates must approach it. Piracy
is centered on the idea that consumers just dont want to pay for the price demanded by the
industry for music, and streaming is the industrys effort to absolve some of the price disputes.
However, the music industry suffers as consumers grow more and more adapted to having access
to virtually free music, so its difficult to claim that streaming has really been that beneficial,
even if it has potentially discouraged piracy. This leaves us to question if free music not liable
to copyright infringement is really obtainable in a way that benefits both the consumer and the
industry.

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If any future steps are to be taken to reform the way listeners can access music, the
producers and content owners must consider the majority of fans that have grown used to not
having to pay (Luckerson). However many in the industry argue that a shift back towards
services that cost money is necessary. Encouraging paid services would create more revenue for
the music industry, so its easy to guess their viewpoint on the subject. (Glaser) Aside from their
directly benefiting from this though, more artists would be paid reasonable rates for their
music (Glaser). This of course would in theory motivate artists to produce more, considering the
profitable aftermath of releasing new songs (Glaser). Actually implementing a shift back towards
paid services however proves to be quite difficult. How could the industry efficiently captivate
consumers who have adapted to paying practically nothing, and persuade them to pursue paid
services? One idea is to have new releases only available on these services that charge. This
could be achieved by purchase or premium subscription (Glaser). Another proposed idea is a
theory called windowing. Most films open in theaters before moving to on-demand and TV.
Hit TV show's premiere on the network that owns or underwrites them, then move to other
distribution services (Glaser). This logic of delayed release to different services can be easily
applied within the music industry. For example, those unwilling to engage in a paid subscription
or buy a song will still have access to the song, but it will be quite a while after the songs release
to paying subscribers. In general the model of free streaming in in constant discussion. Is it
realistic to provide an option free music to a public who will take advantage of these
opportunities? Is it fair to artists to expect them to tolerate receiving less than a penny per play
on a song they spent a lot of time and effort on? Is it even possible to change this system now
that the public has adapted to not having to pay for music? The answers to these questions are

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not expected to come any time soon, but with the constant negotiation in regard to streaming, its
believed we will get to a point where the consumer, artist, and music industry benefit.

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