A decade ago, Apple revolutionized the music industry with the iTunes Store. According to reports, Apple is now trying for another revolution with the rumored launch of Apple Music, a music streaming service based on the existing Beats Music. But along the way, it might be trying to kill existing free music streaming services.
The State of Play
Right now, Spotify offers plenty of music for free through its streaming platform. It currently has 45 million free users and 15 million paid users. However, The Verge recently reported that Apple is getting music labels (which control which services the songs are streamed on) to stop supplying their songs to Spotify’s free listeners.
Since Apple is the biggest digital music powerhouse, it can use some strong-arming tactics. Of course, these aren’t fair and Apple is rightly being investigated for them. But we’re not lawyers so let’s leave that well alone.
The situation that we face as consumers is simple: Spotify’s free platform might be disappearing. How does that affect us? Why is Apple trying to kill free streaming? What impact will it have on piracy? And how is the future looking?
The Problem with Free Streaming
Should music be free or should it have a price? As a consumer, I obviously want to get it for free, as long as doing so isn’t hurting anyone else. But that’s impossible, as the artist needs to get paid.
The Internet made music piracy easier than ever before. Free music suddenly became available easier than ever before. And there is a perception that free streaming services are strengthening the idea that music should be free. There is some evidence to back this up too.
For her Honors Theses, Caitlin M. Seale of the University of Southern Mississippi surveyed college students to find out the impact of streaming services on their music consumption. She found that “those surveyed indicated that they believed that cloud-streaming services would reinforce consumer acceptance of music piracy since the service is free but with limited access.”
The same study also showed a decline in the amount of music pirated by those who use cloud-streaming services. However, it also led to a decline in CD sales and digital downloads.
Plus, iTunes sales for music downloads are declining. In a larger study, Mark Mulligan of MiDiA Research found that while streaming has opened up new markets, it has dented digital music downloads. “23% of music streamers used to buy more than one album a month but no longer do so. Download sales are affected most and will continue to feel the pinch with 45% of all music downloaders also music streamers.” The study indicates that by 2019, download revenues will decline by 39 percent.
Which is the biggest music download store in the world right now? Yup, you guessed it, iTunes. So, naturally, the above information is a problem for Apple. Yet, it too recognizes that streaming is the future of music and ownership is dead. So it needs to monetize streaming as quickly as possible.
Streaming is the Future for Some Artists
Apple’s woes aside, major artists have complained about Spotify’s free service many times, claiming it does not fairly compensate them. Perhaps the most famous of these is Taylor Swift’s article in the Wall Street Journal, after which she pulled her entire song catalog from Spotify.
Our own Harry Guinness thinks Taylor Swift is wrong about Spotify, but the base problem she cites finds several echoes in the music industry.
Take, for instance, songwriter Aloe Blacc’s article in Wired, which also called for streaming services to pay artists fairly. He said, “I believe policymakers will one day recognize that a system that allows digital streaming services to enjoy enormous profits while music creators struggle is imbalanced and broken.” It’s difficult to find fault in that logic.
The current system of payment for music labels and artists is deeply flawed, as Vox explains in a detailed piece. What it boils down to is this: The right people who can do something to fix the situation aren’t interested in fixing the situation.
However, that’s not a good enough reason either, according to Jeff Price, owner of indie label Spin, who says, “[Streaming services] whine to me about how hard it is to figure out who to pay. Why don’t you go be in a band and see how hard that is?”
It’s not just about Spotify either. Swift and other high-profile artists like Madonna, Rihanna, Daft Punk, and others joined Jay-Z’s new streaming platform, Tidal. However, Tidal has drawn criticism from other artists too, who claim it will lengthen the divide between big and small artists, and even drive up piracy again.
Lily Allen weighed in on Twitter:
i LOVE Jay z so much, but TIDAL is soon expensive compared to other perfectly good streaming services, he's taken the biggest Artists
— lily (@lilyallen) March 30, 2015
made them exclusive to TIDAL (am i right in thinking this ?), people are going to swarm back to Pirate sites in droves
— lily (@lilyallen) March 30, 2015
sending traffic to torrent sites. up and coming (not yet millionaires) artists are going to suffer as a result.
— lily (@lilyallen) March 31, 2015
Some smaller bands have accepted the new ecosystem, for better or worse. Nicole Miglis, singer of Hundred Waters, told Vox, “I fully support free music. I think it’s called stealing now, but I think that’s going to change in the future.”
Free vs. Paid Streaming
Reading the thoughts of industry analysts, major artists, indie artists, publishers, streaming services, download services, and more, one thing becomes clear: No one has a solution, everyone has a problem.
In a way, Taylor Swift is actually right when she called Spotify a “grand experiment” because that’s what it is at the moment. No one seems to have concrete data on whether free streaming or paid streaming is the future, and how it will impact the music industry.
As a consumer, I have used Spotify both as a free and a paid user. Spotify’s free tier is supported by ads, and the revenue is used to pay publishers and artists. It is definitely more convenient than even music piracy. However, the ads end up being quite annoying.
After using Spotify Free for a while, I decided to pay $10 a month to upgrade. I listen to music enough for that money to be worth the ad-free experience. More importantly, $10 was a good enough price to pay for Spotify’s convenience over music piracy. I knew the song I was listening to was legit, I knew I didn’t have to worry about malware or any malicious downloads, I knew it was always available whenever I wanted without fear of an illegal song being taken down, and I knew I wasn’t breaking the law by pirating music.
Pirates Will Always Find a Way
The philosophy to battle music piracy differs. Some believe we need stronger laws and illegal download detection. Others believe it’s an economic problem and needs an economic solution. There are ideological extremes on both sides, like people who believe music should never be free and those who believe music should always be free. The only constant is that piracy has always existed and continues to exist.
Take, for example, a service like Netflix for streaming movies and TV shows. Yes, it is paid for and there are plenty of users paying for it. However, pirates come up with apps like Popcorn Time for free movie torrent streaming.
History has shown that every time the music or movie industries think they have found a way to stop piracy, pirates have come up with a new way. As Forbes says, piracy won’t kill you and you can’t kill it either. Ergo, while Kazaa and Napster shut down, music piracy hasn’t stopped.
Piracy is a complex issue and it isn’t going to be solved by free or paid music streaming services. Yes, it will have an impact, but there is no telling yet what the impact will be.
In Defense of Spotify Free
Currently, Spotify Free works as a gateway drug to make you shell out real money for the paid experience. However, Spotify itself says that 45 million users are sticking to free access while only 15 million are paying for the service. The conversion ratio needs to improve. That said, turning off Spotify Free might lead to even fewer conversions, not to mention we might see new avenues for piracy.
In fact, Netflix and other video streaming services offer a one month trial for free, which works as a gateway drug to get users hooked on the experience. Apple is rumored to be offering a similar trial period for Beats Music, and that might be what Spotify is eventually forced to do as well.
The strongest case to be made for Spotify Free is this. Warner Music Group, one of the major music labels, has said that streaming music revenue has surpassed music download revenue for the first time in its history, or the history of any of the other big labels.
Whether this is because of the freemium model or not can’t be proven without a deeper analysis. However, what Spotify is doing right now is actually translating into revenue for Warner. As it stands, Spotify is one of the biggest streaming services around and has 75 percent of users on the Free model. It would be surprising if a major chunk of Warner’s revenue didn’t come from those free users.
Let My Spotify Be Free
As someone who has made the journey from Spotify Free to Spotify Premium, I strongly feel that Apple’s attempts to covertly kill the free version would be detrimental to the music industry. Music is increasingly expected by many people to be free. To not offer an option for free music isn’t the progressive path, nor is it in the interest of either the artists or consumers.
If Apple can’t come up with a business plan that lets them give Apple Music away for free, that’s their problem. If the competition can offer music for free, let them. May the best person win. Apple already fears Spotify might be the end of iTunes, so is it afraid Spotify will kill off its new music streaming service before it’s even got off the ground?
What do you think Apple should do? And will you stick with Spotify if it has to kill the free version? Remember, there are plenty of alternatives like Rdio. Please let us know your thoughts on this issue in the comments section below.