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The Internet Saved the Record Labels (bloomberg.com)
56 points by pseudolus on Feb 6, 2019 | hide | past | favorite | 37 comments


Sounds something like "reduce search and purchase friction and people will stop pirating your stuff".

Seems like the fragmentation for video streaming is heading in the opposite direction. Too many different providers, and too much unwanted behavior, like the Netflix autoplay anything you hover over feature.

Is there a "amount of pirate downloading" history chart somewhere?


A common story - when we started making bigger money we started buying games. True among my circle of friends.


Ditto. I started buying the albums that I used to listen to on YouTube.


Is Bloomberg blocking the Internet Archive?

http://web.archive.org/web/20190206043030/https://www.bloomb...


>We've detected unusual activity from your computer network To continue, please click the box below to let us know you're not a robot.

Looks more like automated protection against scrapping, or perhaps DDoS-like access patterns. Bloomberg certainly could, and ought to, add an exception for Archive.org, but iI wouldn't read any nefarious intent to the current state of affairs.

On the other hand, Archive.is and similar work just fine [1], given that they download the website via your computer rather than via centralized servers.

[1] http://archive.fo/TkpaJ


It looks like they may be using Perimeterx Bot Defender.

Note Bloomberg is not blocking any access without Javascript or cookies enabled.

Perimeterx is a service that purports to stop "bots" by using heuristics to produce a "risk score". The result is that it allows some bots (e.g. Googlebot) and blocks others (e.g. Archive.org_bot). It gives preferential treatment to some http clients such as Chrome while blocking others such as curl or wget. Not only that, as you mention, these blocks are bypassed simply by using an open redirect.

The page you quoted is telling the user to enable Javascript and cookies, making it sound like that is the reason for the block. The truth is that javascript is only needed so the user can solve captchas and send data to Google. One does not need JS or cookies enabled to read Bloomberg articles.


Honestly, I did not see the paid streaming model succeeding. But damn did Spotify and Beats/Apple knock that out of the park. I wonder if the younger generation even considers illegal downloading or if they just go straight to the streaming platforms?


From anecdotal observations: Where I live everything‘s streaming for people under 35, because it’s so convenient. I do imagine it depends on whether your region has affordable and quick cellular internet access.

There are also download stores (DRM-free and lossless, which didn’t exist in file sharing’s prime days), which are popular with music enthousiasts and DJ’s. Coincidentally these also seem to be the people still using file sharing platforms to track down remixes and demo’s etc. that were never released commercially. However most users who need MP3’s for some reason or another (dj’ing at a house party, a trip with with bad cellular reception) nowadays use websites that rip from Youtube. It’s become such a rare event that people wouldn’t bother downloading software for it for example.


Is Spotify even profitable?


I spend more on Spotify than I ever did on buying music, so someone’s winning


Conversely, I used to spend $75-100/month on CDs and downloads before I signed up for Spotify Premium, so I do save money. People like me are probably outliers in the grand scope of streaming vs buying, though.

I still buy a lot of music from sites like Bandcamp, to support artists directly, especially after learning how small of a cut the artists get from streaming services.

Someone's winning from the average person spending more on a Spotify subscription than they would on buying music. Unfortunately it's not the artists, it's the lumbering dinosaur major record labels.


But the spotify model is artists share = total spotify payments * (total number of this artists plays / total number of listens to all artists)

so if i only listen to 5 artists but they are some of the least listened to artists then they get basically none of my money and taylor swift, beyonce etc. get it all... what is worse spofity have been gamin gthe numbers to make sure even more money goes to a few big players.

Spotify also have a really horrendous set of privacy rules. they are storing every tie you touched the controls right back to 2008 and selling that crap like mad.

I just go straight to band camp, then look for the artists own site, then look for othre sites hosting flacs, then look for second hand CDs.. then i save the file myself and just look after it.

all else fails i will just listen on youtube as i see companies like spotify being a real problem as they sell them selves as the exact opposite of what they are :(


Yes, they pool all payments, then portion out according to the share of plays compared to the total number of plays on the platform. That obviously favors popular artists, but it is a reasonable way of portioning payment, based on absolute popularity. Exactly as with traditional record sales, highly popular artists get the lion's share of the total revenue. In that sense, they payment scheme behind Spotify is absolutely nothing new.

I would absolutely prefer if my subscription payment got portioned out to only the artists I personally listened to, but I can also see how that would be a daunting task to portion payment based on the listening profile of every individual user out of millions. It would be more fair, obviously. I bet there is/would be a lot of pushback from the big labels, obviously.

All of this mess is why I still buy downloads from my favorite artists, especially if they're niche bands. I'm not gonna necessarily going to buy the next Kreator or Judas Priest album, but I'll definitely buy the next release from Bonehunter or Blackrat, precisely because they get shafted by the combination of Spotify, big labels and "creative accounting".


No. Reasonable is to split each individual sub proportionally to the artists listened by it. If I listened only to Gojira and Satyricon this month - I want them to take my mpney and spotify their cut, not Cardi B.


I would prefer that arrangement as well, and I don't know if the reason for not doing it is technical, or because of contracts with the big labels.

It may be a deal with the devil to let Spotify continue to exist, as the labels could easily crush them.

And you can already support your favorite artists directly, by going to their shows, buying their merch and buying their music on Bandcamp. Some artists even use Patreon now, which is a sort of interesting return to the days of artists working for wealthy patrons.


I always assumed it was to account for the non-paying listeners (i would rather this was done through a budget - e.g. 20% of listeners are not paying so upfront take 20% of my money to pay for them - then do a fair calc on splitting users revenue by their listens).

I think effectively record labels can say something like this to spotify: hey 70% of music listened to is the charts by non paying members, what are you doing to protect our investment?

i dont know if its a simple as that but i can imagine there are very particular shapes to listening behaviours/


Back in the noughties, the British record industry talked a lot about "fifty quid blokes" - professional middle-aged men who would leave work on Friday, go into HMV or Borders and buy a couple of CDs, a DVD and a book, totalling about £50. They were very well known in retail and were catered to with music magazines like Q, Mojo and The Word. They were hugely important to the record industry (hence all the classic rock reissues at that time), but their spending has mostly dried up thanks to streaming. £20 a month for Spotify and Netflix is a bargain compared to what they were spending on physical media.

I think it's fairly clear from the revenue numbers that the move to streaming has been a net loss for the recording industry. If they are to sustain the growth in paid streaming and return to 1990s levels of revenue, they need to either substantially grow the overall market for paid streaming or substantially increase subscription fees. The big problem they face is segmentation - there's no practical way of charging a hardcore music fan $40/mo and a casual listener $10/mo for the same unlimited service.


I don't think we're ever going to return to a revenue level similar to the 90s, honestly I think that was a historical aberration caused by a number of supporting factors.

In the early 90s, more people in the west had more disposable income, production had become all-digital (lowering production costs), and CDs cost next to nothing to make compared to stamping vinyl or making cassettes, so the profit margins were bigger. There was also the explosion of pop music, especially boy bands with gigantic fan bases. CD players were inexpensive and started to come as standard equipment in cars. At the same time, storage capacity and processing power in the average PC was inadequate for storing uncompressed CD quality audio and playing back compressed audio, respectively. Of course, usable lossy audio codecs were very much in their infancy, and CD-R drives were still very expensive, slow and unreliable. Not to mention the lacking state of mobile devices at the time, if anyone even had a mobile phone at this time, it was very likely to be on an old-fashioned analog network.

It was the perfect environment for big record industry profits, but by the late 90s/early 2000s, we had Napster, affordable CD-R drives, increased storage space, processing power and internet speeds, and of course properly viable lossy codecs. Pandora's box was opened, and now matter how they try, the big labels can't close it back up again.

I don't think segmentation is the solution, you can't get people to accept tiered pricing based on usage, the $10 for unlimited usage like a library is the entire reason people love streaming services. I think what they can do is add higher subscription tiers with bonus features, higher sound quality, personalized content that isn't just made by an algorithm. Maybe they could even do exclusive access to new releases, but that may result in backlash from "basic" subscribers who feel like they're getting cheated out of content.

In the end, perhaps it's just an uncomfortable shift towards less income from records sales/plays, and a bigger reliance on touring and merch sales. I know a few bands that use Patreon as a sort of "pay what you want" fanclubs, where you get early access to various content at lower tiers, and things like Skype chats or guitar lessons at higher tiers.


I switched to buying Vinyl at Shows, and Bandcamp CD releases directly from non mainstream artists.

I always thought services like What.CD were actually good for the industry--as it was essentially an on-ramp onto trying new genres and artists from like-minded enthusiasts. Spotify's charts don't seem to do anything for me, and my exploration is actually lower than before (subbed for around 4 years now...?)


I'd buy more than ten times the number of tracks if they were ten cents rather than a dollar.


Last quarter report they had -$0.22 eps, and they report today, analysts are still expecting it to be less than zero per share.

Edit: earnings beat with $0.44 eps, haven't looked at full report though for any gotchas.


Judging by the "great payouts" to artists Spotify is probably making content creators just slightly more money than pirate sites.

So probably some middlemen get fatter, but not sure it is better for the music and culture.


You see record labels promoting new albumns on posters and billboards - with the call to action being to listen on Spotify. How can that make financial sense if they're not even getting a penny a stream?


Who said you could only do things that make financial sense?

If you believe it does, then the answer can only be that the costs of the advertising are covered by revenue from other sources. A simple model is:

1. Taylor Swift advertises a new album, which everyone listens to for free on Spotify.

2. Taylor Swift is beloved by the people, who have all heard her album.

3. Taylor Swift makes a lot of money selling concert tickets.

It's hard to do step 3 when nobody knows or cares who you are.


The point of the article is people do pay to listen to Taylor Swift on Spotify. Now, and more so predicted in the future.


I don't think Spotify's revenue model allows for billing per song? FAFAIK people's listening habits have no impact on their Spotify bill, so it's more accurate to say that people pay for having access to Taylor Swift's songs.

It's the catalog that drives the revenue, not the listening metrics. I'm sure the metrics are important for Spotify's market position, as they drive its licensing fees and negotiating position. But as the parent says, people don't pay extra for listening to Swift's new album instead of the previous.


Spotify does indeed pay artists per song stream. The rate is between $0.004 to $0.008 per stream, and a "stream" is counted every time someone listens to a song for at least 30 seconds.

https://qz.com/1519823/is-spotify-making-songs-shorter/

https://qz.com/quartzy/1438412/the-reason-why-your-favorite-...

Incidentally, this model incentivizes artists to release shorter songs and to squeeze more songs into albums.

https://pitchfork.com/features/article/uncovering-how-stream...

https://pitchfork.com/features/lists-and-guides/are-rap-albu...

And an artist's new release isn't just competing with their old releases. It's also competing with releases from other artists.


Back in the 70s, most artists made little or no money from touring. You played live to promote your album, which made you the real money. Today, it's the opposite. Your album is practically worthless, but it might persuade people to pay $60+ to see your arena tour. The album is effectively a free sample of the "real" product, the live show.

The recording industry isn't stupid, so most major artists are now signed on "360 deals" - the record label gets a share of everything, from streaming to tickets to merchandise.

https://en.wikipedia.org/wiki/360_deal


Streaming revenue isn't negligible, even if it seems intuitively that it should be.

Record company revenues are textbook Long Tail.

Source: spent the last two years working on a digital sales processing platform for a major label.


It makes financial sense by being a loss-leader product, which the make up with tshirts, ticket sales, lunch boxes, and whatever the kids buy from singers these days...


yeah but don't the artists make that money? I thought it was the albums etc. the record companies made the money on. Of course they probably also put the promotional stuff of the billboards into a list of things the artist needs to pay them for.


Some bands handle their own merchandising, in which case they get all the profit. But most bands that reach a certain level either hire a dedicated merch partner or have their record label handle it, who take a certain cut of the profits.

Using a merch partner/label can be useful, because they have better deals on bulk purchases on t-shirts and so on, which may or may not be worth it for the artists.

The best way to support artists is still to attend their shows and buy some merch while you're there. Online shops, payment processors etc. all take a cut, so direct physical sales are best for the artist.


>yeah but don't the artists make that money? I thought it was the albums etc. the record companies made the money on.

That's changed the last 1-2 decades or so. Popular artists get what's called a "360 deal", so the company gives them money ahead, and they get all their profits across merchandise, albums, tv appearances, online stuff, concerts, etc.

https://en.wikipedia.org/wiki/360_deal


Ruined by internet, saved by internet :)


The article goes into this, but it's more accurate to say that the aggregator subscription business model saved record labels -- paying a flat but recurring fee to access a diverse (but ever-changing) library sourced from various rightsholders.

This is the same model as Netflix, which licensed all sorts of content when studios were glad anyone was offering, but as they realized they can launch their own streaming services, Netflix found it prudent to produce more and more original content to ward against people who might cancel after waves of popular shows are pulled and put elsewhere.

There's not much stopping record labels from pulling a Hulu, except for the fact they already did with Vevo, which was recently killed. Vevo fizzled because it was never clear what value it offered, and its content was also available on YouTube by their own making, in a desperate and bizarre truce against the realities of content discovery. It's like newspapers and their eternal frenemies Facebook and Google, but with more money on the line.

The value proposition of aggregators depends on the content they aggregate, but also on matching the content to a receptive audience. Labels may be looking at Spotify and wondering if they can't short-circuit them instead, but when content rightsholders wall themselves off from an aggregator, they must find this receptive audience themselves. And that audience may not be willing to pay the same way: the same content is available through other sources, even if it's just YouTube, or CDs, or digital downloads of the handful of albums they'd miss, not to mention the wide selection of other music from other labels they might warm up to instead. Movies and, in particular, episodic shows are less affordable through legal means, so it's far easier to withdraw them from aggregators and make them exclusives. And unlike music, motion picture is typically consumed once or just a few times, while music is consumed over and over again.

Conversely, Spotify might court artists to sidestep record labels, but that only helps for new content. Yet there's other destinations now for emerging artists and future fans thereof, and better platforms for discovery. With subscription business models, retention is always key, so enough palatable content has to be present and no competitor must be overwhelmingly more appealing such that subscribers are driven to cancel. And I don't think the Netflix pivot works nearly as well with music: the whole point of Spotify is to never have to worry about the costs and logistics of acquiring -- legally or illegally -- a personal music library ever again, and to remove the friction and mental gymnastics about picking some music you're in the mood for to play now. The reliance on back catalogs, of nostalgia and emotion of repeated consumption (vs. discovering something new) is too great. If labels start to withdraw, that utility will plummet.


>"Spotify might court artists to sidestep record labels, but that only helps for new content. Yet there's other destinations now for emerging artists and future fans thereof, and better platforms for discovery."

For niche genre enthusiasts, Spotify is more of a convenience than an essential service. We've always been good at promoting stuff through word-of-mouth and genre-focused zines/websites, and we're generally very avid concert-goers with a tendency to buy physical merch at the shows.

I could get the majority of my music from Bandcamp, and I do buy a lot of downloads from bands I enjoy, in order to support them directly. Spotify does have an edge in the size (width and depth) of their library, which is extremely handy when you want to play something that you occasionally enjoy, or quickly look up something a friend mentioned. Lately Youtube has been extremely good at adding music to their library however, obviously because of Youtube Music.

I also find the trend in Spotify's recommendations to be very "safe", which does make sense. After all, they build their recommendations on what most people listen to, not niche bands with <10K plays for their most popular song.

When I first signed up for Spotify Premium, I thought I wouldn't ever need my local collection anymore, because why would I? Spotify had/has the biggest library, right? I'm glad I kept my local collection, because Spotify does get a little weird about removing albums because of rightsholder nonsense, and I've seen new albums just never get added, despite earlier releases being available from the same artists.

I still enjoy having millions and millions of tracks available, and their recommendations are decent, if not amazing. But my own curated collection is irreplaceable.

But I'm an enthusiast. For more casual listeners, Spotify (or Google Play Music or Apple Music) would cover all their needs for new music and popular classics. And I think Spotify could easily woo artists into direct releases and promote them through their platform.


If I shoot you in the chest then drive you to hospital did I 'save' you?

Revenues are still down from their heyday, so the internet is still a net negative for the record companies. It is an interesting case study in adapting to a rapidly changing market though.




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