Streaming and the music industry

With Spotify providing over 100 million members with approximately 30 million songs, and YouTube’s almost unfathomable amount of videos viewed by over 1 billion users, the music industry and many aspiring musicians should be jumping for joy at the massive audience they have the potential to reach. But they’re not.

Thousands upon thousands of the budding young stars are crying a unanimous complaint; that allowing listeners to listen to their music for free, the music industry is dying. Despite the massive increase in play count when an artist allows a streaming service to use their music, the paltry royalties these services pay dissuade many from signing up.

The key internal debate here is what is deemed more important to the musician; increased exposure at the expense of cost, or greater cost per unit (record) sold at the expense of decreased exposure. Ultimately this depends completely on the artist making the decision, however the concept is essentially an example of  a decision organisations and marketers have to make across a huge number of industries.

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When a firm is in it’s infancy, it will often adopt a penetration pricing strategy, where the costs of their products are well below the industry standard. The aim here is to entice purchases from consumers who are familiar with competing brands, but are happy to sacrifice the safety of opting for a known product, in exchange for selecting the newcomer and paying significantly less. In this situation, exposure isn’t guaranteed or even offered as a benefit of the strategy, yet many organisations are happy to sacrifice profit margins for the increased likelihood of a sale. This translates straight back to streaming services, where the consumer pays nothing (except having to listen to an advertisement here and there).

So are musicians asking too much? While yes, the money they receive for someone listening to their song is significantly less than someone buying their CD, the likelihood of someone listening to a song on Spotify or any other streaming site is significantly higher, implying far higher likelihood for consumption.  Have your say in the comments!

 

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