Music Streaming Industry’s Race to the Hearts of Listeners & Artists

The more music streaming becomes mainstream, the harder platforms fight to obtain and retain listeners. Therefore, it comes as no surprise to see platforms like SoundCloud, Apple Music, and Spotify take steps to set them apart and loot new customers. Read as Sergey Bludov unpacks the various approaches these streaming platforms have taken in his latest article.
5 min read
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By Sergey Bludov
Senior Vice President, Media & Entertainment
Music Streaming Industry’s Race to the Hearts of Listeners & Artists
“Artists are now better equipped to grow their careers by forging deeper connections with their most dedicated fans. Fans can directly influence how their favorite artists are paid.” – Michael Weissman, CEO of Soundcloud

As the music streaming industry matures, concerns over the major platforms’ infamously low royalty payout rates are coming to the forefront.

Many believe that the emergence of streaming saved the music industry. And while you’d be hard-pressed to find anyone who disputes this fact, an unfortunate reality remains: the majority of artists and rights holders are earning peanuts from streaming services. Some would say they are not even earning the nuts, expected to survive on tiny pieces of broken shells, while the major streaming platforms and a small percentage of artists and labels rake in virtually all of the profits.

As royalty concerns grow, platforms are responding by adjusting their payment models and launching a range of artist-friendly services, signaling the beginning of a new path in the evolving music streaming industry.

SoundCloud’s New Artist-Centric Payment Model

The major streaming platforms currently follow a radically different royalty payout model than what exists for traditional mediums, such as radio and television. Companies like Spotify, Apple, and Deezer combine all royalty money into a single pool which is paid out to rights holders based on their share of total streams, as opposed to traditional models that pay royalties based on each specific piece of music. Many artists and fans criticize this practice, believing that it disproportionately benefits big stars while leaving almost nothing to be paid out to lesser-known artists. The streaming model also raises concerns for fans of niche artists and genres who believe that it is unfair for their use of streaming platforms to be funding music creators and styles that they do not listen to, while the artists they enjoy are left to survive on minuscule revenue.

SoundCloud is making a big move away from the current streaming model with the introduction of its new fan-powered royalty system. Although it is a radical departure from past streaming practices, the concept is extraordinarily simple: artists and rights holders are paid based directly on what is listened to by subscribers. This structure removes the pro-rata system of a giant pool of royalty money and instead follows a more traditional model of paying rights holders for the specific amount their music is used. SoundCloud’s new royalty model carries the potential to greatly benefit independent artists, positioning them to reap financial rewards specifically from the streaming of their songs by dedicated fans.

Apple’s Free New Features

In addition to the industry’s move toward artist-friendly systems, streaming platforms are increasing their offerings for listeners in their quest to gain subscribers.

Apple recently announced the addition of superior sound quality options for subscribers of its service. The company is making its massive catalog of over 75 million songs available in Lossless Audio, thereby enabling subscribers to hear music precisely as it was created in the studio. While many music fans have become accustomed to low-quality sound files, a growing percentage of listeners are showing interest in hearing full-quality audio of their favorite songs. Artists and producers have always been concerned about the audio details that are lost in compressed formats, such as mp3s, and moves such as Apple’s will provide music fans with a superior listening experience through the availability of Lossless Audio, allowing them to hear every nuance of a recording exactly how it was intended to sound.

Apple is also bringing Spatial Audio with support for Dolby Atmos to its platform. Dolby Atmos technology allows producers to generate music mixes far beyond traditional stereo, with sound seeming to come from every direction for an extraordinarily immersive listening experience. Thousands of songs are already available in Spatial Audio, while massive amounts of new music will be added as more artists and producers create mixes in this innovative format.

When it comes to the infamously low royalty payout rates from streaming platforms, Apple recently revealed that it pays an average of $0.01 per stream to rights holders. While this may sound extremely small to some, industry experts report that Apple’s royalty rate is twice the amount of Spotify’s, leading Apple to publish the information in an open letter as an illustration of their artist-friendly practices.

Spotify’s Global Launch

Spotify made a big announcement earlier this year when it unveiled plans to launch in 85 new markets. The company now supports more than 60 languages natively following its expansion throughout Asia, Africa, Europe, Latin America, and the Caribbean. Calling the move its biggest concentrated market expansion to date, Spotify now covers a whopping 178 markets globally.

Although Apple Music launched globally from the platform’s onset, Spotify remains the king of streaming, with 345 million subscribers worldwide in comparison to Apple’s 72 million. However, Apple Music is clearly a strong competitor, with an expansive global reach and dedicated user base.

The music streaming industry is shifting its focus toward an artist-friendly, fan-driven ecosystem. As groundbreaking service offerings and superior audio quality features roll out to global streaming listeners, the future of the music industry shines bright with expansion and innovation around every corner.

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