Get Off of That Cloud: Is Streaming Destroying the Music Business?

Laura Shin

Cloud MusicMany music lovers welcomed the arrival of the Swedish music streaming service Spotify to American shores in 2011.

Suddenly, people who downloaded the app had millions of songs at their fingertips—tunes that were free to those willing to listen to some ads. Open to paying a $4.99 monthly fee? You’d get those songs ad-free.

Spotify represents a big departure from internet radio stations like Pandora, which allow users to create their own channels based on bands, songs and albums that they like. The beauty of Spotify is that it lets you play songs “on demand,” unlike internet radio stations.

So imagine the horror that many of these music lovers—converts to services like Pandora and Spotify—likely felt when musicians began to detail the paltry earnings that they’d received from such streaming services: fractions of a cent for every play.

RELATED: No More Prices? All About the Pay-What-You-Want Revolution

One particularly striking example was published by Damon Krukowski of Galaxie 500 on Pitchfork: ”Galaxie 500′s “Tugboat,” for example, was played 7,800 times on Pandora [in the first quarter of 2012], for which its three songwriters were paid a collective total of 21 cents, or seven cents each. Spotify pays better: For the 5,960 times “Tugboat” was played there, Galaxie 500′s songwriters went collectively into triple digits: $1.05 (35 cents each).”

Krukowski, who released his first album on LP in 1988, calculated that in order to make the profit he earned from selling one LP back in 1988, his songs would need to be played 312,000 times on Pandora or 47,680 times on Spotify.

It begs the question: Are streaming services on track to tank the music industry?