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

Laura Shin

Caldas has some insight, as he told “Spotify doesn’t pay artists. They pay labels.” Not only do labels vary in the amount that they pay artists, but artists have also claimed that labels haven’t paid them what they’re due.

Another thing to keep in mind is the significant lag time beween the plays and the payments. Caldas says that payments, which first go to the labels and then to the artists, could be for streams from a year ago, when Spotify had a much smaller subscriber base.

Caldas also speculates that the amount an artist makes from one ardent fan playing a song over the course of his or her lifetime could end up exceeding the amount that he or she makes from selling one CD. While a CD is a one-time transaction, every time that a song gets played via a streaming service, the artist will be paid—even if it’s just half a penny.

Streaming: Here to Stay?

Despite the controversy over streaming services, many musicians (even those who have been vocal in this debate), subscribe to Spotify. Since even musicians admit that streaming services have a place in their music-listening universe, streaming is likely to only get bigger.

And, as the services grow, payments to artists should also increase: As Donald S. Passman, a top music lawyer and author of “All You Need to Know About the Music Business,” told The New York Times, “Artists didn’t make big money from CDs when they were introduced, either. They were a specialty thing, and had a lower royalty rate. As it became mainstream, the royalties went up. That’s what will happen here.”

So far, the future is looking good for streaming. In Apple’s recent earnings report, some investors noticed that iTunes growth in the last year was a lot lower than analysts expected. As Forbes’ Zack O’Malley Greenburg said, “There’s no denying the trend towards streaming. Though it’s difficult to quantify, some industry sources believe that services like Pandora, Spotify and Rdio already account for the majority of total music consumption. As that continues to become the norm for more music fans, the idea of having a collection may soon be as outdated as the cassette.”

This may be why Apple plans to launch its own streaming radio service—and if that happens, such income “streams” will become a much bigger slice of many musicians’ earnings.