In the old days, when people bought music on CDs, the music industry was focused on making sure a new album had a big opening weekend–kind of like a Hollywood movie. They would make sure the album’s songs were on the radio and on MTV. They would put ads on highway billboards. Maybe you heard the album’s “single” on the radio, and thought it was pretty cool, and then you decided to buy the CD. That happened to me many times back in the 1980s. And for some of those CDs, I got tired of them pretty quickly and I just left them on the shelf. But the music company didn’t care how much I played the CD; they already had my money.
The Internet has changed the music business dramatically. For years now, people have been buying digital downloads of single songs for 99 cents, instead of entire albums. And today, people aren’t even buying the digital download–they’re just renting access to song libraries for a fixed monthly fee. When you sign up for Spotify, each time you listen to a song Spotify pays the record label a fraction of a cent. How could the record label ever make as much money as if you paid 99 cents for the song download? To break even, you’d have to listen to the same song at least 99 times plus.
In a recent study by the Wall Street Journal, data showed that one major record company makes more per year, on average, from paying customers of streaming services (like Spotify) than from the average customer who buys downloads or CDs. How could that be, when almost no one is going to listen to the same song 100 times? Well, think about your life over the last five or ten years. For your most favorite songs, you probably listened to them a lot. And the data shows that’s true. In the Wall Street Journal study, it took 34 months for (anonymous) one indie rock album to make more money from streaming than from sales. Another album, by a male rapper, broke even in four months. And what happens after the breakeven point? People keep streaming their favorite songs, and revenue continues to climb. But album sales only keep going down.
The biggest exception was with pop acts, which tend to rely on lots of advance marketing and get almost all of their sales in the early days. Under the new streaming model, those acts almost all lose money–because they don’t have the kind of staying power where listeners keep listening to them for years. The study concludes that the nature of musical creativity will change:
The lesson for record companies and artists appears to be: making disposable hits may once have been a viable business, but new technology could demand tunes built to last.
On this day, Christmas Eve, I can’t help but think that Christmas songs will do well in the new model, because people listen to them over and over again, year after year.
