Are Paid Streaming Services the Future of Music?

CDs have had their ups and downs. Scratches that made them impossibly skippy, broken cases, awkwardly stacking them on top of your filled-to-the-brim CD holders only to have them topple over with a clatter that made you cringe.

Even with all of those faults though, there was still nothing quite like owning CDs. Having your favorite music displayed for all to see, picking certain favorites to play in your stereo or to remain permanently in your car. The booklets, the artwork, pouring over all of it upon first buying an album. It was so fulfilling.

Of course, digital music has its perks too. All of your favorite music right there at your fingertips, a similar fulfillment watching your iPod’s storage fill up. When digital music first came about, it was new and exciting and there was nothing quite like it. Nowadays people buy music off of iTunes because it’s convenient, and there’s no dealing with the annoying imports from your CD.

Despite their differences, both formats have their advantages. But both are about to be replaced by something even more convenient.


Online streaming has been catching on for a few years now, but with Spotify, it’s reached a new level of popularity. Pandora was nice, but the free form only allowed you a limited number of skips per hour. You heard a lot by your favorite artists, but you could never pick exactly what you wanted to hear. Other music streaming services were similar, or came with an unrealistic subscription fee. However, Spotify offers its free users thousands of discographies for free, with next to no limitations if you’re using their desktop app. If you’re using the mobile app, you occasionally deal with songs you don’t want to hear, and you can’t listen to an album or playlist straight through – it’s always shuffled. But more or less, it’s the same.

However, Spotify has come under a lot of pressure. Most of their revenue is made up from advertisements and subscription users. With 60 million active users as of January 2015, and 25% of them being paid subscription users, this can translate to a lot of moolah. However, a lot of that cash probably goes back into maintaining and advancing the Spotify platform.

Well, let me rephrase. The part of their income that doesn’t go into paying license fees and the actual artists who create the music we love goes back into maintaining the service.

In the last couple of years, Spotify has come under scrutiny for how much they actually pay their artists. In 2015 alone, Spotify paid more than $300 million to artists and record labels. The estimate is about $0.007 per stream, but some artists could be making more or less depending on their popularity and their royalty rates. To help clear the issue up, Spotify gives the following equation:


Even with the controversy surrounding how Spotify pays artists, no one can deny it’s had a big impact on piracy – something that only exists because people can’t afford to consistently buy new music, but want to enjoy it with no restrictions. Acting as a mainly free service, with as much freedom as iTunes if you’re a premium user, Spotify provides an effective solution to the problem of piracy. A report done by the European Commission backs up Spotify’s claims of being a solution to piracy. However, the study did point out it comes with a price. As Spotify’s music streaming service keeps growing bigger, digital music sales are going down as well. There’s still a lack of people actively purchasing music, but they’re not pirating it at least.

“Consistent with the existing literature, our analysis also shows that Spotify displaces music piracy. Given the current industry’s revenue from track sales ($0.82 per sale) and the average payment received per stream ($0.007 per stream), our sales displacement estimates show that the losses from displaced sales are roughly outweighed by the gains in streaming revenue. In other words, our analysis shows that interactive streaming appears to be revenue-neutral for the recorded music industry.”

  • European Commission

The result is a sort of neutral stalemate. Piracy is down, but so are actual music sales. Even though the numbers (so far) aren’t really anything to be too worried about, the music industry is freaking out. People are trying to figure out ways to make up the difference.

The answer it seems is to limiting streaming to premium users on Spotify. Taylor Swift – before her famous pull from the streaming service – was MuseDronesCovertrying to work out a deal where only premium users would be able to listen to her songs. Even though a deal couldn’t be worked out at the time, Spotify has said they “would test and track usage of the ‘premium’ approach if it was introduced for certain artists.” The service has played a little bit with this idea already. “The Globalist,” a ten minute track off of Muse’s latest album Drones, was originally only available to premium users but is now available to everyone.

However, Spotify seems fully committed to having a mostly free service. Artists would make more from premium listeners, but Spotify attracts more paying members through their free service and deals than one would think.

Subscription only services like Rhapsody and Tidal (if anyone remembers what that is) are more appealing to many artists and people in the music industry because they make more from the paying users. However, Rhapsody is losing traction and Tidal never took off. It’s Spotify free format that makes it stand out and more appealing as a paid service.

With Spotify making streaming a more popular channel for music than both piracy and downloading music, it’s highly possible that in the future, the music industry might look to make the full transition from digital downloads towards regulated or subscription streaming. Maybe via Apple Music?

What do you think? Would regulated, paid streaming catch on like Spotify’s free service did?

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