2008 was the year of free streaming music. When MySpace Music entered the fray a little over a year ago, it seemed like the music labels had finally relented, and were willing to experiment with free streaming music to users. The future looked bright.
2009 is the year of reckoning. The European launch of Spotify, which offers users free streaming music on demand, was an affirmation of the trend. Soon Spotify would launch in the U.S., too, the company said.
Things are changing.
Spotify is now saying that they must delay their U.S. launch. They don’t want to launch here with a paid-only model, and the big labels are signaling that they won’t have it. From the NYTimes last month, quoting Sony Music: “We like Spotify as our partner in Europe, but we would like them to move more toward a paid subscription environment.”
And that isn’t the only bad news. MySpace Music is “almost certainly” going to severely restrict free streaming to users, say multiple sources, and move to a paid model. “They are spending $20 million/month on streaming royalties, and that just isn’t sustainable,” said one source with knowledge of MySpace’s relationships with the labels. Other sources have said that MySpace’s royalty payments are much lower, but don’t deny that the service is a cash hole.
MySpace won’t comment on this story, but they have a deadline to all this. The Google search deal is up next year, and $300 million/year in revenue will evaporate. Changes need to happen soon. The last payment of $75 million is due on June 20, 2010.
Sounds like bait and switch to me.
MySpace may want to try running audio ads before they restrict free streaming.
Oh well. Guess it’s back to bit torrent..
whats to stop myspace from resigning another deal with google? google likes being myspace’s search engine and can certainly afford it.
300 Million a year is a nice sum.
I wonder if Google will ever be able to score a search deal with FB or if the Microsoft investment forever barred them from entry.
what year is it?
If it hadn’t been for the free Spotify serv ice to get me hooked I would not have become a paying customer, and would still be getting all my tunes from TPB.
Dude, really?…TPB is your source for music? You could simply use file hosting, but then a gain I don’t think you know what you are talking about.
back to good ol reliable p2p
I hope Spotify sticks with its’ current model. I pay for the premium version (£9.99 per month) and it is fantastic. The record labels need to learn that this is the way forward. Album sales are plummeting and this is the best way for people to discover new music. Even on the premium version I purchase records I really like. So as well as getting £9.99 a month off me they are also getting record sales I wouldn’t have made had it not have been for Spotify.
I’m sure they are getting a lot more premium subscribers with the Android and iPhone applications. It’s great that I don’t have to bother plugging my device into a computer to load it up with more music.
If they get apps out for other platforms too then I can see their subscriber base increasing even more.
For once I’m not sure that it’s the record companies that have to ‘learn’ anything. Surely if companies want to provide ‘free’ content they need to learn how to pay for it by selling enough advertising to do so.
where’s all the posters say Spotify is “different” and will find a way there none exists now?
heh.. a good dose of “I told you so” sucka
dirty truth is that the labels don’t really care for you to “discover new music”, that’s not the business they’re in and never was. Everybody that thought differently is just deluding themselves.
Well, Spotify is different (in a good way) and the US labels are the same as they always were. Thats the problem.
Good. This whole free thing, or supported by advertising crap that people have been touting since forever is just not sustainable!
I have a zune pass and im happy to pay my subscription, if you don’t want to pay then pirate ur music and risk getting caught!
I don’t think I currently listen to anything produced by major labels at the moment.
So I don’t really care what they do.
but they don’t care about you either
I use grooveshark.com pretty consistently now. Its not spotify but its halfway decent for streaming whenever wherever.
How is it different compared to Spotify?
Um, it’s illegal
I see… Can’t load entire albums in play order. Have to go to wikipedia or elsewhere, look up tracklisting and then put them in that order manually. That’s frustrating. Looks like Spotify is still king.
Just put them in whatever order you like. I guess you’re one of those puppets who likes other people telling you what to do. I bet you’re in bed with the labels.
Artists have a track listing for a reason. What if the album is conceptual? Pay for music and listen to it the way the artist intended. If you don’t care then you really don’t have a passion for music and are wasting everyones time.
Its impossible to bring a good music service as long as you negotiate with music labels, you have to ignore them and built an ecosystem which is impossible to control, like this one http://elvirs.blogspot.com/2009/10/decentralizeddistributed-online-music.html
then the labels will come and sign an acceptable deal with you.
no, they’ll just come and sue you, your company, your investors, your dog into oblivion.
that’s why i’m proposing to develop a non-profit, opensource solution that is distributed and decentralized, they wont find anyone to sue
That was the direction of Napster, Kazaa, and many others. There is always somebody to sue.
This isn’t the solution: taking the money out of the market just kills musicians ability to make music their job. A solution needs to be found that cuts away the unnecessary infrastructure and makes the chain between musicians and consumers as short and efficient as possible. What you’re suggesting is fuxxxing the artists along with the labels, and I don’t think you really want that, do you?
Let the artists release what they want to for free to get you interested, and then listen to it on ad supported streaming media like Spotify, if you really can’t afford to pay anything for it.
Free music forever! Down with the corporate dogs!
call skoop
I’ve been really happy with Pandora for a few years. I’ve never understood how they keep the lights on, because I rarely hear ads. And, when I hear ads (in the free version), they are few and far between. I recently signed up for $36/year for the premium Pandora, and it rips. What is Pandora doing right that the other streaming sites apparently suck at?
Pandora is radio rather than free, on-demand streaming like imeem, MySpace and Spotify. Therefore they pay a much lower royalty fee and have a more palatable cost structure.
i personally HATE the Pandora type web radio. It is not real radio. It is simply on demand crap that is uploaded to a dbase and played. I like real radio where the stations are actually programmed by someone who knows what they are doing – no shuffle radio with almost half crap playlists.
as chad said above, i think grooveshark is making a strong push as a stateside free streaming alternative (based in gainesville, fl)
considering how negative investors can be around the term “digital music startup,” i just hope it hasn’t become synonymous with entire space. with rank ‘em ( http://www.gorankem.com ), we never set out to be a streaming destination, but always focused on accelerating music discovery by leveraging those that know the artists the best — their own fans.
lol @ paying for anything on myspace.
Word.
Lala.com FTW!
http://www.imeem.com has free streaming, and they have a ton of music. I don’t know why this site isn’t huge – it is seriously amazing. It’s UI is slightly confusing which is maybe why people don’t realize that there is all this music just there for you to listen to.
Assuming Michael’s source is correct on the $20 Million/month license streaming costs, that works out to be $0.40 per unique visitor/month or $0.035 per visit/month (according to Compete). I am of course assuming that the majority of visits to MySpace are related to music, but I think there are very few other reasons to go to MySpace.
This makes it seem that the labels maybe are not ‘gouging’ as much as is regularly implied, and artists do deserve to be paid for there craft.
However, these figures also allude to the double edged sword of music pricing. The cost is actually quite low, as would happen when you are attempting to compete with free. If MySpace tried to charge $10/month for access to the music library, we’d call it price gouging, and argue that they aren’t providing enough value.
Smaller dollar figures mean we move into a micro-payment scenario, and MySpace would need to figure out an effective way to do this.
What would be the cost involved in managing a micropayment platform for 50 million users?
Essentially, I think they need to find a better revenue stream than a direct pay-2-play.
Dear Myspace
Children don’t have credit cards and most adults don’t spend much time on there your best bet is putting ad’s directly infront of each track unless you don’t want anyone using it at all.
So is the flag lowering on the Freetard Republic finally? Good.
Free streaming sites are no different from Radio.
The internet works very differently from your Boom Box. People will discover music anyways, you can’t force users to watch ads just to HEAR a damn song; while they can download that same song and listen to it as many times as possible.
I wish people would stop looking at streaming sites as “The Savior” for the failing Music Industry. And please guys, WHAT ABOUT THE ARTISTS?
I would like to build ’something’ that will help artists get paid, and allow users to enjoy their music however they please. it is very important that we consider those that make the music that we all enjoy!
and THANK YOU TECHCRUNCH for writing about my favorite topic!
Rafat’s tweet said “Publishers are a large grp to sign up.” This indicates that it’s music publishers, and the mechanical rights that they own, being discussed. Very different set of issues than if it were the labels and sound recording royalties at stake.
Rafat’s tweet: http://twitter.com/rafatali/status/5629518594
Background on music publishers and mechanical royalties:
http://www.alankorn.com/articles/publishing_1.html
I’m more than happy with Lala.
Another industry where technology has left business models in the dust.
A lot of other tweets from Monaco media forum are saying that Spotify is on track for early 2010 US launch. So let´s not get too pessimistic
What is it with you and your constant defence of spotify?
You are not in the real world, the music industry does not have to conform to yours and spotifys view of how things should be!
Get real, spotifys business model as it is in this moment of time was and is half-baked!.
I do think ad streaming can work but it will take a cross industry effort for it to!
“You are not in the real world”
Ok.
Ad streaming alone doesn´t work. Spotify has about almost a million subscribers out of 6-7 million regular users (beside their ad-model). Those are good numbers in “my world”. If you don´t think over 10% conversion rate is good going for a music service, then I really don´t think you have any interest whatsoever in digial markets.
http://8tracks.com
To me it sounds like the RIAA is just trying to control another distrobution channel. Soundexchange is bleeding the industry dry without due compensation to the actual artists. There needs to be a way to cut out all the middle men and let the artists get their royalties while allowing for new types of distribution at reasonable rates. Just my opinion.
Spotify should launch in Russia and China. Areas where piracy is rife and the labels will be happy to get some money.
“Free” won’t ever work for music streaming that requires royalty payments, because that music is not inherently free to begin with.
Artists who treat their recorded works as an advertising tool rather than an income stream are poised to succeed in the new music marketplace. By allowing their songs to be streamed for free to fans and new listeners, they create connections with new fans who otherwise would not hear their music, and ultimately give those fans a reason to buy real goods like CDs, t-shirts, and concert tickets. Unrestricted streaming doesn’t have to involve giving the music away for free. For example, on Uvumi.com, artists and bands can make their music available for streaming with the option of allowing songs to be downloaded, which gives them control over how their music is distributed online. By using free streaming services like Uvumi, and offering CDs for sale at shows and by mail order, and by working with existing platforms like iTunes or Amazon, artists have a real business model that can generate real revenue in spite of old-school record labels and outdated royalty payment systems.
The royalty model is dead, or at least rapidly dying, as is illustrated by MySpace’s rumored $20 million loss per month. Indeed, that model is just not sustainable, but, realistically, artists do not need to play the royalty game to make a living off their creative works anymore.