Your article about streaming is misleading, contains factual inaccuracies, and gives bad advice.

I just wrote an article for NewMusicBox about streaming (it has cat pictures and everything). My goal was to provide some practical advice about what to do, because this is a thing that’s happening, and arguing about how good or bad it is doesn’t change the fact that some of us run labels, our jobs are changing, and we need to know what to do.

I see that you take the opposite stance. When you’re trying to get people to do something, the burden of proof is on you. You have not made a good case. Let’s address some specifics from your article:

1) “With virtually no consultation, musicians and independent labels are being led down the path of the streaming music construct controlled largely by technology companies.”

No music company was forced to agree to anything. Let’s be clear about that. They do it because they think it is a good deal. There is a chance they have more information at their disposal than you do.

2) “Streaming royalties for these services remain mired in mystery. Nobody is privy to how royalties are calculated or assigned to different players in the streaming ecosystem.”

Spotify explain how it works on their website. You could have Googled that.

3) “In what other industry would suppliers offer their goods to distributors without being told precisely how much they’ll receive for their inventory?”

The CD industry. Deals with CD distributors often work on a percentage, with final pricing at least partially at the discretion of the distributor. This is what I meant when I said “There is a chance they have more information than you do”. I’d encourage readers to make up their own minds, but it looks to me like you have no idea what you’re talking about.

4) “It’s clear Apple’s hand was forced and it had to enter into the streaming world, just to maintain credibility and market momentum for its device ecosystem.”

The download market was worth $3.5bn last year (2014) and streaming was worth $2.2bn. Might I humbly suggest that an alternative explanation is that (a) Apple customers would like to use a streaming service and (b) Apple see this as a way to make a lot of money?

5) “‘Streaming makes it very difficult for cult bands who sell 1,000 copies of each release,’ the noted British guitarist and composer Matt Stevens told me. ‘If 1,000 people stream an album 10 times, we probably make a few pennies versus 1,000 download sales which create a model that will pay for modest recording expenses.'”

If everybody who might at some point in the future stream a song from your album is also willing to buy the whole album right now, then you are in a very unusual position indeed and you might be well-advised to avoid streaming services. Such an extreme example of inelastic pricing, though, is in my experience unusual.

6) “Musicians and independent labels jumped along for the ride when Spotify, Rhapsody, MOG, and the rest of the streaming companies essentially constructed services with payouts so low, the end result isn’t much different than piracy. That, however, doesn’t hold true for the core investors in these services, which include the old major label guard. For instance, Spotify’s key backers include Warner, Sony and Universal.”

You expect us to believe that these companies – that’s right – these ones – have conspired to depress the price of music? Ok. By “key backers” you mean “minority shareholders”.

7) “…as the services scale, the streaming royalties actually shrink. Only ad and subscription revenue grow for the services, not royalty payouts.”

This is misleading. I refer you to this graph, which you can find in context here:

If the per-stream royalty has fallen, it can only because subscribers are, on average, listening to more music. Would you rather they didn’t?

8) “The grand irony of all of this is that no streaming service is yet profitable.”

This is simply not true. I have worked on profitable streaming services. You just don’t know about them. If the big ones aren’t profitable, it’s because they are doing something called “investment” which I have explained before here.

9) “Because of the incredible complexities of licensing and the ponzi-inspired nature of these organizations, money is rolling in.”

Also because people like them and they pay a lot of money to use them. Most of the money gets paid to labels. What happens next is between them and the artists. Just like with all other music sales.

10) “In Spotify’s case, they are looking at a giant monetization event in the form of an IPO or acquisition. If either occurs, everyone — including the major label backers — will cash out, and all that will be left is a feeble shell that will eventually collapse.”

Or, possibly, to build a long-term sustainable business that generates a profit for its shareholders while satisfying its customers and paying a fair price to its suppliers. One of the two. Unless your doomsday scenario has no expiry date, there’s an easy way to find out which.

11) “It’s obvious virtually all the insiders of the streaming companies see this model as a short-term, unsustainable play.”

No it isn’t. You see that there? I made that case with the exact same amount of evidence as you produced in your argument to the contrary.

12) “My advice is for musicians and labels to opt out of the commercial streaming services…”

Why the hell would anybody follow your advice? It is founded on falsehoods and unsubstantiated accusations.

13) “…and seek out other options available to them, such as Bandcamp and PledgeMusic, which appear to remain relatively honorable territory.”

Is this an aesthetic argument? They seem like nice indie guys? Is this what you’ve got?

14) “The big question musicians and independent labels need to ask themselves is why allow these companies to determine the value of your music?”

To reach a big audience. That’s it. Do it, don’t do it, it’s up to you. It’s the same dilemma you’d have doing a deal with a supermarket chain or a big box retailer: your products reach more people, all music is priced the same and that price is lower. Cut all the crap about conspiracies, and this is a straightforward business decision about pricing.

15) “You can send people interested in what you do anywhere to access your music.”

True, but people who have never heard of you won’t go looking for something they don’t know about in a place they don’t go. There’s a balance to be struck here, and not all records are expensive to make.

16) “The inevitability is musicians and labels are eventually going to be on their own again as the streaming services begin to collapse one by one across the coming years.”

If this is going to happen anyway, what are you so worried about?

17) “It’s time to plan for that future by establishing your own model now, apart from these companies.”

Better advice would be to seriously consider what part, if any, these companies play in your strategy.

18) “Reclaim your independence and ensure your music benefits the people that really believe in it, not soulless streaming companies seeking to take you for everything you’ve got.”

By all means retain (or reclaim) your independence. It matters, and it’s my job to help people do this. Part of that means not making business decisions on the basis of the unsubstantiated ramblings of some blowhard with a blog and the rhetorical flair of a low-budget Glenn Beck. These soulless companies pay out 70% of their revenue to rightsholders, they’re playing a long game, they know what they’re doing and labels participate because they see it is a logicial step towards more sustainable revenues. If you don’t accept this then prove me wrong.

If major labels are screwing people (which would hardly come as a massive surprise), then investigate that. Talk to some artists, collect some evidence, make a case, show people which specific clauses in the contracts are causing the problems. Find somebody who found a way round this and share what they did. That would actually be a useful thing that resulted in tangible action. Produce some evidence or shut up, because right now you have nothing but clickbait bullshit and it is not helping anybody.

My last listicle wasn’t unhelpful enough. They’re easy to write*, so I did another one. Here’s how to ensure that the contract you sign is a bad one. (more…)

I’m often astonished at the extent to which people who run record companies can be bad at maths.

Yesterday I sat in a meeting where it was suggested that the success of a promotion might be measured be checking the sales of the records in it before, during and after the promotion. It’s not a totally barmy approach, but without comparing the sales of the records in the promotion with sales of some other records over the same period, any increase or decrease might be the result of normal sales patterns or overall fluctuations in the market.

Still, that’s not nearly as daft as this thing I found today. The headline is “Which music services are growing, which are shrinking” which would make for a pretty interesting article if it actually told you the answer to that question.*

It’s not easy to measure this unless you sell music on these all the services** so the author has instead used Google Trends to find out which services people are searching for. In the medical world, this is known as a surrogate outcome. The thing you want to measure is difficult to measure, so you measure something related instead. It can go wrong.

The trouble is that a related variable isn’t necessarily strongly correlated to the outcome you care about. If you’re gong to use a surrogate like this, it’s a good idea to check if it’s really easy to find examples of it not working at all well. The examples below are literally the first things I searched for.

According to Google Trends, Steve Jobs was never more in demand than the day he died, and is still not as unpopular as  when he was alive (that last bit might be true).

Perhaps its fairer to compare Google Trends with a better-known indicator of company performance: share price. Here, Berkshire Hathaway’s search popularity has been in steady decline for the best part of a decade.

Don’t tell their shareholders that, though. According to the NYSE, business has never been better.

Meanwhile, at Yahoo, search interest hit a high plateau in 2010:

And the stock price is doing almost the exact opposite.

Pretty much the entire foundation of all scientific progress is to come up with an idea and then try to prove it wrong, because if you can’t prove it wrong, you might just be on to something. If the author had made even a cursory attempt to check how poorly search popularity was correlated with company performance, I think he might have offered a stronger disclaimer than:

“Of course, these search trends are not the same as having an actual measure of activity. Millions of people play music on Spotify or iTunes every day without performing a search. However, until we can get raw user numbers from every music service, this is probably about the closest we can get to understanding which services are growing and which are shrinking.”

When I wrote “almost everything you read about the state of the record industry is, at best, totally useless” this is just the sort of thing I was talking about.

Footnotes:

* Perhaps I should avoid reading articles with questions in the headlines. If they ever answer the question, it’s because the answer is “probably not”. This is often the way with rhetorical questions.***

** If you don’t sell music, why do you even care which ones are growing?

*** And did those feet, in ancient time, walk upon England’s mountains green?**** And was the holy Lamb of God, On Englands pleasant pastures seen?**** And did the Countenance Divine, Shine forth upon our clouded hills?**** And was Jerusalem builded here, Among these dark Satanic Mills?****

**** Probably not.