To stream or not to stream?

Free music online can represent a challenge for artists and music industry, or an opportunity for new business models.

by Amélie Drouet and Hanna Wolf

On the internet there is a tendency of getting access to almost anything for free. Including music. As the phenomenon of streaming gains strength worldwide, it is seen as an opportunity and a challenge for those attempting to make a living of music industry. As artists, bands and labels seem to be lost trying to find a direction for this new business model, all solutions seem to point to the north.

Access to music online is a trend. In 2014, 46% of the global music revenue was digital, according to IFPI, an international organisation that represents record companies. In Denmark, this kind of service amounted for 58.5% of the country’s music revenue – and the country is one of the few who has actually seen a growth in their music revenue last year.

The Nordics, pioneers of streaming

When it comes to mastering the art of making business from streaming services, Denmark is not alone. According to Rasmus Pedersen, PhD fellow at Roskilde University, the Nordic countries are ahead in this field. The history backs to 2008, when two streaming services were launched: TDC play, in Denmark, and Spotify, in Sweden, which has now more than 60 million active users worldwide. One year later it was time for Norway to launch its own service, and that is when WiMP was born. Today streaming is number one source of revenue of music industries in these countries. “They have a broader band penetration and people are quite open to new technologies and trying out these new ways of listening to music”, Pedersen says.

One of these new forms of listening to music might actually be paying for it – at least in Denmark. According to a report released by Koda, a non-profit collective from Denmark that represents nearly 40,000 composers, songwriters and music publishers, 45% of Danes deem free music as important. This represents a drop in relation to 2011, where they represented 55% of the population.

Another tendency in Nordic countries is the decrease in illegal streaming. An analysis carried out in Norway showed that legal services have almost obliterated the illegal, and the same trend seems to be happening in Denmark, where since the launch of Spotify, illegal services started having less reach. At this point there is almost no illegal service left in the country.

But Danes still value free access to music. According to Niels Mosumgaard, Chairman of the Board at KODA, Youtube is the largest music provider in Denmark, but 500.000 streams pay less than DKK 1000 to those who created the music. And that’s not enough, he says.

Although the music industry is making more money by streaming, this does not mean that individual artists are following the trend. One of the reasons, as Pedersen points out, is the enormous amount of music available to listeners and the fact that it spreads the consumption over a lot of different artists. Spotify has more than 30 million songs whereas in a store like Fona, the catalogue offers 20.000.

In the current model of payment, “pro rata”, streaming services set a fixed share of their revenue for their rightholders and each track receives a fraction of the total payout that is proportionate to the track’s share of total streams on the service that month.“There are users that listen to 1000 songs (A) or 100 songs (B). Listener B would end up paying for some of A’s listenings,” Pedersen simplifies.

It’s not about the money

Despite the difficulties in profiting from this service, being part of it seems inevitable. “You will find few Danish artists who do not make their music available on the music streaming services”, says Andreas Dalvad Hansen from Koda.

Photo: Josefine Nete Bjørnbak Eliasson

Benjamin and Albert from “Benal”. Photo: Josefine Nete Bjørnbak Eliasson

Following this trend, two Danish artists, Benjamin and Albert behind the name Benal, seem to be aware of pros and cons of streaming, especially for unknown bands. “It’s easier to gain access to a bigger crowd, and this larger group of people has the power to give your music a go. At the same time, it’s harder to hit people with a big clean-cut hit record”, say Benjamin and Albert. “Making money and music are two very different things. We don’t worry that much about the money when we put out music, I’m sure our record label will get the best out of it.”

Vinyl is the new black

Apart from streaming its songs, Benal also decided to release their new album, Opstigning (“Ascent”), in a vinyl format. “Putting out a vinyl is a cool thing nowadays. It was our record labels idea, but when I saw my mothers proud eyes I felt like it was a good thing”, one of the band member states. And their decision seems to be part of a growing, counter-tendency: in Denmark, vinyl sales augmented by 27.9% between 2013 and 2014. According to Rasmus Pedersen, this is the result of a combination of a fashion trend and the search for quality. Despite the local trend, the question on how to make people pay for music – and artists profit from sales of their work – remain open worldwide.

Streaming in the spotlight

In trying to address some of the key issues for music industry, experts from different countries will get together in Aarhus during  SPOT+, the business-oriented arm of  SPOT festival. Journalists, executives, researchers and many others will joint the main debate about streaming and the challenges and opportunities music faces nowadays. The discussions will focus on the implications for labels, artists, songwriters, as well as discussing the future of music as a business model. On Saturday, Rasmus Pedersen and Niels Mosumgaard wil debate political challenges of the straming-income. The same day, Benal will play at the Domen stage.

Amélie is a French journalist and one of the Editor’s for Student Life section. Hanna is a German journalist and one of the editors for Society section.