I have been meaning to write about the NY Times piece on royalties in the age of streaming music. People have talked about how real dollars have turned into digital nickels when music went online and sales went from records to individual songs. With streaming, the argument goes, “the river of nickels looks more like a torrent of micropennies.”
The first big gaping whole in the article was that it made no attempt at unpacking what part of the economics goes to labels versus individual artists. I am a big believer that services such as Spotify should enable individual artists to make their music available directly on the service without being intermediated by a record label. Our portfolio company Soundcloud already makes that possible. The NY Times writer apparently got so much feedback that this wound up being the first point in a subsequently published “footnotes” piece.
A second important point though that is not addressed in either the original article or the footnotes is that we are still at the beginning of a world of consumer surplus. When lots of content is free or nearly free the consumers of that content get a lot of benefit. Only once we provide new and innovative ways (above and beyond pay for the song and/or pay a subscription) for consumers to give back some of that benefit will we know what the new economy actually looks like. Kickstarter is one glimpse of that but there are many more yet to come.
We are at the beginning of the structural change in the music industry, not the end. I am quite optimistic that the end state will look better for artists than before. But much like the changes in the labor market, getting there will be painful.