Taylor Swift, Streaming And The Changing Tide

Taylor Swift made big waves over the weekend with her open letter to Apple protesting it should pay for its 3 month free trial.  Her voice was just one more following protests from across the indie community of which Swift and her label are both members. But it turned out that her voice was the loudest and Apple’s Eddy Cue swiftly announced a u-turn on Apple’s free trial pay outs. This is just one more twist in the much bigger streaming story but it does highlight some interesting dynamics, not least of which is how Swift’s worldview differs from many of her contemporaries.

Taylor Swift’s Sales Outlook Is Surprisingly Old School

As paradoxical as it may sound for such a digitally savvy artist as Taylor Swift, she is in fact from the old school when it comes to recorded music.  Swift started her career so early – she signed her first label deal when she was just 14 years old – that she is effectively further into her recording career than most successful 30 something artists.  So she is an album era artist who, with her label Big Machine, managed to build a long-standing successful music sales career.  Streaming, with all of its substitutive impact on sales, does not fit well with the Swift / Big Machine model.   In many respects Swift’s recorded music worldview has more in common with artists of Coldplay’s generation than it does hers.  The contrast with successful contemporary mainstream pop artists is stark. The take of Ed Sheeran (who is just one year younger than Swift) on the role of recorded music is “I’m in the music industry to play live. That’s why I make records” while Calvin Harris (currently romantically linked with Swift) is famously a co-owner of streaming platform TIDAL.  Both of those artists have been supremely successful on Spotify and neither has a decade of platinum selling albums behind them.  For them, streaming is simply how it is and they are learning how to make that work.

Streaming Is Fundamentally Substitutive

None of this is to belittle the hugely disruptive impact of going from a sales model which guaranteed up front revenue to an access model where revenue is fractionalised over many years.  In the sales era a purchased album generated $10 of gross revenue whether it was listened to once or a thousand times.  In a streaming service an album that is listened to once generates $0.10 and only reaches $10 when listened to a hundred times.  If you are a superstar artist you can probably swallow the near term pain because a) your streaming volumes are in the billions so the pennies add up and b) you make the majority of your money from playing live.  If you are a smaller artist the outlook is bleaker for getting through the transition period i.e. until streaming services are big enough to ensure a high tide rises all boats.

Live Is Where The $$ Are For Superstars

Interestingly for Swift, for all her sales success, live is also where she makes her money.  She ranks as the highest earning artist on Billboard’s top earners list with $39 million but $30 million of that came from live.  She explains in her post that “[I] can support myself, my band, crew, and entire management team by playing live shows” and that she is raising her voice for “the new artist or band that has just released their first single”.  This may well be the case but she is also very much doing this for her label Big Machine Records (which doesn’t get to benefit in any truly meaningful way from Swift’s live revenue).   Swift’s rise to prominence and continued success is intrinsically linked to that of her label Big Machine Records and it is fully understandable why she has been so perfectly aligned with Big Machine’s stance on streaming.  But it is a position nonetheless.

Apple Doesn’t Need Any Commercial Bail Outs To Launch Apple Music

None of this though detracts from the core issue at stake here, namely Apple not paying for a 3 month free trial.  Apple is in the business of selling music in order to sell hardware.  Apple’s primary concern is not what % of iTunes sales become substituted by free trials (near term) and subscriptions (long term) but instead how it helps them gain and retain device buyers. Swift, Big Machine and the rest have very good reason for being very cautious with Apple’s streaming strategy.  Apple is the leading source of digital music sales and accounted for approximately $2.8 billion of music sales revenue in 2014, or 40% of all digital music revenue.  If Spotify messes up a free trial the labels risk slowing the rate of new streaming revenue growth.  If Apple messes it up the money that keeps the lights on is at risk.

Apple doesn’t need any financial assistance in launching Apple Music (it does after all have $178 billion in cash reserves) but it does need careful attention from labels and artists alike to ensure it gets the strategy right. Whatever the outcome though the streaming transition is an inevitability and Taylor Swift is no more able to hold it back than King Canute was able to hold back the tide.

6 thoughts on “Taylor Swift, Streaming And The Changing Tide

  1. $0.10 x 10 = $1.00, $0.10 X 100 = $10.00. So an album only need be streamed a hundred times (not a thousand, as claimed in your third para) to generate the same revenue as one sale. Of course, the artist might only get, say, 10% of the revenue (though not in Taylor Swift’s case, I’m sure), but that would apply equally whether it is a stream or a sale.

  2. I’m torn by her statement. On one hand she’s right: why should artists/producers/labels subsidize Apple’s customer acquisition strategy? The thing I don’t like is couching it in the name of struggling artists. Up-and-coming/independent artists aren’t making any significant money from streaming anyway. The streaming services are really a discovery/promotional tool to sell experiences (like live shows). I’m not suggesting that these artists should just roll over for Apple, but it’s not as dire as Taylor is presenting it.

  3. David – thanks for the catch – oversight on my behalf and changed. In royalty income terms for an artist though the ratio is more pronounced as many are on on 15% royalties.

    iamschonne – I hear you. It’s a hugely nuanced issue. But Apple clearly wants to become a platform for breaking artists so they need to think hard about how they get to there (i.e. how much they take artists along as partners). What is intriguing is the speed at which strategy superficially appeared to be switched. Apple isn’t in the business of making snap decisions. Read into that what you will….

  4. I am the owner of an independent recording label and I have had to make a hard decision about the streaming services. I have decided to only release a track or two of an album to the streaming services as singles and no longer release full albums onto the streaming services. If a listener wants to hear the whole album, they’ll have to purchase it either by buying a CD or through purchased download. I want to offer my policy as a suggestion to other independent artists and label.

    http://www.sidscape.com

  5. Pingback: Crossing the Streams: Apple Music’s Swift Coup | A Far Out Sound

  6. Pingback: Apple Music, Pharrell Williams & The Exclusives Wars

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