How streaming is changing the music industry

Nova Safo Jun 10, 2015

How streaming is changing the music industry

Nova Safo Jun 10, 2015

By the time Kina Grannis signed with a major record label, she already had a small but loyal online audience of about 10,000 people.

They had helped her win a major online music video contest. The prize was an appearance in a 2008 Super Bowl ad and a record contract.

Months later, when Grannis met with her label, she found out that what had seemed to be a dream come true was actually very different.

“They had a plan to have me rewrite an entire album, have me co-write it with professional songwriters and be something that they approved of,” Grannis says. “Which I get. But for me, music is so personal, so important to me, that the idea of sitting awkwardly in a room with strangers and having to create with them, in a way that was very unnatural to me, did not seem right.”

Grannis says she also did not want to throw away a number of songs she had already written, which were proving popular on YouTube.

“My music is me, and the idea of having to sacrifice all of that to do it their way didn’t make sense,” Grannis says.

So, instead, she did something that she had never imagined just a couple of years earlier when she was struggling to establish herself and get noticed. She dropped the label.

“It became very clear to me that I would be able to find people, and I had found people in the world, that did want to hear my music,” Grannis says.

Grannis’ gamble paid off. Today, she has more than 1 million subscribers to her YouTube channel, where she regularly releases music videos.

Streaming music is transforming the music industry. Apple, which announced this week that it is also entering the streaming music universe, is the latest in a number of companies that are changing the business model from one of purchased content to one of, essentially, rented content.

But while the business model is changing, the path between musicians and audiences is expanding. Artists have a lot more avenues today, compared to even a few years ago.

“More new music will be discovered than used to be the case, when relatively few gatekeepers were controlling relatively tight playlists,” says Larry Miller, a professor at NYU and host of the podcast Musonomics.

“It’s now possible for almost any artist to access one of the broad distribution networks that feeds Apple, Spotify, Deezer, Rdio, Pandora and everybody else,” Miller says.

So, getting heard is easier. But getting paid is harder. Musicians, in particular, have been complaining about streaming’s business model, which pays less than a penny per stream. It’s eating away sales of albums and MP3s.

“In prior eras, a small artist, or an independent label … could probably get by with selling 10,000, 50,000 copies of a thing,” says Casey Rae, CEO of the Future of Music Coalition. “Whereas if you translate that to fractions of pennies from streams, it’s much, much harder to pay your rent.”

Fractions of pennies add up, at least for big labels. Last month, Warner Music Group reported that, for the first time, its revenues from streaming surpassed downloads. But, individual artists aren’t necessarily sharing in that bounty. Even Kina Grannis, whose videos have generated millions of views on YouTube, makes little money online.

“Ad revenue for me is pretty small,” Grannis says. “Although YouTube is what fuels the entire thing.”

What YouTube fuels is interest in her as an artist and in concert tours. Those tours generate the most income, Grannis says, including income from merchandise and CD sales.

There’s a lot happening in the world.  Through it all, Marketplace is here for you. 

You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible. 

Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.