Streaming offers a bright future – but will it work for everybody?

Independent labels wouldn’t be independent labels without a pinch of cynicism to spice up all that romantic hope.

Yet the understandable early suspicion over the music industry’s transition to streaming seems to have been quietened of late by the big successes: particularly, Spotify reaching 100m active users and Apple Music soaring past 15m paying subs.

Generally speaking – so long as the YouTube fallout doesn’t last indefinitely – there’s a lot of reason for optimism out there.

This hope is backed up by the latest annual report from independent label agency Merlin, which reveals that the body paid out $232m in streaming revenues to members in the 12 months up to end of March this year – up 73% on 2014.

Forecasts suggest this annual figure could even top $400m by the end of next year.

“Looking at the results of our annual survey it is clear that independents are thriving in the new digital economy,” Merlin CEO Charles Caldas tells The Independent Echo.

“Two thirds of them saw their overall business grow year-on-year at a time of great change and transition, which chimes somewhat with the industry statistics we are seeing.

“Additionally, [independent music] performs best from a usage share perspective on the paid tiers of the streaming platforms, which shows that the highest paying consumers are the heaviest consumers of independent music. That has to be good news.”

However, a few weeks ago, we got a sharp reminder that streaming’s not working out for every independent, when historic indie label Ministry Of Sound sold to Sony Music.

Ministry boss Lohan Presencer has long warned of his view that independent labels will be treated increasingly poorly by streaming platforms – especially on their key first-party playlists.

“Although streaming services like Spotify and Apple Music claim to support independents, they are complicit in our decline,” he wrote in a blog article at the end of last year, arguing that streaming’s business model only suited major labels with ginormous catalogues.

Screenshot 2016-06-03 at 19.36.35“Apple Music and Spotify are complicit in [independent label] decline.”

Lohan Presecner, Ministry Of Sound (writing in 2015)

It should be pointed out that, despite Ministry’s well-respected modern A&R force, it has traditionally built its business on licensed tracks from other labels.

That’s possibly why other key players in the independent community take the opposite viewpoint on streaming – that not only are Spotify and its rivals helping democratise music listening, but that independent music actually performs better on streaming services than it ever did in the buy-to-own marketplace.

Beggars Group, for example, recently noted to shareholders that it witnessed a “huge growth in streaming” last year.

Charles CaldasIndependents may get a little muscled out on the pop and chart-driven playlists that Ministry relies upon, but Merlin’s Charles Caldas observes that indies enjoy “deep and heavy engagement” on plenty of other powerful playlists.

This, he says, “gives me confidence that we are finding our own space and a new audience on these services – a space freed of traditional market constraints”.

“That is not to say there are not challenges,” adds Caldas (pictured inset).

“We need to be vigilant in ensuring that the largest companies are not forcing services to make changes to their functionality so as to advantage themselves; that they are not abusing their dominant market share to extract disproportionate value from the market; and that the land grab for distribution rights from major label owned ‘independent’ entities does not suck value away from the sector.”

Obviously [PIAS] agrees with that last point wholeheartedly (!)… but it’s fair to say that the other streaming business challenges mentioned by Caldas have not gone unnoticed elsewhere in the independent marketplace.

Independent label concerns over major label influence are exacerbated by Universal, Sony and Warner’s combined stake in Spotify.

If reports that this joint ownership stake sits at around 15% are accurate, it would be worth $1.2bn of Spotify’s current $8bn valuation.

When we asked Bella Union founder Simon Raymonde how streaming was treating his company in the wake of Ministry’s sale, he told us: “Business is good, but it is all relative, is it not?

“If I was still offering artists the same advances that I was 4-5 years ago, I would be out of business and their options would never have been picked up.”

Raymonde agrees that Lohan Presencer’s wariness of major label playlist domination on Spotify and Apple Music raises some “valid points” – although he notes that there are definitely “small pockets of support” for independent music at the streaming giants.

He adds: “Can we compete with the majors in terms of clout at iTunes and Spotify? No, but why are we trying?

“The slow death of the industry has already passed us by – we are now descended deep into the nine circles of hell.

simon raymonde 77“We will have a virtual streaming account implanted… it will be piped through our sensory organs.”

Simon Raymonde, Bella Union

“We have passed through limbo, witnessed the lust, gluttony & greed of the majors and their cohorts, and probably we are approaching a circle of wrath, to be followed by some well-intentioned heresy and violence, which will drive some into fraud and treachery…”

Heresy and violence aside, it doesn’t require Biblical damnation to think hard about the impact of technology on the future of listening – something else that’s been playing on Raymonde’s mind.

“We will have a virtual streaming account implanted so we just need to think of a song and it will be piped through our sensory organs,” he predicts, with a wry eye on tomorrow’s world.

“There will be a mood algorithm that will detect your metabolism, blood sugar, hormones and aggregate the best ‘sound’ for your current mood.

“The ‘major implant’ will ‘assume’ that everyone sad will want to listen to the shittiest pop music ever to make them feel better. But I would get the ‘melancholy indie implant’ if i was you! It won’t come with so many caveats, terms and conditions… and the music will be a lot better.”

Raymonde’s concerns over where streaming may take the industry in future – and the culture of listening it’s currently weaving – are shared elsewhere.

Wichita’s Mark Bowen points out that we’re seeing an increased marrying of music playlists with specific activities.

The threat, reasons Bowen, isn’t just from the major labels; it covers the very nature of why people choose to listen to music – and what that will mean for the diehard fandom independent music is built on.

BOWEN“Tech companies are positioning music as something to have on in the background while you do something more important.”

Mark Bowen, Wichita

He explains: “Tech companies are positioning music as something to have on in the background WHILE YOU DO SOMETHING MORE IMPORTANT – often involving jogging, it seems.

“For labels who exist because they’re driven to try and expose great new music at the heart of the conversation this is not only anathema but actually scary.

“‘You heard “What’s Going On?’

“‘Yeah did some great washing up to that last week. Really worked.'”

As for the prospect of major label domination of playlists, Bowen fears the increasingly mainstream nature of streaming risks marginalizing independents.

He says: “This was meant to be a paradise of great playlists put together by a clued up audience focused on ‘the music, man!’ instead of marketing spends – [one where] we could genuinely compete with the biggest major releases.

“The current reality is more: ‘Meet the new boss. Same as the old boss.’

“The same issues independents have faced for years at retail/radio/download stores have raised their ugly heads again.

“Playlists are mainly ‘editorial-based’ and – excuse my paranoia – seem to function as just the latest means to promote current major label priorities.”

But the independent music sector is a rich and varied habitat, and Bowen’s view isn’t echoed by all of his peers.

In the latest Independent Echo interview, [PIAS]’s Kenny Gates questions Nettwerk boss Terry McBride’s excitement over streaming – pointing out that not all companies have the catalogue size of the Canadian business (or, for that matter, [PIAS]).

McBride reasons that independents now benefit from a ‘flat world’, where they can closely monitor response to releases anywhere on the planet – and take instant marketing advantage.

Terry McBride“I love streaming – it allows the middle class artist to come back.”

Terry McBride, Nettwerk

He adds that 70% of the streaming enjoyed by Nettwerk’s artists actually takes place on shared (ie. consumer) playlists, as opposed to first-party equivalents.

“I love streaming – it allows the middle class artist to come back,” says McBride. “It allows the artist who before streaming could not sell enough of their records to actually stay at home and make a living.

“When Napster stripped the whole catalogue business away, you had to make it on the first album. The whole chemistry changed. We’re now back to a world where it’s not about that.”

Merlin’s Charles Caldas reassuringly forecasts that, when it comes to the power of first-party playlists on Spotify et al, the streaming services would be mad to deliberately favour major label recordings.

“I can’t see that any service can afford to disadvantage independents in this day and age,” he says. “We now have ten years of data that shows independents performing extremely well from a market share perspective in streaming, and clear evidence that services that try to treat independents as an inferior class fail.

He adds: “This music is not peripheral to the market, it is front and centre, and I am sure that consumers, who are flocking to these services in greater and greater numbers, will be able to smell a rat should service start to stack their offerings in favour of the majors.

“Clear evidence shows that services who try to treat independents as inferior fail.”

Charles Caldas, Merlin

“I’m sure some new entrants will do that, as there is still a lack of understanding of the shape of the new music economy, and a major label sector trying to regain lost advantages.

“But I’m equally sure that those that think the business is shaped as it was in the past and construct their offerings accordingly will go the way that MySpace Music and the other failed services that we’ve seen disappear from the market.

“Our hope is that these services are smart and sophisticated enough to understand that there is a new consumer dynamic, and they need to build offerings that are future-facing – not try to recreate a market that has disappeared.”