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From villain to hero: How streaming is reviving a dying music industry

LiveMint logoLiveMint 09-06-2017 Bhanuj Kappal

For the greater part of their existence, streaming services like Spotify and Pandora Internet Radio have been vilified by artists and music labels alike, largely owing to the low royalty payouts they offered. In 2013, Radiohead frontman Thom Yorke infamously called Spotify “the last desperate fart of a dying corpse”.

Today, these same services are being hailed as the saviours of the music industry, although musicians still have a problem with royalties. Mass adoption of streaming services is the biggest factor behind the global music industry recording its second straight year of growth after a 15-year streak of straight decline. In the US, paid and ad-supported streaming generated 51% of revenue in 2016, overtaking both physical sales and digital downloads. In India, the digital music industry—downloads and streams—is estimated to be generating more than 70% of the Rs12.2 billion music industry’s overall revenue, according to the 2017 “Indian Media And Entertainment Industry Report” by KPMG India and Federation of Indian Chambers of Commerce and Industry (Ficci).

Home-grown streaming services like Saavn and Gaana have been joined by global giants Apple Music and Google Play Music, all scrambling for a share of the monthly active users in India—the report puts the figure at approximately 60 million. As smartphone penetration grows and data costs plunge, that number is expected to grow considerably.

“The real inflection point happened last year, thanks to the penetration of 4G,” explains Prashan Agarwal, chief operating officer of the Times Internet-owned Gaana. “You could finally listen to high-quality streams over your mobile data connection without it being patchy.”

This growth has been accompanied by a shift in the attitude of major labels. Till a few years ago, Indian labels—intent on retaining control of their catalogues—remained deeply suspicious of these upstarts in the technology space.

Today, they have recognized streaming services as a key ally and one of their biggest potential sources of revenue in the coming years. “When digital came in, we were not prepared at all,” says Vikram Mehra, managing director, Saregama India Ltd. “It seemed like the worst possible thing because it was giving rise to piracy at a very rapid pace. But when you start looking at the digital space from a different perspective, you realize it gives you an unparalleled reach.”

One of the first Indian firms to digitize its catalogue and make it available online in 2007, Saregama is now reaping the benefits. Last year, it saw 106% growth in revenue from streaming services. The firm is also using data from digital services to fine-tune its analogue offerings.

Online streaming looks like a win-win for listeners, platforms and major labels, but where does that leave the artist? Royalty payouts per stream remain abysmally low. This is a problem especially for independent musicians with smaller fanbases. Globally, Spotify pays $0.0038 per play to unsigned artists, and Apple, $0.0064. Indian streaming services don’t share figures, but they may be even lower. These aren’t numbers that would fill your accountant’s heart with joy. Indian indie artists and labels remain optimistic, however, about the potential for streaming services.

“With streaming, even though the sums they pay per stream are very low at the moment, I feel that over a period of time it adds up,” says Dhruv Singh, who runs the Delhi-based independent label Pagal Haina Records. “Personally, I feel that in the long term it’s almost better than just getting paid a paltry Rs10 for a one-time download.”

“In the short term, streaming services may not be a big revenue source,” adds Keshav Dhar of progressive metal band Skyharbor. “But in the long term, they are fantastic for getting your music out to people, which is the main thing.”

In recent years, streaming services have been looking at ways to tweak their business models so they can pay artists more. They are working to nudge users from the free ad-supported tier towards subscriptions. They are also encouraging artists to think of streaming as a way to build audiences and use the consumer data they provide to drive fans towards revenue-maximizing avenues such as live shows and merchandise. Discoverability is the in-vogue buzzword and independent artists, at least, are buying in.

“If you look abroad, Spotify is basically where everyone is going to discover new music, it’s where labels are looking for potential candidates to sign,” says Singh. “Getting on the Spotify Discover playlist is almost more important today than getting on the Billboard Top 100.” Saavn is taking things one step further. With initiatives like Artist In Residence and Artist Originals, it’s taking on some of the traditional roles of the label, financing recordings and music videos for independent artists and using its marketing machinery to give them visibility.

It remains to be seen whether these initiatives—along with the projected growth in music-industry revenue to Rs25.4 billion by 2021—will translate into an economic windfall for Indian artists. Recorded music may never be as significant a source of revenue as it once was but Dhar, Singh and others are using the potential of streaming services and digital music distribution to think of new ways to monetize their music.

“We cannot keep on lamenting about how the past was glorious,” says Mehra. “The fact is that the present is offering a new set of opportunities and people who are smart enough are going to grab them.”

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