Is ‘Free’ Music Really Free?

FFirst came the vinyl record. Then came the cassette tape, followed shortly by the CD. Then Napster ushered in the era of digital music, to be capitalized on by iTunes and Amazon. And now with Pandora, Spotify and a host of other music-streaming services are revolutionizing the music world and how consumers access music.

These music-streaming sites are gaining traction as the way to listen to music as the services are often offered for free. No longer necessary to pay per song or pay for a full album, playlists and favorite songs are at your fingertips as long as the site has licensing rights to that artist.

As these music-streaming sites provide legally licensed music, the industry generally embraces this latest incarnation of disseminating music; however, with every change comes the question of how this impacts the music industry as well as its artists. The relatively meager amount of money earned by artists as royalties has drawn concern about this model.

How the streaming sites are able to offer music for free

Most music streaming services are able to offer the quantity and quality of music for free through advertising, paid subscriptions and keeping royalties low.

While basics and availability of the artist are the same, regardless of type of subscriber, free users may have their playback interrupted with sponsored messaging or banner ads appearing on the site. Premium options usually have fewer, or no, ads and greater versatility in usage – like being able to take your music with you – but it comes with a small fee.

Besides generating revenue from advertising and subscriptions, most music streaming sites keep the royalties very low. This allows them to offer a library of music from a diverse range of artists for free to consumers. But what does this mean for individual artists who may rely on royalties as an income?

State of royalties

Artists’ record royalties have traditionally been a percentage of a sale price. For example, for a 99-cent iTunes download, the majority of the sale goes to retailer or website, with a fraction of the purchase price trickling to the record company, producer, songwriter and performer, often netting the artist as little as 7 to 10 cents.

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With the new method of streaming music; however, the already meager-seeming cents to the dollar reduces to even less. Music streaming sites, such as Spotify and Pandora, pay fractions of a cent to record companies and publishers. An even smaller fraction goes to the artists; however, these payments accrue for each time the song is listened to, unlike the one-time sale of a song on iTunes or Amazon.

Whether or not these micropayments add up to anything substantial remains to be seen. Big pop stars can net millions from their hit songs. Even at $0.06 cents a viewing, if a song is listened to 1.2 billion times, as was the case with Psy‘s viral video “Gangnam Style” on YouTube, the artist can earn $8 million dollars from the streaming site.

Unfortunately, the average artist may make as little as sixteen hundred dollars over a period of 6 months, despite having a song that played over a million times during that time period.

Is free music sustainable?

Would this ability to access songs and albums at no cost cut into the sales of CDs and downloads, or potentially replace this form of music ownership? For artists that rely on royalties for a living, this becomes a genuine concern as many artists are unable to survive on the current state of royalties.

Some experts in the industry believe that as more people jump on the music streaming bandwagon, royalty rates will climb as well. Music streaming sites that benefit artists are already growing to meet the demands of consumers, songwriters and performers. When we look more closely with every change in the music industry, when a new format was introduced, royalty rates started off low. As the new format became mainstream and demand increased, the royalties increased. Is that how the music industry will survive this latest change? Or, is this new system unsustainable, and other changes, like how royalties are structured have to happen.

The streaming music revolution may be making music more accessible to people worldwide, but keeping musicians in their bread and butter is important too. How the music industry will be whether this latest change in format remains to be seen.

Marcela De Vivo is a freelance writer with a background in online marketing. As a music lover she loves covering music industry issues, and examining the challenges faced by the industry in an increasingly digital, open source world.