Substitute, Not Catalyst

Is streaming music a substitute for music sales? This question is at the heart of an informative article written by Douglas MacMillan over at Business Week. To quote the article:

“Overall music sales have continued their years-long slide. Total industry sales were about $10 billion last year, down from $14 billion in 2000, according to the Recording Industry Association of America. Revenues from digital download services like Apple iTunes and Amazon MP3 are still growing strong, but they’re not generating enough revenue to make up for the sharp decline in CD sales. Overall spending on music is forecast to shrink 4% through 2013, according to a recent report by Forrester Research.”

Essentially, Macmillan finds that the advent of streaming music services like iMeem and Lala hasn’t worked out in the music industry’s favor, as the ability to access and listen to music online doesn’t translate into digital or physical music sales. To illustrate the example, the article highlights the case of Gitamba Saila-Ngita, who at one point was spending in the hundreds of dollars every month on music, but who now spends as little as a tenth of that on digital streaming services instead.

For my part, I feel that this trend is likely to continue into the future, as more and more of us are “always on” and carrying devices in our pockets with enough bandwidth to allow us to pull whatever we want to listen to from a server rather than having to have our own music with us. 

But here’s the rub: musicians don’t get paid per stream and streaming services still aren’t generating enough revenue to turn a profit (in spite of accruing millions of unique visitors to their sites on a monthly basis). Take the case of Lala.com, which allows users to purchase music for $.99 or opt for a web-only streaming version for just $.10:

“For every 1,000 songs streamed at Lala, users pay the 99¢ download fee for only 72 of them. They pay 10¢ for only 108 out of 1,000. The remaining 820 songs are played for free.”

This certainly is quite a conundrum. What do you guys think? Are we heading for an all-streaming future? Should artists get paid-per-stream? Should we not even worry about it because the industry has a plan?