Music for peanuts: Why Spotify-era musicians struggle to make a living
With her Eras tour projected to surpass $1 billion in gross ticket sales, Taylor Swift has just reached yet another career high.
But, the 33-year-old singer-songwriter is a musical anomaly. For every singer that reaches stratospheric success, there’s a horde of struggling musicians who barely make a living from their art.
Aware of this reality, Swift stood up as the voice of underpaid musicians when she pulled her music from Spotify in 2014. The radical move was to protest the poor royalties that artists receive per stream, citing that music is “important and rare” and therefore should be paid for.
Swift’s bad blood (pun definitely intended) with Spotify ended in 2017, when the company reportedly gave in to the singer’s demands and adopted a ‘windowing’ policy. This meant newly released music would be first available to paid subscribers before it was made available to those on the free plan.
But even this isn’t enough to undo the damage, as artists still barely earn peanuts from streaming platforms. So, whose fault is it? While it’s easy to point a finger at Spotify, the ‘cheapening’ of music started well before the rise of the streaming era.
The reason? Commoditization.
How music became a commodity
For consumers, free access to music is a welcome innovation. However, it comes with a price, and small artists are the ones paying for it.
See, when you offer something for free, people expect it to be free. For this reason, the perceived value of music has decreased over time, and people aren’t willing to spend an arm and a leg for something they can easily access without spending a dime. In other words, music has been reduced to a simple commodity.
Commoditization happens when products or services in the same category lose their uniqueness and competitive advantage, to the point where they become indistinguishable from each other.
Take flat-screen televisions, for example. These were once considered a product breakthrough, with the expensive price tag to match. However, several iterations and manufacturers later, what was once a futuristic innovation is now so commonplace that its pricing has become a race to the bottom.
In the case of music, its rarity started to fade as soon as young, clever folks learned how to share music illegally. It began with bootleg cassettes and CD burning, but illegal music sharing truly entered its golden era with the launch of Napster. Thanks to its peer-to-peer (P2P) file-sharing technology, millions of users worldwide with Internet connections were able to download free music and reproduce it as many times as they wanted. The commoditization of music officially began.
When music streaming platforms entered the picture in the early 2010s, music depreciated so drastically that Spotify could do nothing but harness whatever was left. The company’s success depends on its simple user interface and low subscription fees (Spotify is still not profitable), which meant people were no longer willing to go through the hassle of downloading music illegally.
Why the Spotify era is making music commoditization worse
Spotify essentially acts as a PR machine for a lot of promising musicians. But what exactly does it do to combat commoditization? Not much, apparently. In fact, the Swedish company is surrendering to commoditization as well.
Despite a market share that’s double that of its closest competitors, Spotify now struggles to differentiate itself. With major artists and record labels available on all streaming platforms, the company is losing its competitive advantage by the day.
As a result, music streaming itself is becoming a commodity, as reflected by the almost-identical pricing of Spotify, Amazon Music, Apple Music, and YouTube Music subscription plans.
The consequence of a lower price ceiling is brutal for a lot of musicians relying on royalties. For every dollar their song earns on Spotify, the platform keeps 29.38 cents while 58.5 cents go to the record label. The remaining 12 cents are then shared by the musician and songwriters.
And did you know that Spotify pays only $3-$5 per 1000 streams? So, if an artist keeps 12%, this means that they need 100,000 streams just to take home $25. Yikes.
Music commoditization will continue unless streaming platforms step up their game and take control. Technology isn’t the problem; rather, it’s the failure of the industry to adopt new business models that benefit all stakeholders.
How is this relevant for designers?
No industry is completely immune from the long-term effects of commoditization. However, as designers, we can train ourselves to see it coming, so that we can create differentiated products that stand the test of time. Here’s how:
Examine the market landscape: Yes, there are likely going to be other companies that offer a similar product or service — that’s simply the world we live in. But, where do you stand in terms of positioning? If there is little to no differentiation in terms of features, benefits, and pricing, then the product or service is likely facing commoditization.
Choose your differentiation pathway: If you work on a commoditized product, you can set yourself apart in three different ways — marketing, product, or experience.
Marketing path: Build a brand that differentiates you from other providers of the same product. Think about Coca-Cola or Tiffany & Co., as an example. They sell commodity products (soft drinks and jewelry) but through their visual aesthetic, turned their brands into social icons that tell a deeper story about their products and the people who buy them.
Product path: Build new features or services that help you differentiate in a more defensible way. For example, video streaming services are becoming more and more commoditized and the way they try to fight it is by having original exclusive content.
Experience path: Technology can actually be leveraged as a tool to fight commoditization, by letting users take ownership of their experience. For example, in the case of streaming, there’s already AI technology that allows users to create remixes of their favorite songs based on their taste. By focusing on experience rather than just consumption, one can find new ways to make money from art.