The Value of Nothing: Don’t Accept Junk Food Streaming Music Numbers

It really should be a great day for streaming music. After all Nielsen released a report that showed unbelievable growth for the listening format. In the first half of this year streams have increased by 50 percent over the past year. But these numbers also are leading to discomfort for the streaming industry. Because along with the streaming increases are massive declines in all retail formats. CDs, digital tracks and digital albums are all down around 15 percent in the same period.

Mmmm, junk data.
Mmmm, easily consumable streaming music junk data.

Today’s numbers clearly demonstrate that consumers greatly favor access to their music over purchasing tracks. What isn’t clear is what this means for the music industry. While the revenue model for a purchase is well understood, we have no clarity on streaming’s value.  This is partly because a stream really can’t be equated to a purchase. After all a listen can’t really be compared to a retail event. But the real problem is that streaming services that make up the Nielsen numbers are vastly diverse.

Look, nobody in their right mind is going to compare YouTube and Spotify. But today’s numbers jams several different services with a variety of business models into a single number. It leads us to a question: should we really accept these numbers that don’t tell us anything about the business value?

Discerning A Difference

There are several different streaming products and each one has a different method of providing revenue for the rights holder. Unfortunately, the streaming number Nielsen posted was a single all-in number designed to show huge gains, but not to create clarity. These numbers would actually be revelatory if Nielsen would start tracking and reporting on each of these metrics separately.

As they say at the old ball yard, you can’t keep score without a scorecard. Same with streaming music. And since nobody else is doing it, I thought I’d describe the main streaming sectors and how revenues are generated by each. I’ve also included a few metrics that would help the industry understand the real value of each of these services.

Ad-Supported Streaming

The biggest contributor to Nielsen’s streaming number is ad-supported streams, which is dominated by YouTube’s massive reach and nearly unlimited catalog of music. While it doesn’t have the hype of Spotify or Beats Music, when we in the industry talk about streaming, we’re mostly talking about YouTube. YouTube is free and only generates revenue from advertising that is sold against the plays. Unfortunately, very little of the content on YouTube is monetized and the amount of money it generates per play is unbelievably tiny. Because of YouTube’s scale, a tiny increase in ad sales could vastly increase overall streaming revenues. But it requires significant growth in sales staffing and performance from Google.

Metrics We’d Like to See

-Active users
-Plays per active
-Revenue per play rate

Internet Radio

Comprised of non-interactive services and direct licensed radio, Internet radio includes services like Pandora, IHeartRadio and Slacker. A majority of these pay a stream rate or a percentage of revenue depending if the listener is free or is paying a subscription fee. In the US, Internet radio has performed very nicely. While YouTube can be described as a sampling platform, Internet radio is sticky, with listeners in droves using the services month after month for free, and some even paying to remove ads. The rates are wildly different depending on the deals for both recording and publishing rights. There has been major kerfuffle with this, primarily as Pandora has sought to keep publishing costs at their (nearly unjustifiably) low rate. But it remains a fact that every Internet radio play produces revenue for both rights holders, something that broadcast radio doesn’t do.

Metrics We’d Like to See

-Plays per user
-Number of plays per user
-Number of subscribers
-Lifetime duration of subscribers
-Revenue per play rate for free streams

On-Demand Streaming

When people refer to streaming, many times they’re talking about this bucket, which is dominated around the globe by Spotify, but includes Deezer and Rhapsody amongst others. However there are two different types of on-demand streams. Spotify has found that by having a free tier of the service, the company can build a pipeline of potential customers that it can monetize with advertising and convert into the paid tier. A vast majority of users in Spotify don’t pay a dime for the service. Spotify does pay for every free play, but it’s significantly less than the amount of revenue generated by the premium subscribers. That rate is confidential and differs based on the deal with rights holders. However many artists have seen it on their statements as low as one third of a premium play. It is worth noting that others have followed Spotify into the free racket, like Rdio, but services like Beats Music have stayed away from free.  It’s also worth noting that the number of people who use an on-demand service pales in comparison to Internet radio or ad supported streaming.

Metrics We’d Like to See

-Free users
-Free plays
-Revenue per free play
-Subscribers
-Subscriber plays
-Revenue per subscriber play
-Lifetime duration of subscribers

It’s A Trap

It’s easy to fall into the trap of pointing the finger at streaming services for the loss of retail sales in music. And there’s probably a whole lot of truth that many consumers who previously purchased music now just access it either for free or paying. But since customers are voting strongly for streaming and we’re committed to building new revenue models as opposed to suing upstarts out of existence, we should be asking much better questions about the streaming business.  That’s not only the suit who have their hands on the controls of the business, but also reporters, analysts and industry insiders. We should demand that Nielsen and other market research firms create better metrics that illuminate business value, when instead we get sensationalist reports that deliver big headlines. Good data is good for everybody—especially Nielsen, when we all start obsessing over these metrics like we used to with SoundScan every Wednesday.

Growing Pains: Can YouTube’s Plans Power Music Revenues?

This was originally included in Billboard’s print edition dated March 4, 2014. The entire article is not available online without a subscription, but I’m reposting it to my network.

And no, I didn’t write the headline or the deck.

Opinion Column: Screwed By YouTube?

40 percent of its plays are music – even as its rights payments remain disproportionate

Do billions of YouTube views of Gangnam Style translate to millions for Psy?
Did billions of YouTube views of Gangnam Style translate to millions for Psy?

First it was broadcast radio, then MTV. Now YouTube? Could it be that the music industry is a three-time loser in getting its fair share for distribution of content? Did it give away the golden goose by not suing the bejeezus out of YouTube when it was a startup, or at least cut better deals when Google acquired it in 2006?

Of course it’s not a simple question. At first glance it’s clear that today YouTube isn’t delivering the goods. During a MIDEM panel this year, YouTube vp content Tom Pickett said the company had paid more than $1 billion to music rights holders during the past several years. Well, that’s sweet. Hey, you know who else has done that? Spotify. The difference: Spotify did it with a fraction of YouTube’s audience.

Let’s face it: When the worldwide market is $16 billion annually a billion isn’t that much, not when you consider the size and scope of YouTube’s mighty reach and insatiable thirst for more and more fresh content. While there have been some holdouts on paid streaming services, no working artist would dare skip YouTube — one of the world’s largest promotional channels — and limit his or her reach. According to comScore, YouTube’s 159 million active monthly U.S. users watched 13 billion videos in December 2013. And YouTube says nearly 40 percent of all videos were music-related.

But YouTube doesn’t just represent a promotional channel. It delivers a burgeoning stream of advertising revenue, and could soon find more ways to monetize its massive audience. YouTube does pay a split of ad revenue with rights holders, although the rates for ads are paltry when compared with such established players as broadcast radio. The company is trying to boost its revenue-per-impression rate with premium content, but this will take time.

By comparison, Spotify looks more attractive to rights holders, since it already delivers multiple revenue streams. Like YouTube, Spotify pays a low per-stream ad-supported fee for a play by a free consumer, but its average payout is much higher because it offers premium subscription fees as well. That’s why YouTube has long planned a paid subscription service that is finally expected to launch this year. If the company can convert even 1 percent of its active users to pay for on-demand music, it would be the largest service in the United States. At least that’s the theory.

In practice, converting these free users to paying customers could be much harder to execute. Why? Every all-you-can-eat music service has similar pricing. Want to stream your music on the desktop or on your phone? It’s free. Want to save your music to your Android phone? That’ll be 10 bucks. Asking for $10 from a customer base that has become accustomed to accessing all the music they want for the low, low price of free is a steep hill to climb.

The industry and Google will need to partner to create a new value proposition at a variety of price points. What could it offer the music fan for a buck a month? How about a top 40 app for $3? What about a catalog slice, say indie/alternative, for $6? How about a $2 Vevo subscription?

The truth is, all consumers are not alike. Defining those price points and offers will require innovative thinking and risk-taking by both sides. Remember, yearlong Spotify Premium subscribers pay more than three times what the average customer spends in a year for music.

The industry needs to think of ways to serve a mass audience. But if instead consumers see the same old offer of 20 million songs for $10 a month, we could end up with another Google Play All Access Music, which hasn’t blown the doors off with subscriber growth. That would be disappointing for the entire industry.

Perhaps the industry is learning. Certainly holding out content from YouTube would have made it much more challenging to build new revenue streams, so it was the right decision to bring the service into the fold.

Now it’s time to supercharge it.

Note: I have corrected an error. YouTube was acquired by Google in 2006, not in 2005 as it appeared in print. I regret the error. 

Restrained by Arcane Copyright Law, De La Soul Frees the Music

Screen Shot 2014-02-19 at 6.01.16 PMDe La Soul faced a problem. None of the band’s revolutionary records were available in digital form. Sure you could still buy the CDs, if you cared to, but you couldn’t buy them on iTunes store or stream them anywhere. In this day and age if you’re not on Spotify or Beats, you might as well be invisible. The group has a new record this year, so having their music available everywhere is important for exposure.

So they decided to give it all away. Yep, last Friday the band gave out the music from its own website. That’s great for fans. But it might be a pathetic comment on our current state of copyright.

What made De La Soul so great was that the group used tons of samples in its music. Great for art, but each of those samples have to be licensed. It’s a pretty time-consuming process and Warner Music Group, which owns the rights to the old Tommy Boy Records, wasn’t particularly motivated to clear all the samples, so the band took matters into their own hands.

Tommy Boy founder Tommy Silverman suggested on Twitter that we should create a statutory rate for samples in the copyright law reform that is being considered by the Patent and Copyright Office. That way any artist could sample any work and the original artist would get a compensated for the work. Pretty great, right?

“It’s never gonna happen,” an executive with extensive knowledge of the copyright told me when I asked about the issue. “Is it a lot of work and kind of a pain to get a sample licensed? Absolutely. But it can get done? Yes.” As long as there’s a precedent of samples getting cleared, the copyright office isn’t going to be motivated to create blanket business terms for samples. Also, there are a growing number of voices who are against compulsory licenses for samples, such as Aerosmith lead singer Steven Tyler, who wants to retain control to who gets to remix their music.

The bigger problem for De La Soul and many acts from the ’80s and ’90s was that the bands just went ahead and sampled whatever they wanted and released the record. Once a record is in the marketplace, the sampler artist has no power of negotiation and has to take whatever deal is offered. The most famous example was The Verve’s Bittersweet Symphony which sampled an orchestral version of the Rolling Stone’s song “Last Time.” While the Verve did have a license with the creator of the orchestral version, they didn’t have a deal with the holder of the original recording, which was a big hit at the time. “We were told it was going to be a 50/50 split, and then they saw how well the record was doing,” Verve Bassist Simon Jones told the Toronto Star. “They rung up and said we want 100 percent or take it out of the shops, you don’t have much choice.”

De La Soul’s current troubles stem from whatever settlements the band made with the rights holders for the samples during the CD era didn’t include digital products (since they didn’t exist back then.) So now someone will have to go back and clear all the samples again. Since hip hop has been around 30 years or so, a cottage industry of clearing samples has risen up. But obviously that will cost money, and potentially a lot of it. I’m sure Warner did the math and the costs of clearing all the samples outweighed the potential of digital sales.  ‘Yeah, no thanks. Why don’t you guys do it?’ De La Soul probably did the same math and said, “aww, let’s just give it away.” Eliot Van Buskirk mentioned in his evolver.fm story that everyone and their mother wrote an article about them giving it away, so it was great publicity for the group.

So the band loses sales, and just as importantly, the customer loses. We clearly need copyright reform, as the laws were written for a different era. What that means has yet to be defined. And it’s eating away at the value proposition to the digital customer. Tracks disappear from all the streaming services for rights problems every day. Some days tens of thousands of tracks disappear from the service for all kinds of reasons. Sometimes it’s legitimate. Other times it’s for arcane reasons. Sample-heavy hip hop bears the brunt of these problems. Many times several tracks on an album will not be available for playback. And anything that loses its rights and is in a customer’s playlists? Well those go away, too.

As you can understand, this problem bedevils customers. Support forums are filled with these types of understandable complaints, from customers who don’t blame outdated copyright laws, nor the labels that decide it’s not worth the effort to clear the rights. They blame the services. Rightfully so. Fixing rights issue remains one of the diciest, costliest and least understood problems streaming services face.

Compulsory Background Reading

Evolver.fm: De La Soul Makes Music Free in Copyright End Run

Rethink Music: A Compulsory Sampling License

Billboard: Steven Tyler Against Compulsory Remix Licenses

US Copyright Office: Copyright Policy, Creativity, and Innovation in the Digital Age

Independent Lens: Copyright Criminals (documentary)

Missed Connections: Why Technologists and Music Execs Must Partner to Win

@jmaples | Friday, February 14

Near the end of Marc Geiger’s amazing sermon at the European music conference MIDEM he made a comment about the differences between technologists and music industry execs face.

“Companies that are leading the music revolution don’t even know about the music industry. I can tell you Sergey Brin didn’t grow up in the music industry. Neither did Steve Jobs…even Daniel Ek. They didn’t come up knowing what we all know. We have to educate them. And when they think ‘theory’ we get mad at them. They think about it from the user perspective.  We think about it from an artist and industry perspective. There’s a big disconnect.”

This remains a big problem in the digital music world. Artists, music industry executives and technologists have been wary of each other’s motives. It’s been uncomfortable, and from time to time it can be downright contentious. I’m sure that music executives can reel off a greatest hits of outlandish and ridiculous asks from techies who just don’t understand how the music business works. And I have participated in some ‘colorful’ conversations about shortsighted label terms that only slowed down critically important progress.

Image
Can’t we get along: After Spotify signed Metallica to the service, Sean Parker, Lars Ullrich and Daniel Ek were all buddies.

So I couldn’t agree more with Marc’s points, but it’s a two-way street. Both sides need to come together. What both the startups are trying to pull off (create new platforms of music consumption) and what the industry is in the middle of (rebuilding revenue from a product that no longer works) is hard. It will take both sides sitting down and understanding each other’s issues, motives and problems if we are going to deliver Marc’s vision.

It’s very easy to get caught up in what the other side is doing wrong. What the music industry doesn’t always understand is that to find out what are the great products, we need to experiment. You never know what’s going to take off and quickly building products, iterating as quickly as possible to ‘fail fast’ requires more flexibility than what has traditionally been granted. What technologists need to understand is that music is just not a commodity to be packaged in a cool app. The music industry may have its faults and limitations, but it is still the best in the world at discovering and shaping great artists and understanding what is going to connect with the music fan.

Building Great Customer Experiences

One area where both sides have been fairly unsuccessful is delivering what the music fan really wants in an experience. The industry might know the demand for artists and styles, but they sure couldn’t figure out how to deliver it. Let’s face it, none of the music formats have been really great, which is why we keep replacing them every decade or so. And asking your customers to replace their albums with 8-tracks, cassettes and then CDs while consistently upping the price has proven to be a horrible way to engender customer satisfaction. Part of why Napster hit its popularity in the first place was that there was such a bad taste in music fans’ mouths about having to spend so much money to only get the one song they liked on the radio.

The first few generations of products have felt more like technical solutions designed by people who write code instead focusing on solving hard problems for the customer. Technologists have also fallen way short in their relationship with artists and management. I’ve heard stories of artists seeing demos of tools designed for them without the technology firms even talking to a single working artist or manager about what was needed. The techies started by trying to solve their own business problem instead of artists. Big problem.

To start we need to get both parties together in a room. We need more events like Cash Music Summits that bring both technologists and artists together to discuss some of the thorniest problems and greatest opportunities facing the industry today. It’s a good start, but technologists need to do more than just talk. Getting artists involved in tasks like ideation, product definition, value propositions and even the customer lifecycle would go a long ways towards engendering goodwill and building a strong partnership. After all, if they’re great at making music, they might great at making music products. It bears mentioning that Beats Music’s chief creative officer is Trent Reznor.

Teamwork Rules

So what would working together look like? Well, a good example is the deal Twitter’s Head of Music Bob Moczydlowsky put together with Lyor Cohen’s new label, 300 Entertainment. Bob told Billboard Twitter will provide access to data that will help 300 decide who to sign to the label, a skill known as Artist & Repertoire. It used to be the A&R dude would spent 350 nights a year seeing potential acts to sign. But now data has become an important part of the job (along with going to see lots of music). Twitter understands that they don’t do A&R. But they know that they have amazing data that will help companies like 300. So Twitter partners with someone who really knows A&R and works with the company to provide solutions. Sounds like a pretty happy arrangement.

I have spent hours describing in detail to more than a few tech execs why they shouldn’t get into A&R. It’s a amazingly specialized skill set that very few people at any streaming company know anything about. It’s also ridiculously expensive and the ROI doesn’t pencil out until you invest for years, and even then I couldn’t say with any certainty that it would return anything. Most likely they’d waste a ton of time and money and lose the focus on their mission, which was to build a killer music experience. In a thin margin business where you’re getting squeezed by aggressive suppliers and distributors, it becomes very tempting to try to ‘move up the value chain.’ But that’s a mistake.

Playing Your Position

It’s like playing on a really great baseball team. Everyone needs to play their position.  It doesn’t mean we can’t call out the shortstop for a lack of effort or tell the centerfielder they need better skills. That kind of feedback just makes everyone better. But if we understand our roles and respect what massively talented pros can bring to the table, we could build the all-star team that will be necessary to build Marc’s $100 billion behemoth.

Today’s Teamwork Links

Dave Allen: Can Streaming Music Services Create a Bigger Recorded Music Industry?

CNet: EMI Wants CEO’s Assets

BillboardTwitter’s Head of Music On What The 300 Deal Really Means

RhizomeDo Artists and Technologists Create The Same Way

The GuardianThom Yorke Calls Spotify ‘The Last Desperate Fart of a Dying Corpse’

The GuardianDavid Byrne: ‘The internet will suck all creative content out of the world’

Follow On

Marc Geiger

Bob Moz

Dave Allen

Cash Music

Jesse Von Doom

Maggie Vail

How Streaming Music Continues to Fail Artists

Streaming services could get fans as close to their favorite artists as they get at SXSW.
Streaming services could get fans as close to their favorite artists as they get at SXSW. That’s Alabama Shakes in 2012.

Perhaps it’s the news cycle, the launch of the next-big-thing or just simply boredom with the topic, but it sure seems like we’ve forgotten the meme of artists getting ripped off by music startups.

Nearly all last year this was a huge topic with artist like Thom Yorke and David Lowery menacing pitchforks at Spotify and Pandora. One of the major problems with the streaming services is they can’t have a frank and honest conversation about how much they pay for their content.  Because of their confidentiality agreements, they are bound to not discuss the financials of their deals with major labels. I’m sure it’s frustrating for Daniel Ek to pay out a billion dollars for the rights to music only to hear David Byrne call Spotify evil.

In December Spotify posted an extensive site that breaks down everything from the formula used to determine payments to specifically how artists are compensated. While the site lays it all out nicely, it kinda buries the real message to artists. The unsaid message goes something like, ‘We paid out a crapload of money for the music. But we don’t pay you directly. We pay the label, so go talk to them.’ Also it shows how future growth will make those moderate sized payments grow to gargantuan numbers, which you need to squint really hard to see.

Fair enough. At least when you consider music playback. But I don’t consider that enough and neither should artists. You see, streaming services really should be vibrant active communities of fans who love their favorite artists. But today, they most definitely are not. They are primarily flat, with stale boilerplate content and the charm of a filing cabinet. Even the recently launched Beats Music had nearly the same execution of artist pages as all the other services, (although I have seen some screenshots of a nice implementation of Topspin’s artist commerce in the app, so I’m assuming that the features will roll out soon).

What streaming services must do is find a way to authentically connect fans to the artists they love. And they should provide ways for the artist to directly speak to fans on their platforms. It’s one of the trickier problems for artists today. Fans are listening everywhere from Pandora to Spotify to Soundcloud to iTunes. But unless the fan reaches out directly through social channels or the artist’s website, they won’t know what the artist is up to. And if they’re not paying attention, a fan can miss it on those channels too.

Let’s take a “use case” as we say in product development. Let’s say I happen to be walking through Billy Reid on Bond Street and I ask the well-coiffed dude behind the counter what was that beguiling song emanating from the speakers. “Oh, that’s Lord Huron. Great band.” I pull out my smart phone, download it using my favorite streaming service and dig into it for the next week. But when I finally get around to checking out the band’s Facebook page for concert dates, sure enough they played in Seattle two nights before. Fail!

My service knows I like the band, since I’ve played it incessantly for the past few days. And since I have the app downloaded it also knows where the hell I am. So why can’t it suck in all the concert dates and let me know that I’m about to miss the band in a super small venue (The Crocodile in this case)? And maybe I couldn’t get to the Crocodile, but I should be able to buy a poster or a tee shirt, right? Maybe I want to connect directly to their @lordhuron and read all their updates while I listen. And why can’t it look at all the other verified @artist tags that Lord Huron is following to give me a list of bands that I might like?

Let’s keep in mind, my use case is of an, um, older demographic. There’s a whole generation of fans who crave direct connections with artists and their needs have yet to be defined. There is so much discovery work that needs to be done to figure out what those products and offerings should be. We’re just getting started on what the best product will look like and what people will need.

Services need to shift the way they are thinking about artist engagement. It’s not just a place where fans listen to music. It should be a place that unites the information and offers from artists to create a unified solution for the fan and also be a platform for artists to market directly to the fans that care most about them.

The bad PR streaming receives right now is because they haven’t scaled enough to make up the revenue difference in flagging physical and digital sales, and these services are hot so they become the punching bag. But the services do have the superfan, the ones that live and die for the artist. They might still buy all the band’s CDs. They make it a priority to see the band when they roll through town. They might even buy a $1500 ticket to take a cruise or travel long distances to see a festival.

Solving this problem should be one of the top priorities for every service out there. Until the day that happens, we’ll be talking about the micropayments for plays and waiting for scale. I’m sure this is discussed at every service, as we used to talk about it all the time. There have been a few early initiatives, like Spotify’s integration of Topspin commerce into their desktop applications or Rhapsody linking Bandpage’s Experiences within their apps, it hasn’t been focused on mobile and personal, which are the two key ingredients for the fan to take action. Addressing those valuable modes will power increased engagement and, hopefully, revenue.

Trust me, I know all too well the jammed up product roadmaps that services must juggle. There multiple competing projects all the most urgent priority. But completing this work will go a long ways toward changing the conversation and building new value for both artists and streaming services.

Links for the Obsessive

The GuardianWhy David Byrne Is Wrong About Spotify

MediumWhat Streaming Music Can Be

WSJ (Requires $$$): An Ode To Joyous Streaming

Hypebot: The Barriers of Music of Music Listening: Past And Present

Viacom BlogMTV’s Music to the M Power

Post-cociousDavid Byrne Tells Streaming Services To Get Off His Lawn

Broken Bells To Streaming Fans: We’re Breaking Up

Broken Bells, the project of super producer Danger Mouse and Shins frontman James Mercer, released its second record today. You can go buy After The Disco on Amazon or iTunes. But if you’re one of the many people subscribing to a streaming music service like Spotify, Rdio, Rhapsody or the new entrant into the space, Beats Music, you are out of luck.

Ten bucks a month won't get you the new release by Broken Bells.
$10 a month won’t get you the new Broken Bells on Rdio.

You see the band (or their management) decided to ‘window’ the release, that is allow a time when only people in retail outlets have exclusive access to the record. Why do they do this? The reasons vary. But the prevailing one is that there’s a belief that subscription services are affecting retail sales of the releases. So they believe if fans can’t listen to it on Spotify and the likes, then the fans will be motivated to buy it and then everyone will be happy, right? Not so much.

You see, this infuriates customers of services. They’re paying real money for access to all the music. And when they can’t get a new release by an artist they love, those people at the services hear about it. And while some understand the intricacies of the windowing strategy, most don’t care and rightly so. ‘I subscribe to Rdio. I can’t play it on Rdio. F’ Rdio.’ Need proof of this: look at the Rdio ‘reviews’ on one of the most infamously windowed records, Taylor Swift’s Red

It’s my contention that windowing eats away at the value proposition of streaming music services. Customers sign up expecting that they can play anything released. When that doesn’t materialize the customer asked what the hell they’re exactly buying. Reactions to this problem range from mild irritation to quitting the service.

Let me also point out that the timing of Broken Bells windowing could not be worse. On Sunday Beats Music bought a Super Bowl ad featuring Ellen DeGeneres for their brand new subscription offering. The company is throwing down serious marketing dollars towards the launch. A bundle for a $15 family plan service with AT&T just started. If anyone deserves a pass on this inane business strategy, it is Beats Music.

Artists and management have a bunch of popular misconceptions about streaming services and releases. Let me try to debunk a few of them.

Streaming services are free and I don’t want to give my art away for free. 

While it’s true that Spotify and Rdio have sizable free audiences, Beats Music and Rhapsody are 100% paid customers. So why not hold the release back from the free services and only have it for paid customers of all services?

While I’m no fan of freemium services, the theory goes that every free customer is someone who may one day be so blown away by the experience and value that they’ll end up plunking down their credit card. Removing new releases eats into the value proposition for the service and makes a prospective customer question whether they should subscribe.

What’s the difference between a $10 subscription and a $10 CD?

Customers of streaming are worth a whole hell of alot more than $10. Some services report that their best customers have been with them over two years. That’s $240 in revenue over those two years. Sure some of these people used to be heavy purchasers and they’re getting great deal. But the idea is to build this product with such great value that you’ll grow a huge base of streaming customers who will be around forever. Since Broken Bells self titled released in March 2010 and now, I’ve spent $470 in subscription fees to have access to all the music. If I loved Broken Bells and bought both records, that would have been $20.

Hey, I’m just selling the record on iTunes. They can go buy it if they want to. 

Yeah, that’s true. But let’s be clear about the music consumer in the digital world. It’s a crappy experience. You could be a heavy iTunes downloader and it’s great. But from my years doing product research at Rhapsody, it’s clear that the customer is cobbling together an experience from several different services. Outside of iTunes or Amazon downloads, fans also use a bit of Pandora, maybe use a streaming service, some have a catalog of music. The reasons for this are all over the place, including that the experiences vary widely in ease of use and cost.

But when an artist or management decides to hold it back from streaming the message is clear: I don’t approve of the way you’ve chosen to listen to music. Please change your behavior.

And it might work. A few hardcore fans might go buy the record. Most won’t. Who gets most hurt by this?

The fan.