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From physical record sales to streaming – Paying for Music

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Question: “What do you do for a living?”

Answer: “I’m a musician. I sell T-shirts.”

I hope that sounds as ridiculous to you as it does to me. We live in the digital world where technology and music platforms have sworn to take every bit of music created to every single person on the planet but artistes are encouraged to give their music away free. And sell T-shirts to make money!

It’s the worst advice one can give an artiste or composer / author of a song and one that makes my blood boil.

Just because there is no tangible physical product (now) to hold, can we take away the creativity, time, talent and yes, cost in creating a piece of music? That’s what intellectual property is all about. So by what stretch of imagination can there be a demand for it to be given away free? Why not extend those arguments to physical property as well? Let BMW give their cars away free or Raheja give apartments away free and sell T-shirts to make money! Oh, this sounds ridiculous in comparison? Chew on this: a BMW i8 costs about Rs. 3 crores. Multiply that by the number of cars of this model the company has sold across the world. And compare it with the royalties the Beatles publishing alone would have earned from one song like ‘Help’. I’m willing to bet ‘Help’ is a winner hands down. Then add the record label royalties and it doesn’t sound so ridiculous now isn’t it?

Yes, the business has changed and we’ve moved from ownership of physical product to digital streams on demand. Labels are told there is no cost of manufacture or stock obsolescence, which killed many a music label in the past. You manufactured 100,000 copies of an album that you thought was a sure shot but sold only 5,000. The cost of the unsold 95,000 hit the balance sheet irreversibly. Yet, it’s crazy to expect labels to give away music at throwaway price because there’s no cost of manufacture. It’s the price of the intellectual property that’s the real cost, not the price of plastic!

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In the digital age, the other argument has been piracy of music on the net. Is the business piracy prone? Sure! The music business always has been, so why hammer the poor artiste into giving his music away free now? Instead of dumbing the price down, with no constraints of a cost of manufacture, this could be the best time to create value for the artistes’ work by pricing up, isn’t it?

To be fair, streaming services have struggled to get paid subscribers despite their ridiculously low subscription rates. In an attempt to garner 1.3 billion Indians on their platforms, from the top industrialists to the poorest daily wageworker, each platform has evolved the ‘correct’ price, which gives you access to over five million songs on any service. Many at a price that wouldn’t get you a sugar cube at Starbucks, let alone a cup of coffee! Break this back on a per stream basis and maybe the advice to give away music free isn’t so preposterous…. the rates anyway have ensured that! How does it make sense to the platforms, then? Digital stores earn money through subscriptions, downloads and advertising and get funding based on valuation. So to attract advertising and investment, the main aim becomes getting people on the platform. When you want traffic in a store, you normally tend to trash the price, to the detriment of the content owner and artiste. Hence the advice to sell T shirts, I suppose!

If you look at the way the digital streaming business functions, it may explain the issue of value to an artiste. How many times a day can a consumer stream a song? Maybe five times a day? For a maximum of five days, I would imagine. So 25 streams of one song. Assume 10 songs on an album and one consumer will stream the product 250 times. However, officially now, you require 1,500 streams to make up one album equivalent sale. In the physical business, a consumer prepays for those 1,500 streams when he buys the product. Hitting those number of streams for any one consumer isn’t likely.

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Yes, the business is about hits and Ed Sheeran, Justin Bieber, Kanye West and the like have no problem with achieving an eye popping number of streams so the question is about the average album, which in the days of physical product generated sufficient revenues for labels to recover the costs of recording and marketing. Today, thanks to the low rate per stream, the numbers don’t allow labels the latitude of developing artistes, especially in the Indian market where the streaming rate is possibly among the lowest in the world.

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So it comes back to the question of monetization of music, making it necessary for labels, publishers, artistes and composer / authors to tap into every source of revenue in this world of fragmented music consumption. There are several independent artistes who aren’t members of IPRS or PPL, which is a folly because membership will only enhance their revenue. Plus, some radio stations, platforms and television networks make independent artistes sign contracts waiving any sort of payment, which can be overcome by being part of these industry bodies that have licenses in place.

So if you’re an artiste, don’t give your music away free. It doesn’t make you popular. Only great music does. If you’re advising an artiste, tell him to sell T-Shirts in addition to his music!

This article has been written by Atul Churamani, Founder & MD, Turnkey Music & Publishing Pvt. Ltd.

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