LONDON – As the music business struggles to reinvent itself for the digital world, the only topic more controversial than what a recording is worth is who exactly should have the power to set its price.
Thom Yorke has weighed in on both questions: first, in 2007, when he made Radiohead’s “In Rainbows” album available online on a pay-what-you-want basis, and then last week when he pulled the music of his “other” group Atoms for Peace from Spotify, on the grounds that the online music service doesn’t pay new artists enough. So far, however, no one, least of all Yorke himself, seems entirely satisfied with the answers, answers that have import beyond music, across the cultural industries.
Like several other music startups, Spotify offers an “all-you-can-eat” streaming service, as well as a limited free streaming intended to attract new customers. Over the long term, the idea is that the fees from such services will generate enough revenue to replace a significant part of the money labels and artists now make on CD and download sales. One might compare the model to cable or satellite television, where people pay a monthly fee to one company, which then takes the responsibility for paying copyright holders in turn. It’s an elegant model: convenient for consumers, profitable for technology companies, and — theoretically, at least — fair to creators.
In the short term, artists are complaining that their streaming royalties are pitiful and that these online services seem to calculate royalties in ways that are opaque even by the black magic accounting standards of the music business. Spotify and its competitors rightly point out that they’re in the early stages of building new companies, which could eventually stem the decline of the recorded music business.
But artists don’t have a stake in those companies, as Yorke’s Atoms for Peace bandmate (and Radiohead producer) Nigel Godrich pointed out on Twitter. “It’s about establishing the model which will be extremely valuable,” he said. “Meanwhile small labels and new artists can’t even keep their lights on.”
Naturally, this didn’t go over as well online as Yorke’s pay-what-you-want experiment and a substantial number of music fans with Twitter accounts seem certain he made the wrong move. And Yorke isn’t exactly resisting the Internet: a few days after pulling their music from Spotify, Atoms for Peace announced they had teamed up with the startup Soundhalo to sell audio and video of their upcoming concerts.
It’s worth noting that the debate now consuming the music business has already been rehearsed in the film world. The same kind of subscription model that so worries musicians has created an important new market for the film business in Netflix. What’s more, in television, subscription services now represent a traditional model.
As always in media, the devil is in the detail. In the pay television business, individual deals mean there is an incentive to create better programming so that prices can be increased. That has led to compelling shows such as “Mad Men” and “Breaking Bad,” as well as rising cable costs that many consumers resent. Unlike cable operators, streaming music services pay creators according to what consumers actually listen to, which favours acts and labels with big catalogs. Some indie labels also say that the major labels, which are said to have equity in Spotify, have used their leverage to negotiate deals that give them a built-in advantage.
The obvious solution would be for artists and labels to demand more money from streaming services, just as television programmers demand more money from cable operators. But streaming services are not yet profitable and raising their rates without increasing their prices could make them unsustainable in the long term.
Worse, in the current environment, streaming services such as Spotify are forced to compete with pirate sites, which pay nothing. Plenty of online commentators said that Yorke should take what Spotify offers or risk getting nothing at all. That’s a hard environment in which to negotiate.
Left unexamined amid the usual online table-thumping about this or that business model is the rather remarkable — and encouraging — expectation that an experimental act such as Atoms for Peace would make much money on recorded music in the first place. The group’s debut is bold, inventive and rightly acclaimed by critics, but it’s not exactly full of hummable hit singles.
Without Yorke, the odds of adventurous acts selling enough music to “keep their lights on” have always been pretty slim. Left to their own devices, many musicians might well opt for more secure jobs.
At least in the past, a label that invested in many such acts could aggregate this risk, in the knowledge that several of them will earn enough money to make up for the losses on the rest. The artists that succeeded, like Radiohead, benefited from marketing that helped them get airplay, make videos and tour until playing live became a source of revenue instead of an expense. The ones that didn’t still got enough of an advance to work with a professional producer, fund a tour or two and find some loyal fans to maintain careers as niche artists. If such investments sound unimportant, remember that Godrich doesn’t worry about how much money new acts can make in the long term but, rather, how to make sure they get there.
And when we discuss music, we are also discussing book publishers, movie studios and more. All have long worked on the model of risk aggregation. Some things make large profits; most don’t. That’s why it’s so odd that some of the loudest criticisms of the traditional media business model come from venture capitalists in the technology business.
After all, don’t they, too, invest in a series of hopefuls with the expectation that most will fail but a few blockbusters will earn enough to make up for them?
The media business has always been based on selling similar products for a similar amount of money: CDs, DVDs or a hardback all cost, irrespective of content, more or less the same. Streaming services like Spotify essentially operate the same way — and that seems to work for established acts, as well as new ones that value exposure over revenue. They may yet provide a better living for a larger variety of musicians. In the meantime, creators need the freedom to make their own choices — for better or worse — and adventurous ones with dedicated fan bases might be better off charging higher prices. That’s why Soundhalo will sell Thom Yorke’s Atoms for Peace concerts for £9.99.
Robert Levine is the author of “Free Ride.”