For music fans, all-you-can-stream music services like Spotify, Rhapsody, MOG and Rdio are kind of dream come true. Signing up gives you instant access to a library of millions of songs from major label and indie acts from around the world. Most services are now free, with some limitations on usage. For paying users, as long as you keep your subscription, there’s really no need to pay for most individual tracks or albums (unless you’re an audiophile). In the case of Spotify, you can even merge your local music collection with the service’s cloud-based selection of music. Awesome.
For artists, it’s another story. The dirty little secret of services like Spotify and others is that they are not particularly lucrative for artists. At all. Each of them has managed to court record labels with attractive enough licensing deals, but that doesn’t necessarily trickle down to the artists themselves. As a result, many artists have held back new releases from streaming services, or jumped ship all together.
Paul McCartney became the latest artist to step back from the all-you-can-stream subscription model when he pulled his entire catalog from Rhapsody. Material by the former Beatle and accomplished solo artist was removed from Spotify in 2010.
Initially, independent artists such as bands on small metal labels started to question the value of Spotify and pulled their catalogs. Then bigger artists like The Black Keys and Coldplay declined to release new material on Spotify.
Exact figures range (and are seldom made public), but it’s clear that streaming services simply do not pay out much money compared to physical album sales or paid downloads. According to CDBaby, iTunes accounts for 77.4% of digital revenue for indie artists, while sources like Spotify and Rhapsoy bring in about 2% apiece. Now, with iTunes Match, artists get an additional stream of revenue on top of their initial digital album sales.
In theory, the streaming services will grow their user bases and refine their monetization strategies to a point at which things are fair for labels, fans and artists alike. In the meantime, not everybody is willing to stick around and wait for their business model to mature.