Some Beaming—Others Steaming—Over Streaming Radio

Article ImageSmartphones, tablets, and other devices have made it easier than ever to tap into on-demand digital music and online radio. But more convenient consumer access to streaming audio causes a conundrum for artists, content creators, and publishers seeking to be fairly compensated for their efforts.

Although getting your tracks played on services such as Rhapsody and iHeartRadio can lead to wider exposure, the rates these streaming companies pay artists can be paltry compared to what they might be able to earn via CD and digital download sales. For instance, singer Aloe Blacc claims that a song he co-wrote ("Wake Me Up!") had more than 68 million streams, but he earned less than $4,000 in royalties from Pandora. Pharrell Williams' big hit "Happy" made only $2,700 in publisher and songwriter royalties via 43 million Pandora streams in the first quarter of 2014.

There's no denying that the reach and the audience engagement of internet radio are growing, closing the gap with traditional media. This is important, because advertisers need to decide how to allocate their budgets between traditional and digital media channels, and artists/content providers have to choose how and where to stream their digital creations.

In 2014, 164 billion songs were streamed on demand from services such as Beats Music, Google Play, Rhapsody, YouTube, Slacker, and Spotify, up 54% from 2013, per new Nielsen data. Meanwhile, 67% of Americans listen to music online in an average week, according to Nielsen; online radio reaches an estimated 94 million weekly in the U.S., according to Edison Research. The 10 streaming services with highest awareness among consumers are Pandora (70% awareness), iHeartRadio (48%), iTunes Radio (47%), Rhapsody (40%), Spotify (28%), Google Play All Access (24%), Slacker (14%), (14%), TuneIn Radio (10%), and (8%), based on Edison Research data. U.S. listeners use smartphones (66%), tablets (34%), and desktops/laptops (67%) to access streaming music and online radio weekly, Edison also reports. eMarketer estimates there will be 183.4 million digital radio listeners in 2018. Only 140.8 million CDs were sold in 2014, down about 14% from 2013, per Nielsen.

Ask Pat Higbie, CEO and co-founder of XAPPmedia, and he'll tell you that while many publishers and artists are looking to blame falling revenues on online audio streaming services, they shouldn't be the scapegoat. "Most artists are benefitting from the revenue internet radio delivers, which is helping to offset declines in digital downloads from iTunes and CD sales," says Higbie. "Some artists are generating income that otherwise wouldn't be available, since [terrestrial] radio pays nothing to artists and only small amounts to songwriters. Additionally, internet radio helps to sell out concert venues and drive music purchases."

As proof, note the success of pop star Meghan Trainor, whose "All About That Bass" was streamed 150 million times on Spotify in 2014. She's a good example of how streaming can be instrumental in driving audience awareness and music sales. "Many of the barriers to getting play on traditional radio-with its set formats and lower inventory of music plays per hour-are eliminated in an internet radio environment, and listeners on a single platform can be targeted by demographic," says Higbie. "They can also acquire fans overseas more efficiently."

Audio content creators and musicians should leverage these streaming services as marketing channels to reach new listeners that they wouldn't have been able to reach otherwise, says Richard Monte, CEO and co-founder of Streema. "There's a lot of value in having a diversity of options when it comes to listening to music."

Contributing to lower revenues for artists and content creators is the increasingly harsh reality that consumers simply don't want to pay for the content they enjoy, leading to illegal downloading, a proclivity to use ad-supported free online radio instead of subscription streaming services, and artists being forced to give away the store for nothing.

"The common argument in the digital age has been, ‘Musicians should just give their music away for free and benefit from more exposure.' But that really doesn't work when there are so many artists competing for space that the only winner is the internet radio station or streaming audio service," says Chris DiCroce, a singer/songwriter. "Internet radio stations get a lot of artists submitting tracks to be played, and therefore they can give their audience more variety in their playlists, increasing their audience and leading to increased ad revenues and subscribers. But this benefits the streaming audio entity-not the artist."

DiCroce adds that major musicians making sweetheart deals with streaming services-such as U2, who were reportedly paid $100 million by Apple to provide their latest album to iTunes for free to consumers-only reinforces the belief that intellectual property should be free.

Adam Clairmont, studio manager at Overit, agrees, adding that online radio/streaming services degrade an artist's work because they downsample audio tracks to create conveniently small files that can be smoothly streamed. "Musicians spend a lot of money to record in great studios to convey amazing sonic messages that are simply dumbed down and totally lost when converted to MP3 or streamed online," says Clairmont. "Services like Pandora and Spotify aren't providing a high-quality listening experience."

Despite their dissent, digital music and audio content creators may have to accept the inevitable. "Artists should embrace [streaming] and deal with it and use it effectively. Streaming services have provided an easy way for everyone to get their music out there," says Andrew Smith, the drummer for the Los Angeles-based band We Are Kings & Queens. "There will always be change, and you can either make it work for you or cause yourself a lot of unrest."

Ultimately, capitalizing on streaming services as a content creator depends on how well you do your homework and how realistic your expectations are, says Asher Baker, a punk music recording artist in London. "It comes down to getting a cut of the royalties, licensing, and digital sales. Since nobody's looking to buy a physical CD album, make sure you're getting the biggest slice you can," Baker says. "Sure, lots of people won't buy your CD because they'll stream it instead, and each stream might pay you peanuts-but it's also a great advertisement for your work, your live shows, and your merchandise sales."