Essay: Why Streaming (Done Right) Will Save the Music Business

Rhapsody’s co-chairmen pick a side in the Taylor Swift vs. Spotify debate.

As the first music-streaming service to be licensed by all major labels -- and the No. 2 on-demand music service in the United States -- it may surprise you to learn that we at Rhapsody support, and generally agree with, the decision by Taylor Swift and other artists to not make their new albums available on free streaming services immediately after release.

Why are we taking this stance? We think that Spotify’s apparent demand, that all its content be available in both their premium and free tiers, is overly simplistic and will not break the music industry’s decade-plus-long decline. Instead, we believe in a much more comprehensive approach that (a) differentiates between free services like Spotify and paid services like Rhapsody, and (b) is built on concepts like windowing and other ways to deliver value to both consumers and artists.

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Before Swift's decision, most people didn’t understand the difference between free streaming services and paid ones. It's a big one: On Rhapsody, everyone who has full access to the 30 million-plus songs in our catalog pays for it, either directly or indirectly (for instance, through their mobile-phone service plan). On services like Spotify, many users aren't paying at all -- access to on-demand music is free.

There’s certainly a role for free ad-supported services -- radio has been around for more than 75 years, and the popularity of Pandora clearly demonstrates how robust this model is. But we have long thought that free, on-demand music is throwing the baby out with the bath water.

Windowing is clearly one way to differentiate free versus paid access. The fact that Swift is the first artist this year to sell more than 1 million copies of her new album in just one week demonstrates that the model can work, as it does in other areas of the media world. Most films open in theaters before moving to on-demand and TV. Hit TV shows premiere on the network that owns or underwrites them, then move to other distribution services.

The key to making consumers happy is consistency and exchanging value for value. 

If 90 percent of new releases from established artists were only available at launch on paid services -- whether by purchase, or as part of premium subscription services, or through some new model -- then consumers would quickly come to understand that premium services are the way to get access to the latest music. The result would be a win-win: More artists would be paid reasonable rates for their music, aggregate industry revenue would rise, and consumers would get excellent, virus-free experiences and know what they were paying for.

We truly believe that streaming -- done right -- can be part of a future where recorded music is again a vibrant and growing industry.

This article first appeared in the Nov. 29 issue of Billboard.