At SXSW, Pragmatism Replaces Panic About Streaming Services

Streaming is here to stay. Now the conversation has changed to making it work -- for creators and rights holders.

Casual, off-the-record conversations at SXSW reveal people are less panicky and more optimistic about streaming than ever before. Artists are starting to make good money from streaming. Labels are figuring out how to monetize their catalogs -- building their brands, utilizing playlists -- in new ways. And although there can be improvements in how royalties are collected and distributed, the problems don’t overshadow the fact that streaming’s prominent place in the industry has become settled law.
 
There are three types of music industry professionals. One type knows only a world of streaming, brand sponsorships and piracy. They might sell vinyl but don’t think much of the CD. Another type of professional remembers a time before Napster, compares current industry revenues to the peak of the CD in 2011, and obsesses over the amount of streaming royalties rather than the revenue the services generate.

The third type of music industry professional is a pragmatic combination of the first two. They understand streaming is the future. They have befriended technology companies while criticizing the way digital services have eroded the value of their music. Licensing and metadata are ongoing problems for which they seek better solutions. The value of music is important to them and they sometimes take a hard line, at least publicly, while defending that value through proposed legislation, lawsuits, public relations campaigns and SXSW conference panels.
 
The third type was on display at SXSW Wednesday in a panel titled “Innovation in Digital Music & Making Streaming Pay.” In past years this panel might have been a mud-slinging match. This year it focused on some solutions needed to solve some of streaming’s most pressing problems. 
 
One problem is the one-size-fits-some business model that provides all-you-can-eat access to music enthusiasts for $9.99 per month (the price differs in dollar terms outside the U.S.). There is a growing sense within the industry that reaching more mainstream audiences, the segment that wants less and will (only) pay less than enthusiasts, will require different offerings -- with lower prices.

Outside of a few exceptions, record labels have adhered to a standard licensing structure and price card. Rhapsody has ventured into this territory with its unRadio product, a radio-like service that provides unlimited skips, up to 25 downloads per day, and no advertisements for $4.99 per month. Slacker has a similar offering for $3.99 that offers Internet radio with unlimited skips and offline listening for $3.99 per month. And there have been attempts -- Nokia, Boink, Muve Music -- to bundle subscription plans into smartphones and other consumer electronics.
 
But more experimentation is needed for music streaming to attract larger audiences. As early-adopter markets like Sweden and South Korea have shown, enthusiasts peak out at around 30 percent of the population. To reach the other 70 percent will require more flexibility in licensing; for companies to throw things at the wall and see what sticks, the licensing process needs to be faster and easier.
  
Data is another problem that represents a missed opportunity. Well-publicized issues exist with metadata, especially on the music publishing side, because digital services don’t always know who should get royalties. Here we are in 2016, 17 years beyond Napster, and the music industry hasn’t figured out a solution that ensures the correct rights holder or administrator is paid the correct amount when their work is streamed.

Various solutions have been proposed. Brahim Ait Ben Larbi, head of legal and global digital licensing at the American Music Rights Association, believes direct-to-digital service providers should license with a single rights agency such as AMRA, owned by publishing administrator Kobalt, to account for the billions of micro-payments from streaming services.  “There’s a lot of money being generated but there have been problems collecting and distributions correctly,” he said. It's an understatement.
 
The change in mood this year is refreshing, and a level-headed attitude will be required to reach new customers, to offer a variety of services to meet mainstream needs, and to improve the flow of money. “We’re not looking for the silver bullet,” said Charles Caldas, CEO of independent rights group Merlin. That’s a good thing -- the industry needs more weapons, not a few bullets.