As if the subscription service's business model wasn't already difficult enough, a small group of artists holding out from those services could expect an advance to join one of them. And they'd have a pretty good argument.
Holdouts from subscription services make up a small and exclusive club. The Beatles, the Eagles, Garth Brooks, AC/DC, George Harrison, Bob Seger and Tool top the list of artists who have yet to join services such as Spotify, Rhapsody, Rdio and Deezer, which is not yet available in the U.S. The list got a bit shorter in 2012: Metallica and Red Hot Chili Peppers ceased being streaming holdouts by exclusively joining Spotify (the Chili Peppers are now on other services).
Holding out from download platforms was routine. The Beatles joined iTunes in 2010. AC/DC joined iTunes in November. Neither groups' downloads can be purchased elsewhere. Kid Rock, Bob Seger and Led Zeppelin were among theother download holdouts.
As the New York Times reported earlier this month, the exclusive streaming rights to Led Zeppelin were being shopped to subscription services. The exact time frame is unknown, but executives Billboard spoke with expect the band's songs to be available for streaming early this year.
A few major holdouts have done unique deals in the past. The Eagles -- still managed by former Live Nation executive chairman Irving Azoff -- released its 2007 album "Long Road to Eden" exclusively through Walmart and Sam's Club stores in North America. Garth Brooks, who owns his recordings, inked a multi-year, exclusive deal to sell his CDs at Walmart, Sam's Club and Walmart.com. Brooks has yet to make any of his music available to a digital download store or subscription service.
There are other holes in these services' catalogs as well. Some albums are missing because artists do not make them available to ad-supported services. Some albums, such as Coldplay's "Mylo Xyloto," are added to services months after their release dates.
Because legacy artist holdouts could be waiting for big paydays, subscription services are faced with a sort of prisoner's dilemma. Restraint could be better than spending for short-term gain. If subscription services accept the prices sought for exclusive streaming rights, other holdouts will be more likely to seek a higher price and the subscription services will have punished themselves. But if services refrain from paying for exclusive streaming rights, other holdouts will be less likely to seek these non-recoupable advances.
Subscription services are doing their best to restrain themselves from paying advances. They argue that legacy artists need to maintain their relevancy with the younger demographic reached by their services. Just as YouTube and sync licensing is good for maintaining visibility, being available on an on-demand subscription service can help an older band connect with listeners. "You risk becoming irrelevant with so music being put out there," says one executive.
Services say they’re not throwing money at the problem. "We've had a lot of holdouts sorted out without paying any advances," says one executive. But another executive admits bids have been made in an attempt to gain catalogs. And another subscription service executive acknowledges today's small pool of holdouts provide a rare opportunity for a company to differentiate themselves. With some exceptions, all services' catalogs are basically the same except for the missing high-profile legacy artists.
Of course, nobody wants to go back the early days of subscription services when a label's music could be found only at either PressPlay and MusicNet, he says. "But I think Zeppelin and AC/DC and a couple of these very rare and certainly dwindling holdouts do represent unique opportunities to compete on content -- at least for a limited, exclusive period of time."