Music, money, and YouTube

Lots of talk recently about the mechanics and economics of the various streaming music services - Spotify, Rdio, Mog, and Pandora being the most visible examples. $10 a month for all the music all the time? Sounds like a bargain. However making sense of the economics of it from an artist’s perspective is hard. ​​

Pandora’s founder penned an impressive post about the bundles of cash his service is handing out to artists, which whilst sounding great in theory, was quickly stomped on by music industry guys like Bob Lefsetz (in a typically vitriolic rant), and perhaps more damningly by musicians like Galaxie 500 who report Pandora has given them all of $0.21c for the 7800 plays of one of their tracks.

Meanwhile Spotify finds funding that values the company at $3 *billion* despite losing $59 million in 2011, all of which supports Galaxie 500’s reasoning that, like a Sex Pistols reunion tour, these companies are only in it for the money:

These aren’t record companies– they don’t make records, or anything else; apparently not even income. They exist to attract speculative capital. And for those who have a claim to ownership of that capital, they are earning millions– in 2012, Pandora’s executives sold $63 million of personal stock in the company. Or as Spotify’s CEO Daniel Ek has put it, “The question of when we’ll be profitable actually feels irrelevant. Our focus is all on growth. That is priority one, two, three, four and five.”

Everyone agrees that the physical CD era is over ¹, but the model to replace it is still being thrashed out:

It’s all about crowdfunding. Streaming is the answer. Streaming services will kill you and then themselves. Vinyl is the future. There’s no retail any more. Amazon is the enemy. Amazon is your friend. The labels are dead. Long live the labels. It’s all about distribution. We need a new format. Formats don’t matter any more.

What doesn’t seem to be discussed in all this coverage of how to make money from music is how people—particularly the lucrative ‘youth’—are actually listening to and finding new music.

The answer, according to my highly scientific polling of my nieces, nephews and assorted other under forties, is YouTube. Instead of radio, or CDs, or streaming audio, they all turn to YouTube when they want to listen to *or discover* music. The related links rabbit hole leads them to new and unheard music. Which is the role a good DJ plays on radio: challenging you with new sounds that flow seamlessly from music you already know.

This is quite foreign to old school stereo music nerds. Why go to a video site to listen to music? Pretty easy really - it’s free, it’s visual, it’s bottomless (like the streaming services), it’s shareable, and you can enjoy it on your iToy or PC or pretty much anywhere. More configurable than radio, and cheaper than Spotify. And YouTube even pays artists some kind of meagre royalty.

Maybe [Buggles][bug] were right. [bug]:http://www.youtube.com/watch?v=Iwuy4hHO3YQ