Music streaming platforms

Decrypt this new business full of surprises!

Introduction: The evolution of music streaming

The rise of music streaming is part of a major transformation of the music industry, marked by the advent of the Internet and the dematerialization of music. In the 90s, the music market was dominated by CDs, providing record companies with substantial revenues. However, the arrival of the Internet and the emergence of sharing platforms such as Napster upset this balance, leading to a drastic fall in CD sales in the early 2000s.

This period of difficult transition for the industry saw the emergence of new initiatives, notably with the introduction of Apple's iTunes Store, which offered a model for the sale of dematerialized music by the unit, adapted to new modes of digital consumption. At the same time, platforms such as Rhapsody and Deezer began to emerge, offering legal music streaming services. These initiatives marked the first steps towards the successful legalization and commercialization of online music.

Deezer, in particular, has played a key role in the evolution of music streaming in France. Initially known as, Deezer changed strategy in 2007, negotiating an agreement with SACEM to become the first legal music streaming platform in France. Today, Deezer remains a market leader, with a presence in over 180 countries.

Music streaming has not only changed the way music is distributed and consumed, it has also had a significant impact on the music economy. Platforms such as Spotify, with its millions of subscribers, and YouTube, which has become a key player in online listening, have helped to radically transform the music industry. This evolution has led to the end of the reign of possession, inaugurated by Edison 120 years earlier, in favor of a model based on on-demand access.

However, this transformation has not been without its challenges. The distribution of revenues in music streaming has been a contentious issue, with business models that have favored a concentration of listening on a small number of popular titles, leaving many unknown artists and works in the shadows.

In short, the evolution of music streaming reflects a period of radical change in the music industry, marked by technological innovation and economic upheaval. These changes have not only transformed the way music is consumed, but have also challenged the music industry's traditional business models.


The Business Model of Streaming Platforms

The business model for music streaming platforms such as Spotify, Deezer, Amazon Music and Apple Music remains a complex and nuanced subject. Although these services have significantly increased their user base and generated substantial revenues, their profitability remains uncertain. For example, Spotify, despite an 11% increase in sales in the second quarter of 2023, posted a significant net loss. This trend can also be observed at other platforms such as Deezer, which hopes to achieve profitability by 2025.

The main sources of revenue for these platforms are premium subscriptions and advertising for free users. However, the question of raising subscription prices remains controversial. Some experts believe that higher prices could make music too expensive and relegate it to second place in household spending.

A critical aspect of the business model is artist remuneration. The current system, inherited from 2007, is based on the market-centric model, where revenues are distributed in proportion to the labels' market share. This approach has been called into question for its complexity and lack of transparency, particularly concerning the variable value of a stream according to region. In addition, the 31-second listening time threshold required to generate remuneration has been criticized for encouraging certain dubious practices.

Faced with these challenges, Deezer, in collaboration with Universal Music Group, has introduced a new remuneration model. This model awards a "double bonus" to professional artists (defined by a minimum of 1,000 monthly streams with at least 500 unique listeners) and rewards songs that generate active fan engagement. However, some fear that this new system could disadvantage emerging musicians, redistributing revenues in favor of established artists.

In conclusion, the business model of music streaming platforms continues to develop and adapt. While these services have transformed the music industry, their ability to generate sustainable profits and remunerate artists fairly remains a subject of ongoing debate and evolution.


Copyright and Artist Remuneration on Streaming Platforms

Artist remuneration in music streaming is a complex and evolving subject. Currently, most streaming platforms use the "Market Centric Payment System" (MCPS) model, which distributes subscription revenues according to a ratio based on the number of streams from a catalog in relation to total streams on the platform for a given period. This model has its drawbacks, notably the fact that a proportion of subscribers' payments are allocated to artists they haven't listened to, which can be detrimental to cultural diversity and doesn't necessarily encourage revenue growth for less-listened-to artists.

Faced with these challenges, an alternative has been proposed: the "User Centric Payment System" (UCPS). This model is considered fairer, as it brings revenue distribution closer to the reality of listening, paying only the artists listened to by users. Although UCPS seems fairer, it does not radically alter the level of remuneration received by the majority of artists. Indeed, even with this system, artists who are less listened to would not necessarily see a significant increase in their income.

Furthermore, artists are generally remunerated per stream, but this amount varies according to the platform and other factors such as country, platform subscription, number of listens, and the rate charged by the label. 

In Europe, efforts are being made to ensure fairer and more proportional remuneration for artists in the streaming context. France, in particular, has taken steps to frame this remuneration, in line with the European Union Directive on Copyright and Related Rights in the Digital Single Market, adopted in 2019. This directive provides for "appropriate and proportional remuneration" for the exploitation of works on streaming platforms.

In summary, remuneration of artists via streaming platforms is a constantly evolving topic, with existing models being called into question and new approaches being considered to ensure a fairer distribution of revenues in a rapidly expanding digital environment.


Cultural and Audiovisual Impact of Streaming

The advent of streaming services has brought about a profound change in the way we consume culture, particularly music, films and series. This transformation has had a significant impact not only on consumer habits, but also on the way culture is produced and distributed.

In music, streaming has radically changed the dynamics of the industry. At the start of the digital era, record companies were skeptical about the potential of dematerialized music. The shift from physical CD sales to digital streaming has not only changed the way music is distributed, but has also influenced musical trends and the discovery of new artists. However, despite the huge catalog available on streaming services, a vast majority of music is not listened to, and a small fraction of tracks concentrate the majority of listens.

In the audiovisual sector, services like Netflix have turned traditional distribution methods on their head. Netflix, with its vast catalog of films and series and its production of original content, has created a new paradigm in the entertainment sector. This transformation also extends to other areas of culture, such as online video games, which are beginning to explore streaming subscription models.

These changes have had repercussions on traditional modes of consumption, such as the physical distribution of music, radio and even cinema. Although the physical distribution of music, such as CDs and vinyl, continues to generate revenue, it is now largely supplanted by streaming. Similarly, traditional radio stations have had to adapt by offering podcast formats to stay relevant in the face of the rise of streaming.

In conclusion, streaming has not only redefined the economics of culture, but has also had an impact on cultural diversity and consumer habits, favoring certain genres and artists over others. This evolution continues to shape the cultural landscape, with implications for consumers, creators and the cultural industries as a whole.


Ethical Issues in Streaming Music

Although music streaming has revolutionized the way we access music, it also raises a number of ethical and practical issues. One of the main issues concerns artist remuneration, which is often perceived as unfair. Under the current system, a large proportion of revenues are captured by the industry's powerful intermediaries, leaving small artists and independent labels with a minimal share of the profits. This imbalance is exacerbated by the lack of transparency in the non-disclosure agreements that surround streaming contracts, limiting the ability of artists and policymakers to bring about meaningful change.

Another major problem is streaming fraud, where artificial streams are generated to manipulate payments. This practice not only distorts artists' revenues but also damages the integrity of the streaming ecosystem.

What's more, the governance models of streaming companies are often criticized for their inability to anticipate or effectively manage these problems. Boards and executives need to ask themselves the right questions and adopt processes that address these challenges proactively and thoughtfully.

In response to these challenges, proposals such as the adoption of listener-centric payment models and whistleblower protection are put forward. These measures aim to direct consumer revenues directly to the artists they listen to, and to enable industry insiders to testify safely on these issues.

Overall, these issues highlight the need for reform in the music streaming industry, aimed at ensuring a fairer distribution of revenues and maintaining the integrity of the music ecosystem. These reforms should be supported by appropriate legislation and regulation, as well as more accountable and transparent corporate governance.

Alternatives and the future of streaming

The future of streaming, particularly in music, is marked by continuous innovation and adaptation to current challenges. Several trends and opportunities are emerging for streaming services, with a particular focus on personalization and listener engagement.

Innovations and adaptations

  1. Integrating Virtual Concerts: In the face of the COVID-19 pandemic, streaming platforms have innovated by hosting virtual concerts. Notable examples include the "At Home with Tidal" virtual concert series and Travis Scott's virtual concert in Fortnite, which attracted 12 million viewers. These virtual events have helped artists to partially offset the loss of revenue associated with the cancellation of tours and live concerts.

  2. Monetization and Social Engagement: Streaming platforms are now focusing more on social engagement and monetizing their offerings. Strategies include campaigns like YouTube's "Stay Home #WithMe", which allow artists to stream their content from home and interact directly with fans.

Challenges and Opportunities in Emerging Markets

  1. Highlighting the Local Repertoire: Streaming services in emerging markets are highlighting local talent and developing relationships with local artists and influencers. One example is PortalDisc in Chile, which uses detailed metadata to categorize music by region and sub-genre.

  2. Balance between local and international content: Although the local repertoire often dominates, the arrival of international services like Spotify has changed listeners' expectations, who now want access to international hits.

  3. Affordable prices and freemium models: Local services often offer more affordable subscriptions and freemium models, which are crucial in areas where the average income is lower.

The Importance of Market Research
Market research plays a crucial role in the evolution of streaming. Customized online panels enable streaming services to understand user preferences, evaluate new features, target marketing precisely, and stay competitive.

Forecasts and potential changes

  1. Playlisting and Marketing : Independent labels are adapting their marketing strategies to focus on accumulating streams via independent playlists. The aim is to reach major playlists with large audiences.

  2. Integration in other sectors: Music streaming creates new opportunities for brands in areas such as telecommunications, fitness and gaming.

  3. Offer diversification: Streaming platforms could move towards more diversified offers, including the possibility of controlling their own content, as is the case with video streaming.

In summary, the future of music streaming is marked by innovation, adaptation to market changes, and continuous exploration of new ways to engage and monetize audiences. Streaming companies must remain agile and responsive to emerging trends and changing listener preferences to remain competitive in this rapidly evolving field.


Conclusion: The Evolution and Future of Streaming

The music streaming industry continues to transform and evolve, profoundly influencing the way we consume music. This evolution is characterized by a series of trends and forecasts that shape the future of this sector.

Current trends in music streaming

  1. Listener engagement: Users devote a significant amount of time to listening to music via streaming, with an average of 18.4 hours per week in 2021. The growing popularity of genres such as Afro-Pop, K-Pop and Christian/Gospel music has been largely attributed to streaming platforms, which have become key discovery points for these genres.

  2. Rise of Short Video Apps: Apps like TikTok have played a crucial role in the discovery of new artists and songs, particularly among Generation Z. TikTok has even launched a weekly program to highlight the most viral songs on its platform.

Future prospects

  1. Continued growth: The global music streaming market is set to continue growing, with forecasts indicating a significant increase in revenues by 2030. This growth will be underpinned by the increasing adoption of streaming platforms, changing listener habits and the expansion of emerging markets.

  2. Technological innovation: Artificial intelligence (AI) is set to play an increasingly important role in the industry, with applications ranging from personalized playlist curation to music generation.

  3. Content diversity: We're seeing growth in both the audio and video segments, as streaming platforms expand their offerings to include video, podcasts and live performances.

  4. Integrating Music into Multimedia Platforms: Streaming services are looking to become more integrated into other aspects of daily life, such as social media platforms, fitness apps, and video games.

In conclusion, although the music streaming industry faces challenges, notably in terms of fair remuneration for artists and the fight against fraudulent practices, it remains a driving force in music consumption. With technological innovation and an expanding content offering, music streaming looks set to continue its expansion and shape the future of music.


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