New research calls for more people to pay for online music

“The popularity of free streaming services means that there is value gap – streaming sites such as Spotify are losing money despite not paying appropriate returns."

Dr Allan Watson, Senior Lecturer in Human Geography

Free music streaming services are threatening the survival of the music industry according to new research by a Staffordshire University lecturer.

Senior Lecturer in Human Geography Dr Allan Watson received funding from NEMODE (New Economic Models in the Digital Economy) to explore the current online marketplace and how musicians can protect their intellectual property rights.

“The emergence of the internet has led to illegal downloading and file sharing which has really challenged the sustainability of the music industry.” explained Allan.

“Although record and technology companies have sought to deal with piracy through prosecution and the emergence of legal online downloading sites like ITunes, the industry is still facing major challenges.”

Recent figures from the International Federation of the Phonographic Industry show that digital music sales account for almost half of global industry trade and for the first time are on a par with physical sales.

Because fewer people are buying music in physical formats like CDs and records in favour of accessing music online, Allan believes it is more difficult for artists to protect their work and access royalties.

Music streaming sites like Spotify and Apple Music have become increasingly popular but the majority of customers use free ad-supported rather than paying for subscriptions.

“The popularity of free streaming services means that there is value gap – streaming sites such as Spotify are losing money despite not paying appropriate returns. Earlier this year Taylor Swift removed her music from Spotify for exactly this reason.”

According to Allan, the future sustainability of the industry depends on how it manages three major transitions: the shift from physical to digital music, downloading to streaming and from PC to mobile devices.

“Companies are already adapting by looking for opportunities to make revenue through multi-media channels by working with other platforms and companies.”

“Jay-Z released his last album exclusively through Samsung’s phone app and computer Game GTAV licensed music for 240 music tracks as well as commissioning new songs.”

Allan believes that for the long term survival of the industry there is a need for more strategies to raise awareness of legal access to digital music and move streaming services into the mass market.

“Streaming is still in its infancy, but it would seem it holds the key to the future of the music industry. If the industry cannot find ways to increase revenues from advertisement –supported services, which despite many millions of listeners currently generate only 4% of total industry revenues, or new ways to convert listeners onto paid subscription services, global music revenues are likely to continue to decrease.”

Read the full report here and watch a film about the findings on NEMODE's YouTube channel.

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