Op-Ed: Streaming Vs. Downloading, The Coming Cash-Flow Crisis October 05, 2009
- Digital and Mobile
By Robb McDaniels
First it was, "Fans want to feel it." Then it was, "Fans want to own it." Now it's, "Why own when I can save?"
One of the unforeseen impacts of the global economic downturn on the music industry is the accelerated rate of consumers' adoption of streaming music. Want to save some money while you sit at home looking for a job? Stream. Want to listen to music on your phone while you take care of the kids? Stream. Do you happen to have your iPhone in your car? Stream. Why download when you can stream almost anything you want at any time, in any place?
As streaming becomes more portable, interactive and affordable to the consumer, fans are rapidly shifting their listening habits to embrace this medium that provides instant gratification. And this means trouble for the already wounded music industry.
Labels, particularly independent labels, have lived off of cash flow for many years now. That's why advances have always been the name of the game—money is paid upfront and there is a reasonable expectation it will be made back later. But the rise of streaming threatens to cut off the flow and destroy that model.
Here's the issue with streaming from the perspective of a content owner: It takes 150-200 plays of a song before the content owner earns royalties on par with one download. Content owners typically get paid 70 cents per download and half a penny per stream. How long does it take the average fan to stream a song 150 times—six months? Twelve months? Longer? There's the cash-flow issue.
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