The Future of Streaming Services May Be In The Past

I’ve been thinking about record clubs lately. Do you remember those? If not, they were these mail-order services that you could buy CDs from in the eighties and nineties. If you do remember them, what you probably remember most is their suspiciously generous, heavily advertised introductory offers, which would net you somewhere in the neighborhood of ten free CDs (of your choosing!) in exchange for becoming a subscriber. At that point in time, I would have expected to pay $15-20 per disc if I were buying them new in a store. Every adult I knew was utterly convinced that record clubs were a scam, though no one could tell me exactly how or why.

Recently, I saw this wonderful film on the Internet Archive called The Target Shoots First. It consists of footage shot on a camcorder by a guy named Chris Wilcha who worked for a record club called Columbia House in 1993. It is usually described as a documentary, but I think it’s more helpful to think of it as a vlog a guy made about starting a new job in the record business after graduating college. As part of his orientation, he’s given a tour of the facilities and a definitive explanation of the company’s business model. One way the company is able to increase profit margins is by manufacturing their own discs. The biggest reason why record clubs were able to make money while giving away so much product surprised me, but should not have. 

“For the consumer, joining the record club is actually a good deal,” Wilcha explains. “With all of the free and discounted titles, members end up paying an average of $8 per CD over the course of a membership. It’s the artists who pay the real price. Columbia House pays artists reduced royalties and publishing rates. The club argues that these concessions are justified, because Columbia House ads act as additional promotion for the artist, above and beyond the primary advertising done by a band’s record label. In other words, the artists are charged directly for the club’s cost of doing business … but there are no extra costs for the record labels, which also benefit from club advertising, and the parent companies, Sony and Time Warner, profit from both retail and club sales.”

When I started watching the film, my impression of Columbia House was that of a totally archaic institution, a weird footnote of the CD era with no successful modern equivalent. That was obviously completely wrong! A subscription-based product, priced the same as one CD per month. A company jointly owned by the major labels, which saves money by paying artists less. As I watched Wilcha and his co-workers debate earnestly about whether or not “alternative” should be considered as a distinct genre separate from “rock,” I realized that I was watching the closest thing there will ever be to a truly candid document of the way Spotify playlists get made. Record clubs were just low-tech streaming services, pre-dating and probably inspiring Netflix’s original rent-by-mail DVD business.

For decades, the major labels represented by the Recording Industry Association of America waged war against home taping, peer-to-peer file-sharing, concert bootlegging, and unauthorized competition like DJ Drama’s Gangsta Grillz mixtape empire; they claimed, repeatedly and very loudly, to be doing it because those things were “bad for artists.” I think that’s why so many streaming customers are so dismissive of the argument that streaming is “bad for artists.” Whenever a piece of new technology shows up and makes music more accessible, the record industry always complains that it’s “killing music.” There is probably an appealing simplicity to the idea that the streaming services are a fast-moving disruption engine from the nimble world of tech startups, and that whoever is complaining about low streaming payouts must just be part of the complacent establishment. Streaming is so many orders of magnitude better for the customer than CDs were; I understand why subscribers are so sure that it’s the future and that we can never go back.

A couple months ago, Epic Games bought Bandcamp. The acquisition left a lot of people feeling dismayed and confused. To a lot of folks, Bandcamp feels like a throwback to a different era of the internet. For better and for worse, depending on who you’re talking to. It describes itself as a “publishing platform” rather than a streaming platform: you go to an artist’s page, click on one of their albums, and buy it directly from them. The page layouts are very simple, there are no ads, and there’s a space for customers to leave comments. It reminds me a lot of LiveJournal, aesthetically. After purchasing digital music, you can download it in whatever format you like, as many times as you want, as long as the site exists. You can listen to music you’ve purchased on Bandcamp’s app, but the service works best for listeners who actively maintain a digital music collection and listen to it regularly. 

Without getting into too much gamer stuff, Epic Games is a very successful and extremely ambitious company. People use the term “metaverse” a lot whenever they come up. The initial fear a lot of Bandcamp users had upon hearing about the acquisition was that Epic would try to “modernize” Bandcamp. The perception was that Bandcamp was good specifically because it was anachronistic. Bringing it into the future would just mean making it more like streaming, which would destroy the site’s niche appeal. Users began ferreting out alternatives and bracing for bad news. What if that whole premise is wrong, though? What if streaming isn’t actually the future?

A different perspective comes from Components, “a publication and research group that assembles, investigates, and editorializes large datasets.” They published an exhaustive report on Bandcamp last year, pulling from publicly available data about transactions that occur on the service. “As unaware as people might be that Bandcamp is both profitable and a startup, they’re also often as unaware that Spotify is deeply unprofitable. For the most part, Spotify does nothing but lose money,” the report explains. “This is because Spotify’s understanding of humans as economic actors is almost maximally reductive, antiquated, and fundamentally flawed.”

Spotify’s single biggest operating expense is the cost of licensing music from the major labels. In order to deliver profits to their shareholders, they need to find a way to pay less for music. They are desperate to prove that they’re not just a pipe that the major labels push content through: this is what motivated their investments in podcasting, the notion of a “discovery” “service” for artists which allows them to accept a lower royalty on certain songs in exchange for more playlist consideration, and the proliferation of heavily marketed mood-based playlists on the service that were found to be full of tracks that Spotify itself owns and collects royalties from. They’re stuck burning money unless they can figure out a way to convince listeners to choose their own data-driven, self-generated content over the entire past, present, and future of recorded music as we’ve known it.

The major labels, however, rely on Spotify less and less. Last year, Spotify generated a little under a third of overall major label streaming revenue. The major label business, meanwhile, enjoyed growth, owing to new streams like TikTok. When the subscription-based streaming product was first offered, the major labels were at their lowest point. Now, they might feel like they have options. Not long after Epic acquisition of Bandcamp was announced, Andrew Thompson from Components wrote a blog post following up on their earlier report. “My few conversations with people at large labels have led me to believe that the majors see streaming services as a deal they want out of,” he wrote. “One person went so far as to say that the managers of the largest music company in the world ‘hate Spotify.'” 

What if the streaming services were never really a revolutionary tech product at all? What if the major labels really needed everybody to think that for a little bit because they owned equity in Spotify and wanted the stock price to go up? Perhaps the labels are looking at the subscription-based streaming product and thinking to themselves, “No matter how many subscribers Spotify gets, each one is never going to amount to more than $10 a month. The first thing they teach you in business school is that 80% of your purchases come from 20% of your customers. If 20% of these subscribers would spend more on music if they were given the option, that means this model is losing us money.”

The streaming services and record clubs are alike in many ways, but the critical difference is that the current streaming product gives most people everything they could ever possibly want for one monthly fee. In contrast, the record club model is that you got one album every month as part of the subscription, with regular discounts to incentivize the customer to buy more beyond that. Imagine that streaming subscriptions get more expensive, potentially by introducing tiered membership options. Imagine suddenly being forced to pay significantly more in order to access the variety of major label music people are accustomed to today. Is it so hard to imagine Apple rebooting the iTunes store as the “Apple Music Club” and using the same business model as Columbia House? You get one album of your choosing added to your permanent digital collection every month, with incentives to buy more. An essential subscription for passive listeners who don’t want to maintain their own collections that still allows 80% of purchases to come from 20% of customers.

As an artist, I would like for you to cancel your music streaming subscription. That is absolutely, unambiguously the case. Trying to convince you of that would be a complete waste of my time, though. No, not because streaming is such a good product for consumers or because it’s futile to argue against convenience or anything like that. It would be a waste of my time because very soon, the streaming services themselves are going to do it for me. One way or another, the all-access subscription model will end. Prices will go up, selection will go down, and those who loved the service while it was available will be left in the cold.

What then? Well, I think a lot of folks may find that they wrote digital downloads off prematurely. Some enthusiasts have been able to replicate a lot of the convenience and functionality of streaming with their digital music collections. I really liked this method that the writer Ed Gillett posted on Medium: it involves using Plex and Tidal to set up a media server in your home that will allow you to access your music collection remotely from any number of compatible devices. It certainly isn’t as intuitive as Spotify and Apple Music are, but we can’t rely on them, and we shouldn’t. Every new person who switches over and starts working in any way to rebuild the MP3 file-sharing ecosystem makes it easier for everyone who comes after. I hope everyone who has the time, resources, and expertise to execute this kind of thing does so, I hope they share it with as many people as they can, and I hope everyone who benefits from a robust ecosystem around digital downloads and file-sharing shows their appreciation to everyone who made it possible.

Have you ever heard of a record pool? The first one was started in New York in the seventies. Labels wanted DJs to play their records, but had difficulty figuring out how to get the music to them. A big group of DJs formed the first record pool; alabels would send the records directly to the pool, where the DJs would come pick them up. I’ve seen the same principle applied in a lot of other situations. I’ve known older DJs who happily lent records to younger upstarts, so they had an opportunity to practice their craft properly without having to build an entire collection of their own first. What if streaming services were like record pools? A whole bunch of little ones all over the place, each with a slightly different collection of music owing to the specific tastes and expertise of the pool’s members, and you pay a little bit every month to have access to it, with some of that paid forward to the artists? 

 In the post-streaming ecosystem, I think listeners will be faced with a choice between record clubs and record pools. You’re either going to be paying some service to maintain your music collection for you, or you’re going to be getting someone you know to do it. I’m sure the latter option would probably be illegal, but what effective form of promotion isn’t? Countless video clips on TikTok are downloaded and reposted elsewhere every day––the very definition of illegal file-sharing––but the major labels are making too much money to care. Maybe all of the illegal file-sharing is the reason TikTok is so successful. YouTube is considering bringing back the “download” button, apparently because they think more illegal file-sharing would be good for their platform. What if file-sharing is the future? 

Personally, I have been releasing music exclusively on Bandcamp for almost ten years now, and I find the idea of record pools a lot more appealing. Part of the joy of releasing music this way, for me, is getting to see who connects with it. There are so many people who spend inordinate amounts of time listening to music, thinking about it, organizing their collections, writing reviews, writing posts on Reddit, making mixtapes, making playlists. Though my work is often described as overlooked or underappreciated, I never feel like it is, because at least a couple of times a month I see some smart, thoughtful, accomplished person somewhere on the internet literally begging their friends to listen to it. I think the streaming services encourage all of us to take those people for granted. I think we should fix that. I want those people to be in charge. I want to live in a world where they have at least as much influence as algorithms and paid marketing on the people around them. I hope that’s what the future is.