If Streaming is the “Solution” to Piracy, What Happens When Piracy is Streaming? Rot Oh… #sxsw

A big talking point of streaming, particularly of the Spotify variety has been that streaming is a solution to piracy, and that “access over ownership” models are the future.

Well… ok… but that assumes that piracy (of the corporately sanctioned, ad funded variety) remains a download business, while consumers migrate to the easier more accessible (free tiered, ad funded) music streaming models.

We’re told that the ad-supported free tier is the only way to attract consumers from piracy to legality. To be clear we’re not opposed to free trial periods. Free trials of 30 days, maybe even 60 days should give the consumer the ability to fully experience the value a streaming service offers. We just don’t see how the economics of ad-supported free streaming can create a sustainable revenue model for musicians and songwriters.

But here’s the bigger question. What happens when the pirates migrate to streaming over storing? Now we’re back to square one. A decade ago iTunes and later Amazon provided an legal solution to piracy that was superior in every way except one, price.

Why would anyone think that streaming would combat piracy any better than transactional downloads? Well, for the same reason piracy is, was and remains the primary source of music consumption, price. So the conversation and controversy over streaming is not one about the method of distribution, or technology. The conversation is the same as it has been for a over a decade, price.

Essentially Spotify appears to be designed to model ad-funded piracy whereby the company who can capture the largest market share would have ability to legally devalue music by delivering it to consumers for free. This math just doesn’t work. We can’t even see where the math on paid subscriptions will ever get to scale or revenue at a price point of $9.99 a month per subscriber.

So the inevitable question becomes if streaming is the solution to piracy, what happens when piracy is streaming? There are already multiple applications that are available or in development that reportedly enable users to stream music directly from BitTorrent as opposed to the need to download files to a local hard drive.

So explain to us again exactly how streaming is a solution to essentially the same service? Oh, they both need to compete on the same price point, which is free. Well, guess what, ad-supported free distribution of music is not sustainable.

YouTube is the largest free ad-supported free streaming distribution platform and it can not create the type of revenue required for the sustainability of the recorded music business. If we believe what they say, YouTube isn’t even a profitable business for Google!

So here’s the bottom line. Spotify, YouTube, Pandora and other ad-supported free streaming services are a side show to take the conversation away from the core problem, piracy. Internet piracy is big business and these side shows distract the conversation away from the fundamental truth of our economic reality… Free doesn’t pay. It’s just common sense and it’s just math…


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6 thoughts on “If Streaming is the “Solution” to Piracy, What Happens When Piracy is Streaming? Rot Oh… #sxsw

  1. “A decade ago iTunes and later Amazon provided an legal solution to piracy that was superior in every way except one, price.”

    Not strictly true. A decade ago there were catalogue gaps, DRM and a lack of uncompressed files that were all in the mix too. Fell foul of the maximum of 5 Apple devices at a time DRM many a time prior to 2006/7.Why Apple don’t sell music in ALAC is beyond me

    1. Perhaps the post is confusing, but the argument is simply this – piracy is, was and remains the primary and overwhelming cause of the devaluation of music and depressed pricing due to the legitimizing of black markets as the primary source of consumption. Everything else is a side show and a distraction. A true music economy can not exist without significant efforts being taken to combat piracy, which is the root of the problem.

  2. Once again we have to direct our attention to the elephant in the room: The safe harbor provision of the DMCA. As long as it exists there were will be businesses built on providing unlimited free content. You Tube gets away with as do many others. In a market, the lowest price sets the going rate for any good or service. So that means that as long as the safe harbor exists, music services will never be able to charge for music and there never will be enough money to sustain the music profession.

  3. Yet another excellent point from The Trichordist. Your math and your analysis of streaming are spot on. But I disagree that the only thing streaming and piracy can compete on is monetary price. Most people aren’t thieves and like supporting businesses and artists they love, as well as doing the right thing generally. Legal streaming needs to stop focusing on price, and start focusing on the other aspects that matter: convenience, quality, and – most importantly – the experience.

    You can steal a song, but you can’t steal an experience. You can’t steal the feeling of connecting with your favorite artist, for instance. You can’t steal the feeling of community, or of doing the right thing, or of being part of something you love. Before you downplay these things, consider Patreon and Bandpage (even Bandcamp to some extent). These great sites all demonstrate the value of experience, but they do so in limited ways that, by design, can never become mainstream for consumers.

    So the future of streaming vs. piracy, if you insist on competing exclusively on price, is unfortunately likely to be one where piracy wins. Likewise, the future of the Spotify Streaming Model vs. Streaming Piracy is bleak: even if Spotify “wins,” the music industry loses.
    But stop competing exclusively on price – stop devaluing music AND the associated experiences – and just maybe we’ve got a fighting chance here.

  4. Another point: You quote the following –

    “A decade ago iTunes and later Amazon provided an legal solution to piracy that was superior in every way except one, price.”

    So let’s focus on price alone; price is a big thing in commerce, after all. iTunes was a fixed market: everything had the same arbitrarily chosen price, which means the market couldn’t respond to demand. People weren’t given the option of paying or stealing in a free, responsive market. They were given the option of paying arbitrarily fixed prices or stealing in a completely non-responsive market.

    Consider this in a different context: widgets. You start selling widgets. You set the price at $50. If not enough people buy them, you lower the price to $45. Sales should go up, but if they don’t go up enough, you lower price again to maybe $40; you repeat this process until you’ve found the revenue maximizing price point.

    This process of feedback and adjustment happens in virtually every market. It was NOT allowed to happen in iTunes (and still is generally dismissed in music). iTunes said “we don’t care about maximizing revenues or profits; a song is 99 cents no matter what.”

    (Why did iTunes say that? Probably a lot of reasons, including pressure from the music industry to pick a high price that mimicked traditional sales. Also, it was easy and iTunes is primarily a loss leader for Apple; it’s nice to make money on it but they don’t really care, the foremost purpose of iTunes as well as the App Store is to drive sales and engagement of their devices, where they make the serious money).

    So consumers were forced to choose between paying a price that didn’t match the value placed by it on the market, or stealing. Is it surprising they chose stealing? Their substitution of illegal downloads for legal purchases didn’t say “I refuse to pay anything for this at all,” it said “I refuse to pay this specific price for this.”

    There is no evidence to support the claim that consumers (in general) always prefer to free to paid. You can’t reasonably draw that conclusion from a fixed marketplace, where market participants weren’t able to adjust to demand; it was just opt-in on fixed terms or opt-out, no adjustment option.

    On the flipside, there is evidence to support the claim that consumers are quite willing to pay, so long as the product is presented on terms that match the value that consumers’ place on it.

    1. To clarify, iTunes didn’t literally “say” that – I don’t want to be misleading, and my phrasing there was unfortunately unclear. That is, rather, the position they effectively assumed with their iTunes model, and the position they arguably communicated, through their actions, to the market.

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