How would you feel about a music streaming service with CD quality sound, video and editorial content, full offline capabilities, and exclusive tracks from your favorite artists? Sounds amazing, right? But is it worth ditching your free Spotify account for a $20-a-month fee? Rapper and business mogul Jay Z thinks that it is, and has enlisted a crew of Illuminati grade artists to back him.

The new music streaming website Tidal, also known as TidalHiFi, promises to revolutionize the music industry by becoming the first “artist owned” music streaming platform of its kind. That sounds like a great way to solve some of the problems artists have with the music industry, like getting next to nothing for music royalties. But it’s not solving a problem for consumers–it’s creating one. Tidal subscriptions will end up costing listeners $20 for high-definition streaming and $10 for regular quality, with no free ad-supported option.

The fact of the matter is that music listeners don’t want to pay for music, especially when they can easily get it for free. Spotify, which is the current leader in online streaming, attempted to solve that problem by starting out with a free ad tier in its service that allows listeners to enjoy their music mixed with ads first before deciding whether or not to upgrade to the premium benefits of its subscription version, which costs $10. That worked for Spotify, but with no free version to entice listeners, convincing anyone to pony up $20 for Tidal is a tough sell.

One thing Tidal does have working for it is a list of top names in the music industry invested in it, including Nicki Minaj, Beyonce, Daft Punk, Rihanna, Kanye West, Madonna, Alicia Keys, and Taylor Swift. Convincing Swift to come back to online streaming is impressive, especially after the singer famously broke up with Spotify last year over a disagreement with how artists on the site are compensated. In a Wall Street Journal op-ed, she stated “valuable things should be paid for.” Tidal’s plan to offer a few exclusive tracks is nice, but still not a huge selling point. If Tidal were somehow able to make it so people could only listen to music from these artists on its site, they would really be getting somewhere.

You can watch some of the platform’s celebrity supporters below in Tidal’s press conference:

Not every artist supports the new platform. Singer Lily Allen was pretty vocal about her apprehension by voicing her first impressions of the site in a series of tweets that posed some valid concerns. Allen writes:

i LOVE Jay z so much, but TIDAL is soon expensive compared to other perfectly good streaming services, he’s taken the biggest Artists

— lily (@lilyallen) March 30, 2015

made them exclusive to TIDAL (am i right in thinking this ?), people are going to swarm back to Pirate sites in droves

— lily (@lilyallen) March 30, 2015

sending traffic to torrent sites. up and coming (not yet millionaires) artists are going to suffer as a result.

— lily (@lilyallen) March 31, 2015

Making content exclusive to Tidal may in fact push people only interested in hearing these artists’ music for free back to pirating sites as an alternative, which would make all artists suffer. While Jay Z’s idea sounds cool, I’m not convinced it will somehow revolutionize the music industry. A greater quality music experience is definitely something to strive for, but it’s also important to keep in mind consumers’ desires and not just artists’ pockets.

Alexis Evans

Alexis Evans is an Assistant Editor at Law Street and a Buckeye State native. She has a Bachelor’s Degree in Journalism and a minor in Business from Ohio University. Contact Alexis at aevans@LawStreetMedia.com.

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Today music streaming sites like Spotify seem ubiquitous, but the truth is that they’re fairly recent innovations. As much as consumers appreciate streaming sites, they’re not always as beloved by artists and their collaborators. Read on to learn about music streaming sites, their history, and the legal foundation behind the popular products.

Where did streaming sites come from?

Since the mid-1990s and the era of Napster, the relationship between music and the internet has been rocky. Before most homes in America had a Wi-Fi connection, the only way to get a copy of a song or album was to go to a store and purchase a CD or cassette tape, or go through the painstaking process of recording the song off of the radio. As soon as more and more homes started getting access to the internet fans realized that sharing music with others could be an easy and cheap way to listen. File sharing networks were a dime a dozen, and anytime you wanted a song or an album, you could download the songs and burn them onto a recordable CD.

This obviously meant that many musicians, songwriters, and rightsholders lost money at an alarming rate, and record companies saw a decline in sales, profits, and even advertising. The response was abrupt: lawsuits against file sharers, program developers, and those who downloaded the songs. Lawsuits ranged anywhere from a few dollars and cents to millions of dollars. Of course, that led to bad PR from the general public and made people share music even more while being even sneakier about it. Eventually, the Recording Industry Association of America (RIAA) stopped filing lawsuits and instead turned to internet service providers to monitor illegal usage.

All seemed to be going better, for at least a short time; however, streaming music came to the forefront of the industry and everyone started to get their music for free from websites like Pandora, then Gooveshark, Rdio, YouTube, and Spotify.

Streaming music sites are paid services–or sometimes free, as long as you’re okay with waiting through ads–that enable you to stream music. With Spotify, for example, you start the program, suggest your favorite artist or song, and then you listen to artists and songs that are similar. On some services, you can mix genres, so you can listen to the Broadcast Cast, Nicki Minaj, and Mozart combination radio station, if you really want. Every time someone listens to a song or an album, the artist gets paid by Spotify.

Musicians used to make money in a fairly simple model based off of album sales through record stores and online. It was convoluted at times, due to percentages and contracts, but at its core it was like any other retail endeavor–producers were paid for their product. Today, however, artists make money on everything from iTunes downloads to on-demand streaming to YouTube videos. Unfortunately, many of these methods generate little-to-no money for the actual artists.

Now these services have a responsibility to the artists and those working on the songs. The American Society of Composers, Authors and Publishers (ASCAP) has just granted Spotify a license to stream more than 8.5 million musical works. Cloud-based music services, which Amazon, Google, and Apple have recently introduced, allow users to store music online and play back the music on any device.

In addition, there are fights among the bigger names in music. Entertainment giants like Disney have fought to extend copyright protection on some of their most popular and lucrative pieces of intellectual property, and musicians and songwriters would certainly love to have a longer period to milk royalties out of their creations before the tunes hit the public domain. With Disney leading the way, we might just see some big reforms on the horizon.

So, how do artists make money off streaming?

There are a few different ways musicians make money. If listeners don’t pay for their subscriptions, they get money from the ads that play every few songs. That revenue goes to the streaming site, which then pays the artists their share. Some users get annoyed with the ads, so then they purchase a premium subscription. According to Spotify, this means that the average user now spends $9.99 a month instead of the $5 a month they would spend without it. This chart from Spotify shows the relationship between money earned and music sales in the digital and physical formats. Spotify says that it “pay(s) out nearly 70 percent of (its) total revenue to rights holders.“

Artists no longer make money from the sale of albums or singles, but rather the play of songs. Many people think that this is making artists “up their game” and make albums with better songs, while many artists view it as not being paid for their art. Here is the official description of how they figure out what “per stream” means, right from Spotify’s website:

An artist’s royalty payments depend on the following variables, among others:

• In which country people are streaming an artist’s music

• Spotify’s # of paid users as a % of total users; higher % paid, higher “per stream” rate

• Relative premium pricing and currency value in different countries

• An artist’s royalty rate

Recently, these variables have led to an average “per stream” payout to rights holders of between $0.006 and $0.0084. This combines activity across our tiers of service. The effective average “per stream” payout generated by our Premium subscribers is considerably higher.

So while artists do get compensated when a streaming site uses their work, it’s not as dependable or as lucrative as brick-and-mortar album sales used to be.

Current Debates

When Spotify streams music, it of course takes a cut so that it can stay in business and pay employees. Everyone is happy, right?

Not so fast. It still doesn’t stop illegal download of music, nor does it stop people from piling on the same account, much like people do with Netflix. There has also been some backlash from the musicians themselves. The most notable is Taylor Swift, who refuses to let her album 1989 be played on the service, but also includes Garth Brooks, The Black Keys, AC/DC, The Beatles, and Led Zeppelin. Bette Midler, in particular, is against the services, with Billboard claiming she gets “microscopic micropayment of .00002733076 cents per track.”

Courtesy of Bette Midler/Twitter.

Pandora responded to the Billboard story, saying:

We love Bette’s music and certainly respect her advocacy for fair compensation for artists. But we must clarify an important fact: Pandora paid more than $6,400 for those 4+ million plays, based on our 2014 rates which are published publicly. In terms of compensation to the creative community Pandora remains by far the highest paying form of radio. Pandora pays songwriters a greater percentage of revenue than terrestrial radio. And Pandora paid 48% of our revenue in performance royalties to rights-holders in 2013 – more than $300 million – while terrestrial radio was required to pay nothing.

Of course, Bette Midler probably has enough money to last her, as do many of the other artists mentioned above, but what about artists who do not have as much commercial success? They may not be able to get by on such low payments.

Taylor Swift wrote an Op-Ed on the matter and defended her opinion to Time, saying to those who criticized her choice:

Well, they can still listen to my music if they get it on iTunes. I’m always up for trying something. And I tried it and I didn’t like the way it felt. I think there should be an inherent value placed on art. I didn’t see that happening, perception-wise, when I put my music on Spotify. Everybody’s complaining about how music sales are shrinking, but nobody’s changing the way they’re doing things. They keep running towards streaming, which is, for the most part, what has been shrinking the numbers of paid album sales.

Some musicians are defending the services, however. Bono recently said:

I see streaming services as quite exciting ways to get to people. In the end, that’s what we want for U2 songs. The real enemy is not between digital downloads or streaming. The real enemy, the real fight is between opacity and transparency. The music business has historically involved itself in quite considerable deceit.

Essentially, artists want a fair price for their music. But in a world where almost no one pays full “iTunes” prices for their music, is it worth it for those celebrities to take a stand? As long as there are only a few artists standing against streaming services, it will probably be a losing battle.

Trickle Down Effect?

Swift also defends her choice because she sees her music as an “art.” This begs the question, if the stars are complaining about what they get, what does that mean for everyone else? Alex Anders, a music producer and engineer who has worked with many artists, including the cast of Glee (which charts multiple songs on iTunes and Spotify when the show is in season), had this to say:

@NoelDiem It is the songwriters, engineers, producers, and studios, etc that are paying the price with their livelihood. They can’t tour!

— Alex Anders (@alxanders) January 14, 2015

So who is missing out on money when it comes to streaming? Those who fall into the “other” category, and they have to share a small piece of the puzzle. The Songwriter writes the actual melody and lyrics of the song; the Publisher pays for the music to be recorded; and the Engineer sets up and mixes the music.

The move away from a traditional model of selling music means that these people are sometimes cut out of the equation, or don’t receive as much money as they used to. Can this problem be solved with a restructuring of the music business? Maybe. But it will take artists working together with record labels, streaming services, and internet providers to make a real change.

Conclusion

Streaming music is still in its relative infancy, so it has the potential to improve for everyone in the equation. There have already been many changes in just the last few years. Apple is still in its first year of streaming, and more and more artists are paying attention to cash flow. Is it perfect yet? Hardly. Not by a long shot. But it is a much better alternative than the era of pirated music and zero artist compensation.

Sources

 Primary

Spotify: Spotify for Artists 

Pandora: Artist Support

Additional

Billboard: Bette Midler Disparages Pandora, Spotify Over Artist Compensation

Independent: Music Streaming: The End for iPods?

Time: Taylor Swift on 1989, Spotify, Her Next Tour and Female Role Models

Reuters: U2’s Bono Defends Under-Fire Music Streaming Services

Independent: Why Musicians Hate Spotify

Wall Street Journal: For Taylor Swift, the Future of Music is a Love Story

Noel Diem

Law Street contributor Noel Diem is an editor and aspiring author based in Reading, Pennsylvania. She is an alum of Albright College where she studied English and Secondary Education. In her spare time she enjoys traveling, theater, fashion, and literature. Contact Noel at staff@LawStreetMedia.com.

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Steve Jobs will be testifying in a class-action trial in which it is being alleged that Apple broke anti-trust laws.

Now, Steve Jobs is, of course, dead. But before he died, he recorded a deposition and now that deposition will be played during the trial. In addition to the deposition, emails that he sent during that time period will also be used.

The suit essentially says that during part of the early iPod era–2006 to 2009–Apple only allowed music downloaded from iTunes to play on the devices. The reverse was also true–if you downloaded music from iTunes, which was admittedly one of the easiest platforms at the time, you couldn’t get it to play on another kind of device. By not allowing music downloaded from competing companies, Apple essentially broke anti-trust practices. That’s obviously no longer the case–Apple changed its products to allow music from other platforms in 2009. Now, it’s pretty easy to get content from other music retailers onto iPods, iPhones, iPads, or any other Apple devices, but “the plaintiffs argue that it inflated the prices of millions of iPods sold between 2006 and 2009 to the tune of $350 million.”

Jobs’ “testimony” seems like it could be pretty damning for Apple. For example, an email released a few years back includes a statement from Jobs as follows:

We need to make sure that when Music Match launches their download music store they cannot use iPod. Is this going to be an issue?

In addition, the plaintiff’s attorneys claim that their most salient proof comes from the reaction that Jobs had to a rival company, RealNetworks, releasing software called “Harmony.” Harmony would have allowed songs purchased from Real to be played on Apple devices. Apple responded by quickly releasing updates that rendered Harmony incompatible. Bonnie Sweeney, an attorney for the plaintiffs, said that there is evidence that Jobs was furious at Harmony’s release, and his testimony will show that.

Jobs isn’t the only familiar face from Apple who will be testifying at this trial. Marketing Chief Phil Schiller and the exec who runs Apple’s software sales, Eddy Cue, will also be there.

The fact that Jobs’ testimony is being incorporated a few years after his death says a lot more about our court system than the case itself. The case was first filed in 2005, and there’s been basically a decade of legal back-and-forth over the issue. Now, almost 10 years later, it’s hard to even remember the days when you could only use iTunes if you had an iPod. In addition, the money that’s up for grabs–the suit is for $350 million–really isn’t that much to a company like Apple. After all, Apple makes about $180 billion in a single year. But it’s gotten pretty used to defending itself in court, and this is just further example of that attitude.

What’s really making the news here isn’t the class-action lawsuit–which to be honest is pretty run of the mill and boring. It’s the fact that Jobs, who has an almost cult-like following, is going to be sort of the “star witness” from the grave. It’s not something that our legal system really imagined, but it could very well help prosecutors prove their case against Apple.

Anneliese Mahoney

Anneliese Mahoney is Managing Editor at Law Street and a Connecticut transplant to Washington D.C. She has a Bachelor’s degree in International Affairs from the George Washington University, and a passion for law, politics, and social issues. Contact Anneliese at amahoney@LawStreetMedia.com.

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Taylor Swift made waves this week when she pulled all of her music from the popular streaming site Spotify. The 24-year-old singer-songwriter’s newest album, “1989,” was never put on the site, and her older music can no longer be found there.

Spotify is a music streaming site that was launched in the United Kingdom in 2008, and has been in the United States since 2011. It is able to stream music so effectively because of deals it has worked out with various record labels. Labels and artists are compensated for Spotify’s use, although to be fair probably not as much as they would if they had actually sold the songs or albums; however, as Spotify explains it, there is tangible benefit for the artists. Spotify provides a service that’s convenient, relatively cost-effective, and easy to use. It hopes to divert those who would otherwise pirate or get songs illegally. In Spotify’s eyes, artists are better joining up with them and making a little money than not making anything because of piracy. Spotify explains its success:

Spotify has already made considerable progress towards restoring the value lost to piracy and other less well monetized forms of music consumption. As of March 2013, Spotify had over 24 million global users. 18 million of them were using our free tier, wherein listeners pay for their consumption by viewing and listening to advertisements. At that time, as well, more than 6 million users were paying a $9.99 / £9.99 / €9.99 monthly subscription to use Spotify’s Premium tier.

However, if an artist or its label does not want to have music on Spotify, they can take their music down. T-Swift is by no means the first artist to do so, and others simply never allowed their music on the site in the first place. The Black Keys, Beyonce, and Radiohead are all good examples of other popular artists whose music is not available to stream through Spotify. The argument is that services like this are predatory and take advantage of artists. Swift has long been against services like what Spotify offers. In a Wall Street Journal op-ed this summer, she wrote:

Piracy, file sharing and streaming have shrunk the numbers of paid album sales drastically, and every artist has handled this blow differently. Music is art, and art is important and rare. Important, rare things are valuable. Valuable things should be paid for. It’s my opinion that music should not be free, and my prediction is that individual artists and their labels will someday decide what an album’s price point is.

To its credit, Spotify has handled this marvelously. It’s capitalized on Swift’s retreat from the site by using it as a social media marketing opportunity. The music streaming site tweeted at the singer with a pretty creative message:

We love @taylorswift13 as much as you do. Here's a message we hope brings her back http://t.co/yRm5bfNV23 #justsayyes pic.twitter.com/1lj2JB1SMI

— Spotify (@Spotify) November 3, 2014

It also got some fun and creative use out of one of T-Swift’s more famous songs, again on Twitter:

We were young when we first saw you but now there’s 40MM who say stay, stay, stay. It’s a love story baby #justsayyes pic.twitter.com/n6tHkG8GCq

— Spotify (@Spotify) November 3, 2014

Spotify’s actions on Twitter really kind of sum up what this debate is all about–the Internet has changed how we do all of this. From how we listen to music, to how we respond to scandals, to how we are able to interact with the public, technology has completely radicalized all of it. T-Swift and other artists’ dedication to their art is admirable, to be sure, but is it really the smartest course of action? Spotify, and all other streaming services, are on to something here. There will always be ways to find this stuff illegally; you’re better off getting people to pay a little for it than nothing at all.

Now, T-Swift is rich enough and has good enough brand recognition that my guess is that this is more of a political statement than a financial decision. It’s a decision that she can afford to make, but I don’t know that it will create any real change in the industry. While it’s a shame that the music industry is no longer what it once was, I highly doubt that it will end up going backward and we’ll all revert to purchasing music. T-Swift may just do better shaking it all off and going back to Spotify.

Anneliese Mahoney

Anneliese Mahoney is Managing Editor at Law Street and a Connecticut transplant to Washington D.C. She has a Bachelor’s degree in International Affairs from the George Washington University, and a passion for law, politics, and social issues. Contact Anneliese at amahoney@LawStreetMedia.com.

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