Streaming: What Netflix Can Teach The Music Industry

It has become commonplace to hear artists, management, agents and labels complain about how streaming will crush the music industry.  This same mentality arose during the transition into the CD and digital downloading eras.  Don’t fear the numerous myths that have saturated our industry, streaming is not evil; merely different.  And it is about to become the next powerhouse, quite possibly changing music distribution in a way never seen before.  This transformation has already commenced in television and film.  The music industry has fallen behind, but is quickly catching up with vengeance. 

The Millennial Invasion

To understand the trends that are changing the way music is distributed, we must first take a look at the behavior of the driving force behind new technologies: The Millennial Generation.  The Millennials are categorized as individuals between the ages of 19 and 28.  Technology has been an integral part of the Millennial lifestyle since their early formative years.  According to the latest Nielsen Report, Millennials make up roughly 15% of the US population.  Three out of every four Millennials own a smart phone, and over half own at least one laptop, tablet and/or gaming console.  They are a more engaged audience, interested in real-time updated trends, driven by the nature of web-based culture.  This higher level of engagement makes the presence of strong niche markets more feasible.  Millennials have grown up in an age where improvements and updates are just a click away.  And when it comes to content consumption, they follow the path of least resistance.  

Rise of Netflix

Netflix was founded in 1997 in response to the rising presence of late fees.  They introduced the concept of unlimited content access based on a monthly fee.  This appealed to consumers who had previously been subjected to late fees that stacked up like a 5 year old’s lego tower.  As internet-based content became more commonplace, Netflix introduced streaming, and the concept of an insta-queue, where subscribers could choose from a content database that was instantly accessible.  

Now, Netflix has begun to introduce original and exclusive content, in an attempt to rival Premium cable titans such as HBO.  Introducing smash hits like House of Cards, and a revamped season of Arrested Development, Netflix has initiated a conversation that the music industry SHOULD be taking note of.   

Streaming in the Music Biz

Almost every musician has heard of at least one Music Streaming service.  Companies such as Deezer, WiMP, iRadio, and Spotify have popped up, offering the same concept as Netflix to their users.  However, one key distinction is that music streamers lack any substantial original content.  

It is important that we look not at what streaming currently offers, but what it will become in the future, to understand why artists should be paying attention to this trend.  Music distribution will change in a way never seen before.  As I discussed above, the Millennials are all too key to this revolution.  Content consumption is not limited to a single device.  People don’t just consume content on a desktop.  Music is consumed in one’s car, on a commuter train, in a plane, at work, at home, etc.  Millennials are notorious for their numerous electronic devices, which means a multi-device interface for streaming is in high demand.  Streamers are quickly looking for solutions to fill this void.  The possibility of bundling options, similar to what we see in cable television, are in talks.  There could be a day quite soon, where music consumption is embedded within one’s monthly wireless data plan.  

What Artists Should be Doing

Artists; If you have already introduced your music onto streaming sites such as Spotify, Pandora, iHeartRadio and others, work with your contacts within these companies.  Suggest special promotions, and offer ideas that can help both you, and the streamers.  This may seem like an unorthodox approach to music distribution, but that’s exactly my point.  Don’t rely on a record label or manager to handle album promotion.  Streaming is something very young, and the companies involved are, and should be accepting creative ideas.  Who knows, maybe Spotify will place a spotlight you and your content.  

What Streamers Should Be Doing

You have seen the success that Netflix has gained with exclusive content.  There is no reason this concept cannot be paralleled in music streaming.  You have already accumulated a vast database of artists.  Pick standout groups, and negotiate deals that can help draw their fans to your portal.  Imagine picking the next Adele, promoting her work (which is solely available via your streaming service), and gaining her loyalty for the next 10 years.  There is no reason that a reasonable investment in original content development cannot yield positive results.  

This article is not meant to be a final solution to the challenges music streaming presents to all involved.  I don’t expect to be receiving calls from the top streamers, begging for more of my ideas.  I just hope this will initiate a more expansive dialogue between streamers and musicians.  It’s time to stop fighting with one another, and get a conversation started.  We have so many challenges that face us in this industry, but are eager to turn down potential solutions.  And of course, it is always important to remember the reason we are in this industry- to promote and share our passion for great music to society.  

Thanks, and Happy Music Making!

-Dillon Roulet

I work for an entertainment, digital, and business media consulting firm.  I specialize in Artist Development, and manage a small portfolio of bands and solo-artists.  You can add me on Twitter , Linkedin , or Facebook if I tickle your fancy.  

Comments

[Jeff Shattuck]

Good article, like the idea of certain music streamers having exclusive content, BUT you overlook a key difference between Netflix and, say, Spotify. For a lot of reasons but mainly file size video has not been subjected to the same piracy that music has. More important, Uncle Sam cares about enforcing copyright laws for movie makers but not music makers. Oh, and I guess the movie industry has handled everything better, but that's only because they've had the benefit of watching music die.

[Ryan Anderson]

A couple of things:

1 - The are very few competitors to Netflix (maybe Amazon or Hulu) which gives them clout with content creators to offer original shows to their sizable audience. There are wayyy too many music streaming services (and more every week it seems) for musicians to want to offer anything exclusive for fear of missing any listeners.

2 - Because of the high cost of producing a movie or TV show, creators/producers can command higher royalty rates than musicians, who are working in an art form that is valued less and less these days. In addition, there are fewer video content producers (and even fewer good ones) which gives them more clout with companies like Netflix, in contrast to the sheer number of music creators.

3 - The barrier to entry is much higher with video streaming, which explains why Netflix is still the major player in the game after being around for almost 16 years. With music streaming, new services come on-line all the time, and others fall out of favor, are subject to lawsuits (like Grooveshark) or continue to devalue musician royalties (like Pandora).

Personally I think YouTube is a far better model for video streaming, especially in terms of volume of long-tail content as well as sharing, and consequently seems to be the growing choice for young people to be exposed to music of all kinds.

thanks for getting the conversation going!

[Hawaii in PDX]

You fail to see the difference in acting/hollywood and with music artists. Whereas actors and directors and producers are able to have multiple projects at one time and are simply paid to play a role or offer a service on one front, musicians are responsible for two mediums, recording and live performance. If this said streaming service owns the rights to said performers music and image, this greatly limits her availability to exposure, success, and especially revenue through live performance. All touring and promotional work will be done through this said music streaming company which will become a HUGE headache for promotors, producers, and managers to have to deal with.

Secondly, you are forgetting the fact that Netflix, Hulu, etc are mostly AMERICAN companies and are not viewable outside the free world. Television and film is limited to a particular cultural context in which the setting occurs and often it's country of origin whereas music is transcendental. If said streaming service were to solely own an artists music in the US it'd be extremely difficult for the artist to be promoted globally.

Thirdly, you fail to see that most all musicians have personal ownership of their own music in one way or another. An artist would be hard pressed to sign their life away to someone like Spotify if all it meant was they were a hired gun simply for Spotify's advancement. No artist is going to sign on to do nothing but make Spotify owned music for their entire career. Moreover, if music fans knew said artist was simply own and operated by Spotify, they'd be hard pressed to engage with it because the knew they would't be listening to an artist, but to a Spotify creation. It'd have greatly diminished value.

The biggest difference in all of this is that in film and TV you are marketing a PRODUCT, in music you are marketing a PERSON. They are not interchangeable.

[Dillon Roulet]

^ Hawaii in PDX: Thank you for exemplifying the point I make in my final paragraph. I'm eager to learn what potential solutions you might bring to the table.

[Greg Greenwald]

I think your spot on that the music industry will ultimately embrace streaming as the television industry is doing. Once all the "rules" have shaken out it's about content and whatever means there is to deliver it, in this case streaming will continue in it's popularity. I can see many advantages for new artists for increased exposure. Look at what iTunes has already done for music and television. People are looking for the quickest, simplest way to obtain the contact they want and streaming fits the bill.