Pandora CEO: Free on-demand music streaming habit is killing the music industry

warner music group streaming
Garry Knight/Flickr
If you love being able to stream whatever you want, whenever you want, and at no cost, you’re not alone — but you may actually be hurting yourself in the long run. That’s according to Pandora CEO Brian McAndrews, whose recent op-ed for Business Insider argues on-demand music destroys the music industry when it’s free all the time.

To McAndrews, on-demand is “the modern equivalent of ownership,” and he makes a compelling case; if you have an album or song constantly at your disposal, for all intents and purposes, you own it. He argues that giving consumers such “ownership” is no different than allowing them to walk into a record store and take any record for as long as they want without charging them. McAndrews says it changes our perception of the value of music, driving it down — to the detriment of the industry and listeners alike.

McAndrews doesn’t name names or point his finger at any specific company, but it’s not hard to figure out which streamers he thinks are to blame. YouTube and Spotify, for example, each have a subscription option, but they offer plenty of music on-demand to nonpaying users. He credits free on-demand services with the creation of a gray market.

Naturally, McAndrews makes sure in his op-ed to distinguish between these streaming services and what Internet radio services like Pandora do. He explains that the latter are typically ad-supported and programmed, so listeners are exposed to new music, rather than their own picks. This in turn, says McAndrews, encourages the discovery — and purchase — of new songs and albums. “Music discovery leads to music ownership,” he writes.

The fact that artists are paid royalties, even when streaming is free, is touched on in the op-ed, but McAndrews argues that free on-demand music should be used as an “on-ramp” to subscription services and that it’s up to content rights holders and these services to make changes. He encourages limiting free on-demand music to trial periods and increasing the number of converts from listeners to subscribers.

McAndrews’ concerns about these streamers are valid, but it’s arguable that he doesn’t go far enough. As Digital Trends’ own Ryan Waniata pointed out in April, even ad-supported services like Pandora are paying such low royalties to artists — fractions of pennies per stream — that only the strong can survive. In other words, the Taylor Swifts of the world will be fine, but many emerging artists may never be able to sustain a career under the current paradigm. Swift, in fact, had to go to bat for artists in June prior to the launch of Apple Music, getting the company to change its policy and pay artists for streams during the service’s three-month free-trial period.

Music streaming is becoming increasingly common; midway through the year, streamers had already racked up 1 trillion plays. How these services handle royalty payments will have an enormous impact on the industry as a whole. As much as McAndrews makes good points, if we want variety and quality in our music, there’s more to worry about than just free on-demand streaming.

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