Local musicians ambivalent about benefits of streamed content

As Spotify and similar streaming music platforms gain a foothold in Asia, Hong Kong artists are in two minds about their benefits, writes Charley Lanyon

PUBLISHED : Tuesday, 04 March, 2014, 10:20am
UPDATED : Tuesday, 04 March, 2014, 10:20am

Hong Kong hip hop artist Masta Mic (real name Tong Sung-ching) is constantly hustling to get his music out to the people, and last month, he had a breakthrough. After extended negotiations, he got his music on the library of Spotify, one of the world's biggest music streaming services.

"It's a very good platform for artists promoting music in Hong Kong because people don't like to pay for things."

How can you say you're supporting artists when you're making the middle men rip them off?
Rapper masta mic

But as pleased as he is, the exposure has its price. Although Masta Mic describes himself as a fan of Spotify, he can't keep his frustration bottled up for long: "Come on man, how can you say you're supporting artists when you're making the middle men rip them off?"

What the rapper is referring to are music aggregators. Spotify cannot make direct deals with musicians or labels, so to get their music on the library, artists must use aggregators - companies like Label Worx and Finetunes, which act as middle men. They provide the music to Spotify for a fee or a cut of the profit. Recording companies, too, must also employ a middleman, typically a music rights agency like Merlin, to deliver music through Spotify.

Masta Mic's feelings towards Spotify reflect in part the music industry's conflicted relationship with streamed content.

The growth of streaming services such as Rdio and Google Play All Access, which deliver audio content online through a continual flow digital "packets", is shaking up the music business.

Music labels and artists have signed on, buying into the argument that streaming helps bring their music into millions of homes and smartphones, and reach whole new audiences who would eventually want to make purchases. But this streamed music is mostly available for a small monthly membership fee, or alternatively for free with advertisements. Detractors attack the model as one that will cripple the music business; the sums per stream that flow back to artists and recording companies are so minuscule they do not begin to compensate for the effort that goes into creating their music and isn't sustainable inthe long term.

Spotify, which expanded into Hong Kong and other Asian markets last year, has come in for its share of criticism as a leader in streaming services (it now reaches 55 countries and claims more than 24 million users worldwide).

Developed in Sweden in 2008, Spotify first found success in Europe; but the service only really exploded after 2011 when it launched in the United States, partnering American record labels and music magazines. From losing US$4.4 million in 2008, Spotify was valued at US$3 billion in 2012 by Goldman Sachs.

The service came on the scene when the music industry was going through seismic shifts: record sales were dropping off in favour of digital downloads, legal and otherwise; and musicians were increasingly having to rely on live performance rather than record sales for income.

Spotify positioned itself as a platform that would satisfy musicians and record labels, as well as fans who were accustomed to getting their music for free.

The service works on a two-tiered system: ordinary users can stream music to their heart's content for free but will have their listening interrupted by radio-style advertisements; those who purchase the premium service (priced at HK$48 per month) receive an ad-free playlist and other perks like the ability to download music and listen offline and enjoy unrestricted listening on their mobile devices.

According to Spotify, about 70 per cent of its revenue from every piece of music goes to rights holders - labels, publishers, artists and the like. But this sum is based not on the number of streams or times a song is played, but on the artist's "market share". Spotify determines this by calculating performer's number of streams as a proportion of the total number of streams for the month.

So while musicians with large followings, the Rolling Stones for example, will receive a comparatively large payout, bands that are just starting out may struggle to receive much money at all. In fact, the payout can seem paltry even for established artists; according to the Spotify website on average an artist makes between US$0.006 and US$0.0084 per stream.

This scheme has proved controversial in the West, with big name artists like Patrick Carney of The Black Keys and Talking Heads frontman David Byrne criticising Spotify as being unfair to artists. Radiohead lead singer Thom Yorke, one of Spotify's most outspoken critics, withdrew all his solo work from the service last year.

In response, Spotify argues that these criticisms miss the true value of the service. Its most important role is to reduce piracy by convincing music fans around the world to pay for music again as "monetised users" of its platform, and by helping to draw attention to new music.

Spotify's director for Asia, Sunita Kaur, describes the criticisms as baffling. "We have seen artists literally launch themselves on Spotify and do very well. A great recent example is Lorde [the teen sensation from New Zealand] who launched herself on Spotify, got huge and then got signed. We have a lot of examples like that," she says.

So far, the disputes over compensation have not followed Spotify to Asia. Record labels and artists in the region seem largely unconcerned; often they did not know of Spotify's existence. A local record producer, who preferred not to be named, replied in an e-mail: "lol … the difference [Spotify makes] in Hong Kong is pretty negligible".

Pop singer Jason Chan Pak-yu, whose music is available on the service, shares the view of many emerging artists that the small royalties are more than made up for by exposure it gives his music and that it discourages outright music piracy.

"I don't know if there's any change to the money we make but I'm sure it helps us because people can choose to listen to us without downloading illegally."

For the most part, he suggests, problems are overstated: "People aren't going to buy your CD just because there's no Spotify. They're either going to buy it or they're not. At least Spotify gives them more ways to listen to it."

The relatively small size of streaming services here may account for such nonchalance in the Hong Kong music business.

"I don't really think there is that problem in Hong Kong yet because not that many people use it here," Masta Mic says. "Among my friends, most of the people around me use services like KKbox or Moove that are more popular in Hong Kong."

"Streaming royalties ... still make up such a small percentage of the revenue and monetisation channels for artists," says Errol Tan, manager of KittyWu Records in Singapore, a Spotify "label partner".

Anthony Fung, an expert on Canto-pop culture and head of the School of Journalism and Communications at Hong Kong University, says he would be surprised if streaming services found the same kind of success they had in the West here in Asia.

"The local industry for the most part will not collaborate with streaming technology [like they do in the West]", not while there is still so much more money to be made the old-fashioned way, selling CDs and playing shows."

Tan also believes that because streaming is so new in Asia, that musicians and labels simply don't know what kind of impact it is having yet.

"The industry infrastructure is yet to mature into something like in Europe or the US, with music publishing companies, royalty collection agencies, music distribution companies still figuring out and vying for a slice of the monetisation pie."

With negligible revenue for streams in Hong Kong right now, Tan says what artists and labels should take note of is the "accessibility, global reach and social feedback" that the service provides.

When KittyWu records was preparing to launch a new album by their artist MONSTER CAT this week, they worked closely with Spotify to "synchronize and amplify" the coverage with audio advertising, banner ads, and an exclusive pre-release stream of the new album before its launch date. As a result "fans and critics alike have taken a liking to the new material even before its official launch", Tan says.

In Hong Kong, music industry insiders say it has been business as usual in the wake of the Spotify expansion. But if events in the United States and Europe are anything to go by, Asia's musicians may very soon find themselves singing a different tune.