[nemothekid]

>No one has done more than they have to create the price point expectations for products like theirs.

I think Napster/Limewire/Kazaa were far greater influences on price point expectations for Music. This reads like complete erasure of music distribution from 1999-2011. Not to mention you already have companies like Rdio and Grooveshark that were pretty much squeezed to death by the labels.

Yes, Advertising is a poor way to monetize such a service (just look at Pandora), but Apple is in a privileged position being able to start today with a subscription only service; one that is enforced by their market position in devices. There is no way you could have pulled that off in 2008, and the reason for that was piracy.

[wwweston]

> I think Napster/Limewire/Kazaa were far greater influences on price point expectations for Music.

Unauthorized copies have been a fact of life not only through the dawn of the P2P era but back through the cassette era. And you don't even have to get into the ethics of that in order to understand that none of them ever set price point expectations. Everyone involved in that activity ultimately understood that they were not participating in economically supporting the artist (or indeed, in any economic transaction at all). Everyone was clear on the accounting.

Spotify adopted an economic model marginally different from piracy but with the veneer of a legitimate economic transaction, the pretense of some kind of proper accounting.

So yeah. It absolutely did more to set price point expectations.

> Rdio and Grooveshark

Rdio and Grooveshark are weird examples to pull in, Rdio because it was always too late and too small to have really made that much of a difference, Grooveshark because it started life as more of a P2P tool. What's next, pointing out the missed relevance of audioscrobbler/last.fm?

> There is no way you could have pulled that off in 2008, and the reason for that was piracy.

The primary reason you couldn't have pulled that off in 2008 was economic contraction, not piracy.

If you actually look at the RIAA sales history figures you can see it:

https://www.riaa.com/u-s-sales-database/

The total sales volume peaks quite clearly coincide more with macroeconomic trends than technical trends. CDs get huge during the "irrational exuberance" of the 90s. It dips with the dot-com crash, but even with P2P taking off like crazy and digital retail barely getting off the ground, the amount of money going into CDs is more flat than downward ... until 2007, of course, and everyone knows what happened then. And the recent primary huge revenue growth in streaming has coincided with periods of big economic growth.

And you can also see the story in there of digital retail growth from 2004... up until streaming cannibalized that.

[nemothekid]

>Everyone involved in that activity ultimately understood that they were not participating in economically supporting the artist (or indeed, in any economic transaction at all).

I don't believe you can present this decision as independent of piracy and business model. The reason for Spotify's abysmal payouts compared to Apple's has to do with the _business model_. Advertising is an awful way to pay to content when it comes to music especially when you have to placate labels. You are making it seem Spotify just kept the money for themselves, when there simply wasn't that much money to go around.

>Rdio and Grooveshark are weird examples to pull in

I bring them up (and include Pandora) because they had the functionally the same business model; to appease labels by giving them advertising revenue. It didn't work because the revenue wasn't there.

>The primary reason you couldn't have pulled that off in 2008 was economic contraction, not piracy.

Spotify was founded in 2006; and launched in the US in 2011 (the same year Limewire shutdown). You could not have launched a successful, subscription only streaming service the year limewire shutdown. Your chart is a great resource - look how tiny the "On Demand Streaming (Ad supported)" revenue bar is; that is the "money pool" most artists are drawing from when they get paid from Spotify.

To summarize, Spotify's payouts are historically terrible and will continue to be terrible for as long as they continue to support their free product. The advertising market just isn't there, and all those free users depress the pay per streams that Spotify provides. Spotify's "price expectation" was driven by the fact they likely needed to launch with a free ad supported product or they would have never succeeded in the competition with piracy. Apple now enjoys only having to compete with Spotify, and not with Limewire, and doesn't have to offer a free product. With a much larger revenue pool to draw from, per stream, their numbers naturally look better than Spotifys.

The effects of piracy cannot be discounted; even Jobs practically built iTunes and the iPod on the backs of piracy.

[yunohn]

> Spotify adopted an economic model marginally different from piracy but with the veneer of a legitimate economic transaction, the pretense of some kind of proper accounting.

How does your critique of Spotify not apply to Apple? They lack a free/ads tier, and claim to pay a bit more to artists. Does this fundamentally change the fact that they’re still /streaming/?

[wwweston]

/Streaming/ itself isn't the problem. The problem is the /payouts/. Retail revenues were replaced with fractional revenues more suitable for broadcast. That makes life economically more difficult for musicians.

So my critique could apply to Apple in approximately the ratio between their payouts and Spotify's (averaging around $.01 to $.004).

I would also point out that Apple's scheme starts to get into territory that looks reasonable-ish as a replacement for recording retail. Ask yourself how many plays you're likely to get out of a single you buy. If my recall of my iTunes history is any indication, it probably averages out to around 50. $1.00 a track, 70% to artist, that's right around a penny per play.

Of course, there's a short peak (opposite of long tail) of more individually popular tracks that people will play hundreds of times. Those the economics probably works out down in the tenth-of-a-penny range. But even then, retail incentives were better -- front-loading payouts creates a situation where new-music-creation is incentivized more heavily, leading you to be more likely to have more from your favorite artists if there's more to make.