Free streaming is 'killing music industry': Ministry boss

Sheet Music Yejun Kim

If Ministry of Sound boss Lohan Presencer had his way, there would be no free option for streaming music services such as Spotify, Deezer and Rdio - or YouTube for that matter.

Related: Ministry of Sound sues Spotify for copyright infringement

Despite having settled his company’s lawsuit with Spotify over playlist copyright infringement, Presencer remains a combative opponent of free streaming services – a point he made forcefully during a recent Mobile World Congress debate with representatives from Deezer and Rdio.

“My beef continually over the last few years has been with the free aspect, the freemium model. I just can’t see how that is sustainable or supportable. The argument goes that by making a free ad-funded service available, you give the pirates an alternative. I just don’t buy it,” said Presencer.

“I think what you do is you take casual consumers of music and you turn them from purchasers into noshers, into browsers, into snackers. They don’t have to engage in the subscription model. The reality of some of the bigger streaming services is that 75% of their user base are free, which has a horrific impact on the music industry and its ability to invest in talent going forward.”

Presencer also attacked streaming services for being beholden to their investors rather than musicians and rights holders.

“Your objective is to grow your user base, to tell a story such that you can IPO or you can sell, and you can exit, and you can put money back in the pockets of your investors. You are not the ones who are investing in developing talent. You are not the ones who are signing artists,” he said.

“And our artists and investment – our creative community – is contracting daily, as a result of the free services that are out there and giving music away, with the objective of you achieving some sort of exit at the end.”

Presencer’s criticism came at a time when the viability of free, on-demand streaming services is under increasing scrutiny within the music industry. Lucian Grainge, head of the largest major label Universal Music, said recently that this model “is not something that is particularly sustainable in the long-term”.

Deezer’s Europe vice-president Gerrit Schumann and Rdio’s head of business development Chris Burton made their cases for the defence.

“I’m not going after people who are willing to pay today, and I’m gonna stop them from paying. That’s not our intention. We’re looking at a new way of consuming music, and obviously I have to get people excited about a new product,” said Schumann during the MWC panel.

“A lot of people are not willing to pay for music, but they’re engaged with it, and that’s the first point. We see a lot of people coming to us who don’t buy CDs any more. They haven’t for about 20 years. But now, they go in the freemium funnel, or they get a free trial. It’s easy, it’s on mobile, and they start paying for music again. It’s that simple.”

Meanwhile, Burton warned that Rdio spent four years as a subscription-only service finding it “very difficult” to persuade people to sign up. He said that if the music industry turned away from freemium it would be “extremely difficult” to keep increasing revenues.

Unrest over free streaming was at the heart of Spotify’s dispute with Taylor Swift in 2014, when she pulled her music off the service in protest at the company’s refusal to allow her to make it available only to paying subscribers.

Spotify chief executive Daniel Ek wrote in a blog post at the time that its free tier had been a crucial factor in his company’s $2bn of royalty payments to music rightsholders. “More than 80% of our subscribers started as free users. If you take away only one thing, it should be this: No free, no paid, no $2bn,” wrote Ek.

Presencer’s ears remain deaf to such an argument. “We need to switch off free across the board. We need to switch off free … and we need to come up with clever alternative payment mechanisms that allow people to snack, that allow them to pay as they go, that allow them to pay through micro-payments,” he said at MWC.

“The reality is that on-demand music is a consumption medium, and giving it away for free just kills the industry.”

And YouTube? Presencer wants the music industry to exert more pressure on that service too. “YouTube has been the elephant in the room for many years. As an industry we openly, and somewhat naively, embraced it and Vevo as promotional platforms,” he said after the event.

“Clearly when content is available on demand that shifts from promotion to consumption. For a whole generation that has grown up with YouTube, it’s the primary destination for listening to music. No strategy for addressing the pernicious nature of legal free music is complete without putting YouTube behind some sort of pay mechanic. I fear it may be too late, but as an industry we owe it to ourselves to try.”

Powered by article was written by Stuart Dredge, for on Wednesday 11th March 2015 10.03 Europe/ © Guardian News and Media Limited 2010