Jimmy Iovine, the former CEO of Interscope and the muscle behind Apple Music, spoke with reporters last week in Los Angeles during a dinner to celebrate the Blu Ray release of his HBO documentary The Defiant Ones, and during the event, he focused most of his time discussing the unique hurdles facing the music streaming ecosystem.
Iovine believes that the major obstacle facing on-demand streaming platforms is the value proposition of paying for music versus streaming it for free.
“The streaming services have a bad situation, there's no margins, they're not making any money,” he detailed. “Amazon sells Prime; Apple sells telephones and iPads; Spotify, they're going to have to figure out a way to get that audience to buy something else.”
From the outside looking in, on-demand streaming appears to be a booming marketplace, but every major service is currently operating in the red.
“The streaming business is not a great business,” Iovine added. “It's fine with the big companies: Amazon, Apple, Google... Of course, it's a small piece of their business, very cool, but Spotify is the only standalone, right? So they have to figure out a way to show the road to making this a real business.”
As writer Colin Stutz points out in his coverage of the event on Billboard, Spotify has spent nine years in the music industry without turning a profit. Streaming may have revamped the way we consume music, almost to a fault, but it has done little to change the way music can be monetized.
Iovine admitted that consumers may not be willing to pay a premium price for a service that is free elsewhere. Should Spotify attempt to raise their price, or remove their free tier, he believes consumers will turn to other mediums like Pandora and YouTube. Should all of those outlets develop a paid barrier to entry, music fans may very well likely return to pirating their music.
Though Iovine does not see a clear solution to stop streaming companies from hemorrhaging money, his analysis is a friendly reminder that the artists, some of whom are racking up millions of plays but earning little profit, aren't the only unhappy part of this equation.
Does this mean we should put our money where our fandom is? Certainly. Will consumers be inspired to actually buy more music? That answer might be too grim.