yofti
Yofti M
yofti.xyz
Jul 27, 2023

Limitations of the Music Streaming Industry

We can do a lot better with music on the internet.

This is a brief description of structural limitations that are stunting the internet’s music market, as well as what is needed to overcome them. This article explains the motivation behind the proposal for an open protocol for streaming (OPS) described here: github.com/ymilkessa/ops0

You are welcome to reach me to share your thoughts: iris.to/yoftinator

The existing music market

The current music market on the internet is what I will call the “platform model.” In this model, the market is composed of streaming platforms, each of which functions like an isolated marketplace.

Each streaming platform does all of the following under one roof.

  1. Hosting content from artists.
  2. Making all the business decisions in their marketplace.
    This includes setting subscription prices, running advertisements, and negotiating on shares of revenue with artists and record labels.
  3. Generating revenue from users and advertisers.
  4. Curating content for users, such as running the recommendation algorithms.
  5. Running the standard client application. These become the primary interface with which users listen to music.
  6. Serving client APIs. These allow for alternate user interfaces and use cases, but still function similarly to client applications in all other respects.

Limitations

The music market is highly inflexible under the platform model:

  1. Artists have little say on the price of their work. They can only sit back and wait on how much revenue the streaming platforms have managed to gather, and negotiate on what portion of that goes to them.
  2. The only business models or experiences available are the ones that the streaming platforms have decided to provide. For instance, I cannot subscribe to a single artist for a lower cost. Neither can I purchase “100 plays of Ed Shareen.” None of the streaming platforms have offered such deals. And the artists have no avenue for making such business models happen.
  3. If you want to try new business models, you would need to build a whole new streaming platform from scratch and get artists to onboard onto your platform. Hence the cost of building new user experiences is needlessly high.

In short this system is actually holding back artists, users and developers from extracting more utility out of the internet.

Successes

Despite its limitations, the platform model has so far gained dominance for two reasons.

  1. Streaming platforms have been largely successful with IP protection. Artists are now making money on the internet and not just being ripped off by it.
  2. The business model employed by these platforms has so far garnered the most revenue that the music industry has ever gained (although it is still unclear how profitable the platforms themselves are, or how sustainable their business would be moving forward).

Explaining the platform model

Digital rights management is at the core of why the industry has gravitated to this model. As it turns out, this is the only feasible arrangement with which these services can protect artists’ IP, which is a crucial part of their business. By controlling both how music is streamed from servers and how it is decrypted on users’ devices, these companies can make it difficult for people to steal music off of their platform. But as a consequence, the same platforms need to handle practically every aspect of their own marketplace.

Note that the web APIs of these platforms do not impact this arrangement since they also have to be equally restrictive. For instance, only premium subscribers of Apple Music or Spotify can be the end users of any application that utilizes the respective API.

The Alternative: An Open Market Model

A much better alternative is one where artists and listeners can transact in whatever terms they choose with no barriers to making their transactions happen.

Here are the requirements that an open market model should satisfy.

  1. Users are not fragmented across disjoint platforms. Instead, there is a standard protocol for streaming which is not limited to any one platform and which anyone can use to purchase and listen to music.
  2. New business models and use cases can be built with minimal friction. Developers can simply follow predetermined specifications on how to pay for and access music for their applications.
  3. It should have an effective mechanism for IP protection. Otherwise, this market would not be viable and would fall apart.

Requirements 1 and 2 are easily solvable by using a decentralized network like Nostr. My OPS proposal is a solution to requirement 3 and would make the open market model possible. Feel free to inspect the protocol: github.com/ymilkessa/ops0

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