It is widely accepted the the rise of streaming music services like Pandora and Spotify are somehow the inevitable conclusion in the evolution of digital music on the internet in a continuum that followed Napster and Bittorrent and iTunes. This logic assumes and proclaims that ‘downloads are dead’ because streaming provides an answer to the music piracy problem and also provides the best convenience and utility for users.

However, its not all roses, and its not quite that simple. Many Artists are outraged at the very low royalties that these services pay and, looking deeper, at the underlying situation it is clear that these services are not profitable but continue operation, with major record labels as shareholders, based on the promise of profitable IPO exits, or just to maintain their status quo.

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As Ethan Varian explained in his article ‘Spotify’s Mysterious Royalty System Explained’ on performermag.com

The first thing to know about Spotify’s business model is that artists and rights holders are NOT paid out on a “per play” basis. Instead, royalties are distributed based on an artist’s “market share” of the total amount of streams on Spotify over a given month.

This effectively means that the larger acts that are more popular will always take the larger share of royalties squeezing out the smaller less well known artists. In this way, the model tends to perpetuate the existing power structures in the music industry and also not facilitate less well known Artists to break through.

We believe that these new streaming services

  • don’t provide fair returns for Artists
  • don’t effectively deal with or represent the massive amount of music being produced globally
  • are constrained by rights and territory agreements that disadvantage Artists
  • perpetuate the large monopolies of the major record labels
  • have failed to extend on the promise and potential that P2P systems offered

What is Bittunes intending to do and how are we going about it?

We are wanting to make a platform that significantly changes the status quo in the music industry and, quite simply you cannot do this over night. To create a system that has the potential to cause real disruption we needed to prove principle of our concept and then to build strategic alliances with key ‘friendly’ players in the independent music sector to be able to offer a viable alternative distribution system that incentivises the Artists that make the music and the fans that buy and distribute that music.

This represents a completely new paradigm for how music is distributed, and if successful, could be highly disruptive. So, it is very important for us to move carefully and in line with a ‘disruptive strategy’. This is our current focus.