Rhian Jones 18th May 2021

'Music is a loss leader': Is Sonstream's model the solution to a flawed streaming market?

The pandemic has proven to be something of a catalyst for fierce debate over the feasibility of streaming and the modern music ecosystem at large. Seb Clarke is firmly on the side that says artists aren't getting enough from the current set-up - but he thinks he's found the answer...

The UK Government’s inquiry into the economics of music streaming has raised plenty of interesting discussion points about a status quo that has, generally speaking, fallen under the public radar since Thom Yorke called Spotify “the last desperate fart of a dying corpse” in 2013.

Recorded music revenue is rising globally every year, propelled by streaming subscriptions, and markets never before monetised are starting to generate revenue. Whether this seemingly pretty picture is benefitting musicians, as well as record labels, depends on who you talk to.

Seb Clarke, founder of Stoke-on-Trent based alternative streaming service Sonstream, is firmly in the ‘artists are being shafted’ camp. In addition, he says the major labels have been taken “for an absolute ride” since Steve Jobs walked into a boardroom and got them all to sign over licenses for the Apple Store in the early ‘00s. “We’re all paying the price for that now,” Clarke suggests.

Clarke, who has history in the TV world, founded Sonstream, which operates on a pay-per-play basis, after his band (This Is Seb Clarke), their label (SONS Ltd) and the acts they’d signed became commercially unviable, which he says was due to streaming.

He recalls: “By 2005/2006, I started to figure out that streaming would some day become the primary source of music distribution. All the issues that would create seemed very obvious to me.” Clarke expected some sort of solution to the mess he professed would arrive one day, so busied himself with the label, before having to shut it down in 2010 (it’s since been revived as SONS Records).

He soon decided he’d better create the solution himself and Sonstream was launched. It’s taken years of trial and error (during which time Clarke says he has battled business partners going off the radar and “all sorts of nefarious behaviour”) before reaching the operational stage it’s at today.

Clarke, who is running the platform on £350k investment, has secured a licensing deal with The state51 Music Group and has just over a million tracks on the service. He also assures us that he’s in active and positive talks with all the big players: Universal, Sony, Warner, PRS and PPL. Sonstream reportedly has 4.5k users and is growing, with updates due imminently to both its iOS and Android apps, as well as its website.

As an interviewee, Clarke is intensely passionate, which manifests in long and damning rants about today’s music ecosystem as well as (multiple) lengthy follow-up email explanations to expand on his points, some of which we’ve done our best to distil here.

Read on to discover the economics of Clarke’s alternative streaming model, plus his thoughts on how internet companies have seized control of distribution at the expense of creators, and what he’d like to see as a result of the UK Government’s inquiry.

Sonstream founder Seb Clarke at the Stoke-on-Trent based SONS Records office.

Can you describe how Sonstream is different to other streaming services?

Well, it couldn’t be more simple. If somebody joins [as a subscriber], they have to put their card details in and if they play a track, they get charged between 1.25p and 3.3p per stream. If they don’t play, they don’t pay, and we don’t have advertising. At the end of the week, we accrue their usage and put together the bill. Out of that, the taxman gets paid, we take our 10% and the rightsholder gets the rest, which is, on average, 2.5p. Roughly speaking, it’s 23 times more than Spotify pay.

My mission isn’t just to say ‘Sonstream is a great idea’ but to highlight how flawed the rest of the streaming market is. The subscription and ad-funded models serve the interests of the label heads but, more importantly, the internet companies themselves. Everybody else is being shafted. The advertisers are the paymasters so the business model has to revolve around what the advertisers want. And they don’t want to reward the small guy whose only getting 1,000 streams, or even 10,000 streams, they want to reward people who are getting a million streams.

By advertisers, do you mean the companies advertising on the free tiers but also major labels who advertise on the streaming platforms in a less direct way?

Absolutely. Everybody’s been drawn into thinking how to deliver music to the consumer from the perspective of the internet, so in other words, the product isn’t the music anymore, the product is Spotify, the product is YouTube. And essentially, the major labels are allowing themselves to be paid off to give music over to act as a loss leader for the internet platforms, like Google, Amazon and YouTube, to then sell lots of other products by countless algorithms, campaigns and the sharing of people’s personal information etc. It’s all about advertising and marketing and selling more internet products by the traffic that’s generated by the fact people can go to those platforms and listen to music for free at the drop of a hat.

Spotify has famously failed to turn an annual net profit. How do you, as Sonstream, do that with far less clout and investment?

The reason why Spotify doesn’t make any money is because Spotify isn’t treating music as the product. Spotify treats music as a loss leader to sell Spotify ‘the experience’ — a virtual world for the music lover to engage in – and, by proxy, as the majority of their users are MAUs [monthly active users], advertising, and user behaviour data from advertising. This requires a hell of a lot of industry — a huge workforce of professionals paid to make it all happen but also, as the platform is essentially using music as a loss leader to sell this virtual world, they have to engage with the prerogatives and directives of the labels in order to keep everyone happy. Because we haven’t got any middlemen and all the things that go hand in hand with that, if we hit 30,000 users plus, we actually start going into cash in the bank status. We start making net profit at half a million users.

"YouTube, label heads, PRS and PPL, will officially say the ad-funded model is monetising music but it's not really. It’s monetising the big hits but, for your average musician, there is no money to be seen."

Sonstream as a platform is pretty stripped back — no playlists, banner ads, no artist info.

We work on the belief system that it is the label and/or the artist’s role to market the music elsewhere and that a platform’s role should be to respect that the fans can play what they want to play, and find what they want to find themselves. We think that the devolution of marketing to the platforms, like Spotify playlists, has corrupted the marketplace and serves as an insidious, duplicitous function for the platforms.

Our aim is instead to provide a service where the user can, at a click, find the exact version of the song they wish to listen to. And, at a click, [we can] tell the user anything they need to know about the track — who the drummer was, which studio it was recorded at, links to articles etc., maybe even one day play the video! Essentially, a really clever, accurate but simple platform where the consumer makes all the choices. It will take some time for us to perfect, and it’s not easy from a back street studio with a leaky roof in Stoke! Even Stockholm have struggled — a quick look at Spotify soon reveals that after all these years they still have lots of anomalies, poor or missing information.

What impact do you see today’s streaming world having on musicians?

You’ve got a situation where all musicians have left is their pride. You could be getting 10,000 streams  but you’re not going to make a living out of that, unless you were getting it each and every week, and it’s impossible for anybody to be producing that much music all the time with all the marketing that comes with it. Yeah, if you sell a lot of it, and I mean millions and millions, that’ll make a lot of money, but it’s so few who make it that big.

Here’s an example: the guy who used to be in my band is now a platinum selling award-winning producer and he’s earning £50k a year at the peak of his career, which is not a great deal of money in the grand scheme of things. Now, if you’re a budding, relatively niche market artist, you might be able to go on YouTube and find lots of people want to listen to your music, but all you’ve got left is the fact that you can see all these people looking at your music.

So what’s happening is, everybody is paying [companies] to boost the views on their videos, through which they’ll make no money back. The rabid musician would rather pay out the money and receive the popularity, but actually they are being utterly conned. You know that something is wrong when musicians starting out in their careers, are pushed, even willing, to spend much more money boosting their songs and videos on YouTube, Facebook and Instagram than they can ever dream of making back. They are literally paying money to lose money.

What would you like to see as a result of the DCMS enquiry into the economics of streaming?

None of these issues will be solved while you’ve still got music being given away for free. YouTube and even the label heads, PRS and PPL, will officially say, ‘Oh yes, the ad-funded model is monetising music’ but it’s not really. It’s monetising the big hits of the day but, for your average musician, there is no money to be seen at all in relative terms. What it’s absolutely doing is corrupting the actual market for the consumer. The consumer has gotten used to the idea that they can just listen to whatever they want to listen to for nothing.

If copyright law was radically reformed so that recordings as well as publishing held value for far, far longer, then it could, in this digital and global era, dramatically incentivise investment into the creation of music; boosting it’s attractiveness as a career to those from all backgrounds. Overhauled copyright law, and streaming that paid equally per unit for all, could revitalise the revenue the UK makes from musical IP for many years to come. One thing’s for sure: the market dynamics that have ruptured the music world’s economy and future so detrimentally are soon to affect all our media industries. Our politicians really need to be brave, think outside of the box, and act now.

Rhian Jones

Rhian Jones is a UK-based journalist and author who specialises in writing about the music business. You’ll find her byline in The Guardian, Music Business Worldwide, The Independent, Vice, Hits, Billboard and Music Week, amongst others. Her health-focused career guide for musicians, Sound Advice (co-authored with Lucy Heyman), is out now.