Leave Taylor Alone! Why Taylor Swift Albums Sell Well in the Age of Streaming Music

Taylor Swift, teen idol and Grammy Award-winner who shot to fame with catchy lyrics like "we are never, ever, ever getting back together," is perhaps not the first person you'd expect to be delivering economic insights in the pages of the Wall Street Journal, yet that's just where you can find her. And why not? Taylor Swift is the country's highest-paid musician, and that success is due only partly to the mass popularity of her music. After all, there are many artists who get more radio time but don't make as much money. Swift has made very astute decisions on how to monetize her music and image and position herself for a lengthy, successful career. However her musical stylings strike you, her thoughts on the future of the music industry—an industry she has come to dominate at the age of 24—are worth considering.

What's in an album?
Taylor Swift's primary argument seems rather naïve at first blush: that the album is still very much alive and very relevant as an economic entity, and that the value of an album "is, and will continue to be, based on the amount of heart and soul an artist has bled into a body of work." Characteristically, Swift spares no time or romantic metaphor in comparing the music industry to a relationship, and her tone may have led in part to fairly dismissive responses along the lines of Vox author Nilay Patel's "Taylor Swift Doesn't Understand Supply and Demand." After mischaracterizing Swift's view as claiming that album sales will remain important, the author explains that the album is dead because "you can't sell a handful of singles and some OKish filler songs to people for $10 or $15 or $25 anymore."

Swift didn't advocate a handful of singles and some OKish fillers, of course, she recommended trying to create albums that fans will cherish for years to come. That may seem like counterintuitive advice: so far in 2014, only one album (Disney's "Frozen" soundtrack) has sold over one million copies, compared to dozens of singles that have passed the million mark. But Taylor Swift knows that it's harder selling albums nowadays, she says as much in her piece. So why focus on great albums, rather than just great singles?

Compare Swift's career to another fresh-faced country-pop female singer: Carly Rae Jepsen. In 2012, Carly Rae Jepsen's hit single "Call Me Maybe" stormed the charts, becoming 9X certified Platinum by the RIAA as of May 2013, selling more than half again as many copies as Taylor Swift's highest-selling single, 2008's "Love Story." Most of Swift's singles have sold fewer than a third of the copies of "Call Me Maybe."

The reason that Carly Rae Jepsen had a better-performing single, yet isn't even on the list of highest-grossing musicians, is that direct music sales, whether from albums or singles, are a decreasingly important element of a musician's compensation. Six months of touring in 2013 brought in an estimated $30 million, or about 75% of Swift's list-topping financial performance for the year. Swift can sell out arenas at high ticket prices precisely because she has put work into albums: collections of songs that resonate deeply with some fans who will pay dearly to listen to spend time listening to an uninterrupted hour or two of her music.

"Call Me Maybe" may have had much broader appeal than any given Taylor Swift song, but Carly Rae Jepsen's shallow repertoire largely limited her touring success to being an opening act for Justin Bieber. This isn't unique to these two artists: increasingly, touring drives earnings both directly and through higher merchandise sales, and touring is still done on the backs of albums, not singles.

Actions sing louder than words
One of the most disparaged insights in Swift's piece is her claim that "music is art, and art is important and rare. Important, rare things are valuable. Valuable things should be paid for." Critics pounced, with Patel accusing Swift of having "failed to understand that the idea of rarity simply doesn't exist in the digital marketplace." Fair enough, on the face of it, but Swift's actual career suggests she understands the value of rarity and the opportunities and dangers of the digital marketplace perfectly well. Swift notes in her piece that every artist has handled the challenges of piracy, file sharing, and streaming differently, and she herself has handled these issues very adroitly.

Her rise to prominence owes much to the loyal fan base she cultivated on her MySpace page, where listeners could discover Swift's music for free and where fans can still stream dozens of songs free. Once this fan base was built, however, Swift embraced the concept of rarity. When her hit album Red was released in 2012, it was unavailable on relatively low-paying streaming services like Spotify and Rdio, and was even held back from Amazon and Google's streaming services for fear its price would be discounted. Swift's biggest fans had to purchase the album at full value, and even then only at a few key retailers including pizza chain Papa John's, which agreed to deliver the album to customers in an unusual distribution deal. By keeping her music largely off digital venues, Swift reestablished rarity and successfully sold over 5 million copies of her album for generally over $14 each, a much larger sticker price than singles command.

More than six months after the record's debut, once her biggest fans had already made the album one of the best-selling of 2012, Swift and her label changed tacks again, releasing the album to streaming services like Spotify. This is smart price discrimination, getting the most value from the more enthusiastic fans who can't wait to listen to her new albums, while making music more broadly available once the core customer base is tapped.

It's moves like these that have helped drive Swift's incredible earning power, despite the relatively lackluster performance of her singles. Her critics are right that fewer albums are being sold, yet despite that Swift's success has hinged largely on the work put into her albums, and then finding as many avenues as possible to drive value from them.

Taking a step back, it shouldn't be much of a surprise that Taylor Swift should have a take on the industry that breaks with the conventional armchair wisdom that albums are dead and singles are the future. Fast-rising entrepreneurs within slow-moving industries are known for being disruptive, after all.

From one disruptor to another
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!


Read/Post Comments (2) | Recommend This Article (10)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 11, 2014, at 1:00 AM, ELHarbeson wrote:

    You gave the only critique on Miss. Swift’s op-ed I agree with. She wrote it in a very Taylor style the style that made her rich and famous. A style allot of people make fun of in spite of the fact it made her $65,000,000 in 2013. She is an insightful young woman with more brains then any who are knocking her. I quit buying albums 30 years ago (except John Denver albums) because most albums have 3 or 4 songs I want and the rest are throw away songs that I did not even want to hear. I have bought all 4 of Miss Swifts albums on CD and 2 on vinyl too. Her Target Red Deluxe has 22 songs and I can listen to and enjoy all of them. She puts her hart and soul into her music. Her music can even (as she stated in her op-ed) put an arrow into even an old mans shriveled dried up hart and make him remember being young.

  • Report this Comment On July 11, 2014, at 12:04 PM, n8larson wrote:

    I'm pretty far from being a Mister Music Person, but I think that while hitting that "pure of heart and voice" sweet spot is simple (formulaic), it's not easy. I'm not much of a concert person. However, as with most things people buy, the key element of appealing across generations counts for something when it's time to count the earnings. The best praise any artist gets is when people pay fairly for their stuff, so even though I like just a couple of her songs personally and only keep "Tim McGraw" on my pod, I say 'Hats off' to Taylor Swift for deft navigation of the music business' rapids. See the opportunity for change, and shoot that gap. Swift, FTW!

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 3024271, ~/Articles/ArticleHandler.aspx, 8/21/2014 1:22:13 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement