4:42 PM CDT, March 16, 2012
AUSTIN, TEXAS -- Streaming services have replaced downloads as the trendy new way to access recorded music, and, as usual, huge questions center on who in the recording industry will get paid and how much, if anything.
The record labels, especially the big multinationals, are getting paid first in their deals with relative newcomers such as Spotify, so what does that leave for the artists?
A decade ago, compact discs were still the coin of that lucrative realm, retailing for upward of $15, with artists making about 10 percent once they recouped their upfront money from the record labels. Few artists made a living off their recorded music, but the music industry profited handsomely. The advent of Napster shifted priorities to single MP3 files; legitimate services such as iTunes required payment of 99 cents per track. That led to a precipitous decline in music industry revenue, with even less money being distributed to artists. Now streaming services such as Spotify are paying less than a half-a-cent per stream to the music industry, and the revenue pie is smaller than ever.
The "Pennies from the Celestial Jukebox" panel Friday at the South by Southwest Music Conference outlined the harsh realities of the new streaming economic model. "We're not talking about pennies, but pieces of those pennies," said attorney Edward Pierson.
Early stories of Spotify's emergence in Sweden four years ago were tainted by reports that even major artists such as Lady Gaga were making tiny royalties even though their tracks were the most popular on the site. Even now, Spotify commands just 3 million worldwide subscribers. But there is potential for many more as the mobile market expands and the desire for music anywhere, anytime on cloud-based services skyrockets. Potentially huge markets in China and India have gone relatively untapped.
Under the new math of the music industry, many more people would access the music via streaming at a significantly lower cost than ever before. Yet many of the same disturbing questions remain about equitably dividing the revenue.
Label deals with Spotify and other services lack transparency, artist manager Nick Stern said. Just as 20th Century artists rarely knew how much the labels actually made off their albums, today's artists don't know how much licensing money the Spotify-type services have paid the labels to stream their music. "Its not a problem with the economics of Spotify," Stern said, "it's a problem with the economics of the music business."
One thing is certain. "The days of the $14 billion a year music industry are gone and they're not coming back," Downs said after the panel.
Yet no one was advocating a return to the way things used to be.
"Consumers are telling us they want to experience music this way (via streaming)," Stern said. "So it would be stupid to fight it. Otherwise we're just going to repeat the last 10 years."
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