The Music Business Is More Unfair Than Ever

No Comments 28 September 2017

The Music Business Is More Unfair Than Ever

By: Leonid Bershidsky

The music business is booming, and it’s doing so thanks to streaming. But the tech pioneers who made this possible in the last two years aren’t making any money, and neither, really, are musicians: It’s legacy businesses—the music companies that own the catalogs—that are collecting all the profits. Something has to give.

The Recording Industry Association of America reports that U.S. retail music sales were up 17 percent year-over-year in the first six months of 2017, to $4 billion. That’s still very far from the industry’s revenues at the height of the compact disc boom in 2000, but it’s spectacular for this decade. Streaming is running behind this achievement: In just two years, it’s grown from 33 percent to 62 percent of the market.

Yet the market leader, Spotify, is still unprofitable after posting an operating loss of $412.3 million in 2016. Pandora, another beneficiary of the streaming boom, posted 10 percent year-over-year revenue growth in the three months to June but dramatically increased its net loss —to $125.8 million from $76.3 million. For Tidal, founded by rapper Jay-Z and now part-owned by Sprint, no profit is in sight. It’s unclear how much Apple and Alphabet make from their streaming services because the companies don’t break out these results, but they probably would do so if the services were profitable.

Like at the dawn of streaming, musicians are still complaining that it’s next to impossible to make money from it. The RIAA has calculated that a music creator only earns $1 from 58 hours of streaming video on YouTube—the company most often blamed for the “value gap” that plagues artists. Other industry leaders are more generous, but that’s not saying much. On average, an artist earns $100 for 152,094 streams of a song to Spotify subscribers. That’s dismal; you have to be extremely-popular before you can earn enough for food.

Only the oligopoly of record labels that control the intellectual property—Universal Music Group, Sony Music Entertainment, Warner Music—are reaping profits from the boom. Warner Music posted a record profit in the three months to June; no wonder it now controls one of the world’s top streaming services, Deezer, which once planned to go public. At Sony, music is one of the strongest profit drivers. UMG consistently provides most of the profit of its corporate parent, Vivendi.

In its recent forecast for the music industry, Goldman Sachs predicts that record labels’ share of the music industry’s revenue will increase by 133 percent between 2015 and 2030, while the share that goes to musicians, venues and tour organizers will only grow by 60 percent. So the investment bank expects the labels to continue reaping a disproportionate share of the benefits.

Read More:

  • Google+
  • Pinterest
  • LinkedIn
  • Reddit

Your Comments

No Comments

Share your view

Post a comment

Submit the word you see below:

Notify me of follow-up comments?