Streaming Services Showing Profits for Record Labels

After years of clear decline in music sales, there seems to be new hope for record companies in the form of streaming services such as Pandora, Spotify and iTunes Radio. Preferred formats for recorded music have changed throughout the years from records, to CDs, and then digital downloads. However, in recent history many people, including most Americans, have ceased paying for music altogether, causing an unprecedented decline in revenue for the music industry.

Now, for the first time since the decline began in the early 2000s, there seems to be a glimmer of hope in the form of subscription streaming services. Both online radio versions, such as Pandora and iTunes Radio and services such as Spotify and Deezer pay record labels a fraction of a penny each time a song is chosen.

A close look at music labels’ worldwide revenues show that streaming services are beginning to show profits for labels in regions that had been showing steady declines. Perhaps more exciting, these streaming services are beginning to show profits in sectors that had rarely seen any before. The Economist sites a Swedish record label that has begun showing profits from its music streamed in Brazil and many indie labels that are having far more sales than would have been possible with physical media.

And record execs are not the only ones to take notice. As upgrades in cell phone service, cloud storage and other technological advancements have begun to popularize paid streaming, investments in these services of more than $1 billion have begun to pour in. Currently 4-5% of US music consumers are using paid streaming services. If this grows to only 10%, we can expect game changing profits for record companies once again.

A New Face for Pandora?

After years of inciting resentment from within the music world, it would appear that Pandora is attempting to change its image. The one-time disrupter, now helmed by CEO Brian McAndrews, known for fighting Congress in hopes of protecting its profits (publishers only receive 4 percent of the company’s revenue), is trying to make friends within the industry.

McAndrews claims that he wants to listen to what the industry has to say and work together. To this end, he has recently hired several vets from different areas of the industry who have together, launched a campaign to put a new face on the company. As part of this strategy, Pandora plans to put on 79 free concerts in 2014 with performers such as Iggy Azalea, Celine Dion, and Magic, based on geo-targeted listening data, which identifies locations with concentrations of fans, as detailed in the article from Adweek linked below. In addition, the company has recently signed a direct (United States) licensing and marketing deals with indie-label collective Merlin and publisher BMG, as noted in the LA Times.

Still, experts are divided. While some are impressed, RIAA VP Mitch Glazier is quoted as calling this a “turning point” in Pandora’s evolution, many remain unconvinced. David Israelite, CEO of the National Music Publishers’ Association, has referred to these moves as “lip service” saying “They’ve done nothing differently to address the actual reason they’re so unpopular in the music industry.”

More on Pandora’s efforts to reach out to the music industry: Billboard: Pandora Playing Nice or Paying Lip Service

Learn how data is used to target audiences for the Pandora concert series: How Pandora Mined Data to Create Lexus-Backed Concert Series

Article that details the agreement between Merlin and Pandora: Pandora partners with Merlin in first direct record label deal

Sirius XM Loses Lawsuit on Pre-1972 Royalties

A federal judge in California ruled yesterday that Sirius XM satellite radio is liable for copyright infringement because, up until this point, it has not paid royalties on recordings made prior to 1972. This particular case was filed by members of the band The Turtles. Sirius and other such companies have argued that they are not responsible for these royalties because, according to federal law, copyright applies only to recordings made on or after Feb. 15, 1972. However, it was argued by The Turtles that their copyrights are still protected under state law.

The New York Times reports that besides California, the group filed suits in Florida and New York, for over $100 million dollars. And the implications of this verdict may be even wider. Several major record companies have now filed suits of their own against Sirius XM and Pandora Media. In addition, music industry groups are lobbying Congress to change the laws governing pre-1972 recordings such as Sound Exchange’s promotion of the Respect Act.

It’s too soon to know the precedent that this particular case will set for US and state law. However, as Sound Exchange estimates that $60 million in royalties from pre-1972 recordings are left uncollected every year, there is potential for large ramifications.