For many artists, monetizing their music and increasing profitability through steaming services such as Spotify and Pandora has often been an issue. And now, with the emergence of new paradigms creating more options for streaming music services, regulation has become an important factor in this debate. Based on 2014 data (link is external) from the Recording Industry Association of America, Newsweek reports (link is external) that revenue from streaming music sites exceeded CD sales for the first time — signaling its growing dominance as the leading source of earnings for the music industry.
In addition, while Spotify saw a significant increase in subscribers, rising from 6.2 million to 7.7 million for its premium membership, digital downloads were on the decline, dropping 9 percent during that same time period. Given this substantial shift, artists and music publishers are focusing on a potential regulatory update expected to unfold over the course of this year. This article (link is external) in POLITICO notes that a number of high-profile musicians, from Melissa Etheridge to Tom Waits, are calling for regulations that give songwriters a greater degree of negotiating power. This action would also provide labels with an opportunity to request higher royalty payments. Understandably, streaming music providers are opposed to this move.
While Pandora has more than 80 million active listeners, the company is not yet profitable. Such a change could cut significantly into streaming music providers’ margins or cause costs for consumers to rise. Moreover, under the new rules, musicians could potentially withhold or withdraw a song or their catalog of music as a bargaining tactic, creating more issues for streaming business models.
At this point, the Department of Justice (DOJ), which is considering the new regulations, has not publically committed to a specific regulatory framework. But, as POLITICO points out, regulatory changes that do occur will likely also come with the modernization of 1940s-era government consent decrees with Broadcast Music Inc. (BMI) and the American Society of Composers, Authors and Publishers (ASCAP) that control the performance rights for approximately 90 percent of songs. DOJ attorneys are currently speaking with key stakeholders, and formal recommendations are expected later this year.