From vinyl to tape to CD to iTunes to Spotify, it has been a wild ride for the music industry. Gone is the golden era of vinyl in the ’70s or the even brighter times of CDs in the 90s. With the end of the 2000s, it seemed the industry was about to die.
Its undoing—music sharing on the internet—has now become the industry’s lifeline.
On one hand, it seems the record industry finally found a way to make money in the digital age.
On the other, it’s still far from the glory it once basked in.
With CD sales in a free fall and digital single sales declining, the industry set its eyes on music streaming.
Spotify, a streaming service that lets its subscribers listen to over 30 million songs for $9.99 a month, has been almost doubling its subscriber base every 2 years, reaching 30 million in 2015.
Together with similar services like Apple Music and Rhapsody, paid streaming attracted some 68 million users and reached about $2 billion revenue last year.
Digital streaming as a whole became the largest money source for the industry.
Spotify gives record publishers 70 percent of what it collects, but some say that doesn’t add up to fair compensation.
Taylor Swift, in a high-profile move, pulled her entire collection from Spotify in 2014.
“I’m not willing to contribute my life’s work to an experiment that I don’t feel fairly compensates the writers, producers, artists, and creators of this music. And I just don’t agree with perpetuating the perception that music has no value and should be free,” she told Yahoo Music’s Chris Willman.
Spotify allows users to listen for free in exchange for exposing them to ads. A cut of the ad sales goes to the record publishers.
But there’s an entity drawing much fiercer ire from the music industry.
Over 800 million users a month watch music videos on YouTube. Almost all of the most watched YouTube videos are music videos (Psy’s Gangnam Style is still number one with more than 2.5 billion views. Taylor Swift has two songs in the top 10, combining for a total of 3.1 billion views).
Since 2007, YouTube has been signing contracts with publishers and splits with them the advertising revenue from their content.
That means record publishers get a cut from ads placed on all YouTube videos that use their music—even if the videos use the music without permission.
YouTube uses a system, called Content ID, that automatically recognizes if an uploaded video contains copyrighted material.
Owners of the material, whether sound or video, can set the system to automatically place ads on the video and split the ad revenue with YouTube.
Such “fan uploads,” as YouTube calls them, drive half of all the ad dollars YouTube sends to publishers.
Publishers call this system “ad-supported streaming” and it earned them over $600 million in 2015. They haven’t presented further details, but it is safe to say the lion’s share of that number probably flows from YouTube.
Yet, the industry complains the ad-supported streaming provides even less value for the artists than the subscription model.
Spotify’s mixed model of subscriptions and ad-supported streams pays between $0.006 and 0.0084 per stream, according to the company.
Spotify only pays if the listener stays on the song for more than 30 seconds. More than one in three songs are skipped before reaching the payment mark, according to a 2014 blog post by Paul Lamere of The Echo Nest, a music intelligence company.
YouTube pays record labels, on average, less than $0.0008 for each music video stream, according to MIDiA, a media tech analysis company.
A small Canadian label representing about dozen artists earned $1,773 (USD) for a total of about 2.5 million YouTube views (about $0.0007 per stream), according to the data the label shared earlier this year with Digital Music News.
“You [YouTube] have built a business that works really well for you and for Google, but it doesn’t work well for artists,” wrote Irving Azoff, a manager of artists such as Christina Aguilera and the Eagles, in an op-ed on Recode.
The problem is, publishers don’t have much leverage over YouTube.
The Content ID allows the owners of the copyrighted music to automatically mute or even completely block every video that uses their music.
If publishers don’t like what Google pays them, they can shut down their official YouTube channels, block all the “fan uploads” and take their business elsewhere.
Yet, as YouTube points out, 95 percent of the time the owners don’t block the fan content and choose to earn money from it—however much it may be.
“These companies appear to be complaining about how bad their dinner is, mid-swallow,” wrote Hank Green, a professional YouTube creator, in an op-ed response to Azoff on Recode.
YouTube currently negotiates new contracts with major publishers, a person familiar with the matter confirmed to Epoch Times.
The YouTube standard partnership gives copyright owners 55 percent of the ad revenue from their content. Neither YouTube, nor publishers would reveal what percentage they agreed upon in their previous contracts.
Publishers, supported by artists like Taylor Swift and Katy Perry, are asking Congress to toughen rules on copyright violations via the Digital Millennium Copyright Act (DMCA).
This is historic. 500+ creators and 20+ companies united. pic.twitter.com/zqeahdq2T2
— Irving Azoff (@irvingazoff) June 22, 2016
The law currently requires content hosting websites to promptly take down any copyrighted content when the copyright owner alerts them about the violation. For the rights owners, the job of alerting websites about every single violation ranges from cumbersome to impossible.
But the Content ID, by handling the process automatically, goes beyond what the DMCA requires. YouTube says 99.5 percent of copyright claims on its platform are handled by Content ID.
Given YouTube’s massive volume, even the remaining 0.5 percent may be a lot to handle by rights owners.
Yet on the other hand, the system is already criticized for going too far.
YouTube has been criticized for giving copyright owners the power to automatically block even videos that use copyrighted material within the confines of “Fair Use.”
Fair Use has rather strict criteria, such as only using the copyrighted content for the purposes of education or criticism. Yet many popular YouTube channels specialize in such purposes and complain about routinely facing unfounded claims of copyright violations.
Whether music publishers convince YouTube to give them a bigger cut or not, faces its worst time in decades.
In 1999, every American was buying, on average, over $52 worth of music every year (the equivalent of over $75 in 2016 dollars).
But with the invention of MP3 compressed audio format and sharing music online, the free fall of CD sales commenced.
In 2014, the industry sank to its lowest ebb since 1973.
Americans were spending, on average, a meager $21 on recorded music a year, based on Recording Industry Association of America data collected by music industry research Peter Tschmuck.
Since 2003, legitimate digital purchases started to kick in, started mainly by Steve Jobs and his iTunes Store’s dollar-per-song. But it is not clear how much the model convinced people to stop stealing music and how much it just further convinced people to not buy CDs.
In any case, digital singles sales peaked in 2012 and have since dropped by more than 26 percent.
In 2015, the industry slightly grew. But it is yet to be seen whether online streaming can bring it enough money to adequately compensate artists.
Meanwhile, one idiosyncratic alternative is celebrating a comeback: vinyl sales are on the rise, even beating the revenue from ad-supported online streams last year.