US study: Labels should get less streaming revenue, artists more

A new study claims that Americans feel the music industry should get less and artists more when it comes to streaming rates.

The survey of 1,092 people by San Francisco-based CALinnovates said that 53% believe “labels and industry groups should get a smaller slice of the pie so the artists and streaming companies can make a living.” 12% reckoned “streaming companies should be forced to pay more so that the labels and industry groups can keep their share.”

The survey, conducted on December 12 and 13 put artists and songwriters at the top of the list of those who should benefit from streaming royalties, with a high 78% consensus. Labels and music industry groups at the bottom: only 9% reckoned they should get the most amount of money.

CALinnovates serves as a bridge between California’s technology communities and public policy communities in Sacramento and Washington, DC.

Its Executive Director Mike Montgomery said, “It’s time to shake up the status quo and break the hold that the labels and PROs have on the music industry. Taking that brave step will spark even greater innovation that not only gives music lovers more choices, but also energizes a dynamic creative industry that is at the heart of the American culture and economy.

“Keep in mind that streaming is still a relatively new industry with new technologies, and rates should reflect that. Hiking rates will only trim already thin margins, which will discourage the investments that spur innovation and music’s virtuous cycle.”

It is not known how people were chosen for the CALinnovates survey. But they seemed highly sympathetic to artists when it came to the negative impact of digital piracy if legal streaming sites went out of business. 43% said artists would be pirated more, 29% felt consumers would lose a convenient way to hear music, and only 8% felt sorry that record labels would lose out on an important source of revenue.

The study over royalty rates comes as America’s Copyright Royalty Board rules later on today on rates that online radio stations as Pandora and I Heart Radio should pay the music industry over the next five years,

The Copyright Royalty Board – made up of three Federal judges in Washington – has been hearing arguments from all sectors over the past year over webcasting royalties. Pandora, which pays 14 cents per 100 songs streamed, wants it down to 11 cents. The music industry’s representative SoundExchange wants 25 cents per 100 songs played.

An estimate by Music Business Worldwide put the amount of streams at 313.7 billion a year. If rights holders get the rate they want, that would work out to $345.1 million a year – or $1.73 billion over five years.

Pandora claims it has paid out royalties paid out $1.5 billion to the music industry. Royalties are its biggest single expense (44%) last year and a hurdle to its profitability. One analyst said that Pandora’s operating expenses, which were $1.26 billion in 2015, could rise by almost 13% to $1.42 billion.