Pandora, Google and Amazon have joined forces with restaurants, radio stations and other music distributors for pushing back against an effort by publishers, musicians and record labels for charging more for the use of their music and songs. The MIC Coalition was launched on Wednesday in Washington and has raised the stakes in a battle being conducted over the economics over the music industry. According to some companies like Spotify and Pandora, some of the most popular streaming services of this age are under threat and they could go out of business.
AM and FM radio broadcasters, online services and other commercial music users come together in this coalition. These members claim that big publishers and record companies like Warner Music, Universal Music and Sony have dominated the debate over access to music and licensing rights. The MIC Coalition said that the next two years could be pivotal for the music industry because big decisions would be made by the Congress, the Copyright Royalty Board and the Department of Justice, which will have an impact on where and how music is played and the cost that the users and consumers will bear for it.
The antitrust exemptions made in the era of the Second World War are being reviewed by the Department of Justice because they still influence how much can be charged by the publishers for song performance royalties while revisions to the digital royalty rates are expected from the Copyright Royalty Board in December. Record labels and music publishers argue that in order to fairly compensate artists and songwriters for their works, the copyright reforms are needed.
The President of the National Music Publishers Association, David Israelite, said that these archaic regulations have been exploited by streaming giants such as Pandora for using the work of songwriters and not paying them much. Therefore, he added, it didn’t come as a surprise to know that they were teaming up with other tech and streaming giants for fighting the artists and songwriters. Representing record companies and artists, the musicFirst coalition’s Ted Kalo said that this new coalition was just a bunch of huge corporations hiding behind a gauzy mission statement and new website for continuing their campaign of not compensating musicians fairly.
Spotify, Pandora and other streaming services state that more than half of their revenue goes in paying royalties and their operations would be hamstrung or they may go out of business completely if they are forced to pay higher rates. According to Spotify, if it paid the same to publishers as it was paying record labels, it would be giving away 100% of its revenue, making it unsustainable. A submission made to the Copyright office showed that about 70% of Spotify’s revenue is used for paying royalties in the US.
Apart from that, in its 10 years of existence, only two profitable quarters have been generated by Pandora because of high royalty payments. Even though it has about $81 million listeners, its royalties were about half of its $1 billion revenue last year. Some high profile performers have also been forced to take action because of their concern over getting fair payments. For instance, Tidal was launched by Jay Z, a service that aims to offer more to stars for their songs. Likewise, Taylor Swift also withdrew her songs from Spotify last year. However, these moves haven’t been successful in slowing down the growth of established streaming brands such as Rhapsody and Spotify. Streaming revenues surpassed CD sales last year in the US and they are on their way to overtaking downloads as the single largest source of revenue for the industry.
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