Published on September 21st, 2016 | by Alan Cross0
Hang On: You Mean the Recording Industry is Okay Again?
How long have we been hearing that the recording industry was in decline? Since 2000, at least. Revenues peaked in 1999 and have been in free fall ever since. Physical sales cratered over a decade-and-a-half, resulting in layoffs, roster trimmings and cost-cutting.
But hang on. Could it be that the bleeding is over? Or that the industry is even doing okay again? Are revenues actually climbing?
It looks like it–at least in the US, the biggest music market in the world. For the first half of 2016, revenues were up 8.4%. There hasn’t been that kind of year-over-year gain since…maybe the late 90s?
If physical sales continue to drop week after week, where’s this new money come from? Streaming. Record labels are collectively seeing tens of millions of dollars each week pour in from companies like Spotify, Apple Music and YouTube.
This sets up and interesting situation. The labels want the streamers to pay more yet they can’t squeeze them too much lest they go out of business, depriving them of revenue that’s now essential to their existence. Meanwhile, the streamers continue to lose money because of the agreements they were forced to take by the labels. Spotify pays a whopping 84% of all its sales to rightsholders, mostly record labels. They have to cover all their costs with the remaining 16%. There is no profit; Spotify lost $200 million over the last year).
Spotify pays a whopping 84% of all its sales to rightsholders, mostly record labels. They have to cover all their costs with the remaining 16%. There’s nothing left over to serve as profit; in fact, Spotify lost $200 million over the last year. (Apple Music and YouTube are also money losers, but they’re owned by companies who can afford to lose money on these projects forever.)
At the apparent bottom of the food chain is the artist who is getting less for their music than ever before. But if so much is going to the labels, why isn’t it trickling through?
There’s a lot that still needs to be done. Meanwhile, a little transparency would be nice. Meanwhile, read a detailed story on the current state of the industry at Bloomberg.