Why the Online Music Industry is a Mess
This will explain a lot. From CNN Money:
If disruption means losing money, then online music services know how to spend like rock stars.
Adoption and revenue growth rates at a few top players like Spotify and Pandora are real — Pandora (P) reported earnings yesterday, breaking even — but what are the costs to play? It’s still unclear in many cases if audience growth will translate to profit.
Every few years a new service rises up, captures audiences but then has the same cost-centric problems as every one that has come before: negotiating terms with rights holders. Music labels, music publishers, and in some cases, emerging artists who circumvent traditional music property conventions by going it alone — think self-managed Taylor Swift — all want or need a stake in streams or downloads, and that can make or break a deal.
“With most other businesses, if a supplier makes unreasonable demands, a retailer can turn to other providers,” wrote Michael Robertson, CEO and founder of MP3tunes.com, about the problems with the industry. “Since copyright law gives record labels and publishers a government-granted monopoly, no such option is possible with music. Digital vendors have only two options: Accept the terms or not include those songs in their offering.”
