Opening Pandora's box: the rise of streaming music

Shifts in the technological marketplace are pushing the popularity of online music streaming, a phenomenon that began in 2000 with Pandora and accelerated in recent years with the advent of smartphones and high-speed mobile networks.
BY GEORGE LANG glang@opubco.com Modified: December 9, 2012 at 5:10 pm •  Published: December 10, 2012

The song remains the same, but the way people hear that song is changing by the minute.

On Dec. 5, Bloomberg reported global sales of tablets — iPads and Android, Windows and Google-based flat, touch-sensitive screens — are expected to hit 117.1 million units in 2012. By 2016, tablet sales are projected to hit 282.7 million, outstripping the market for hard drive-based laptops. And the desktop computer, that bulky, stationary machine where millions of people have stored their digital music since the mp3/iPod revolution of the late-1990s and early 2000s, will be going the way of the typewriter.

This shift in the technological marketplace is pushing the popularity of online music streaming, a phenomenon that began in 2000 with Pandora and accelerated in recent years with the advent of smartphones and high-speed mobile networks. In July 2011, Pandora had more than 100 million registered users worldwide. That same month, the Swedish streaming music service Spotify debuted in the U.S., providing its customers with access to more than 20 million songs.

And the streaming music ranks keep growing as other domestically available services, such as Mog, Rhapsody and Rdio, continue to add subscribers and overseas companies such as French-operated Deezer wait in the wings. Most offer limited free access with commercial breaks, while premium, commercial-free mobile services hover around $9.99 per month, and are accessible via mobile apps. Last week, Rdio made its 18 million-song catalog available to several new European markets, bringing its service to a total of 17 countries.

In a Dec. 6 interview with Charlie Rose and Gayle King on “CBS This Morning,” Spotify co-founder Daniel Ek said by making huge amounts of music available easily and legally, services such as Spotify are effective in combating the music piracy that escalated in the late-1990s with Napster and peer-to-peer file sharing.

“The music industry — because music is the most social object — it was probably one of the ones that was hit hardest of all media types when it comes to piracy,” Ek told Rose and King. “So, you know ... the music industry back in the year 2000 was actually about a $45 billion industry, and now it's about $15 billion. It's one-third of where it used to be, but at the same time, people are consuming more music now than ever before. So it's pretty clear that there's something wrong here. And what's wrong is that people are listening to music illegally. What we're doing is taking them from ... an illegal service into Spotify.”

But not everything is streaming smoothly in the digital music world. These services, which pay licenses to record labels, artists and performing rights organizations such as the American Society of Composers, Authors and Publishers (ASCAP), are coming under fire from musicians for their royalty rates, which do not compensate musicians as well as the rates for album sales. In an Aug. 31 Twitter post, the Brooklyn, N.Y.-based band Grizzly Bear said, “Spotify might be good for exposure, but after 10k plays we get approximately 10 dollars.”

Scott Booker, manager of The Flaming Lips and president of the Academy of Contemporary Music at the University of Central Oklahoma, said it is often hard to tell just how much the Lips are earning from such services, but he knows that, as of now, it is small potatoes.

“Royalties come in so many different forms, and what happens with Rhapsody, Spotify and those types of things is: it goes to the label, and then the label gives us our piece of it,” Booker said. “But a lot of times, it's buried in our statements that don't show up for six months after the payment period.”

Booker said he is not concentrating much on the issue, for now, mainly because most of the band's income is derived from concert ticket sales, merchandising and licensing rather than recorded music, whether it comes from physical compact disc sales, iTunes downloads or streaming audio services.

“There's a side of me, too, that doesn't want to look into it and just get depressed,” he said, laughing.

The backlash among artists against such services reached critical mass in November, when Pandora sued ASCAP to force a reduction in royalty rates it pays to songwriters and publishers. On Nov. 15, artists including Rihanna, Katy Perry, Sheryl Crow, Cee Lo Green and Pink Floyd's David Gilmour signed a public letter criticizing Pandora's actions.

But Oklahoma singer-songwriter Beau Jennings said Grizzly Bear's much-circulated tweet and the Pandora protest letter miss the point. He said musicians should not expect to get rich from their recordings in the current industry environment, but that hard work and good songs are rewarded eventually.

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