With Spotify prepared to pay royalties of half a billion dollars and Apple selling more than 21 million songs every day, the future of the digital music industry looks bright for 2013 and beyond.
Spotify likely will pay out the same amount during 2013 that it has in its entire existence up to this point, said founder Daniel Ek at a Los Angeles event presented by Founders Forum. The $500 million the company expects to pay will go to artists, labels, publishers and other rights holders, and is roughly equal to the amount the company has paid since it was founded in 2008.
Critics have claimed that too much of royalties from streaming sites like Spotify go to major labels rather than artists, and Rob Wells, president of global digital business for Universal Music Group, was on hand at the same event and said that Spotify provides a “substantial” source of income for his company.
But it seems the best news here is for Spotify and other digital music startups. Major labels are still trying to determine how to traverse the new digital landscape with old methods, while new companies come into the industry with new and fresh ideas, particularly with the new focus on mobile, which Ek says is significantly cutting down on piracy and allowing the digital music industry to “start all over again.”
Part of that starting over has to involve payment systems that are fair to both the digital music companies and the musicians, particularly including independent artists using the services.
Last year, 69 percent of digital music sales were made in the iTunes Store. The venue accounted for 29 percent of all music sales, beating out both Wal-Mart and Target.
That has all helped Apple to sell over 25 billion songs since it launched the iTunes store nearly a decade ago, and it continues to sell 21 million songs every day. In the final quarter of 2012, this represented a revenue of $3.7 billion for the company, up 22 percent from the same period a year earlier. And that large number doesn’t represent the revenues artists earned from the sales.
Reports were not quite as good for Pandora compared to Apple and Spotify, as the internet radio service’s listener hours stayed constant at 1.39 billion, the first time since June of last year the number of hours hasn’t grown month-over-month. Additionally, the number of monthly active users fell for the first time in the past year.
However, even with Pandora’s setback the outlook for internet radio is positive. A new eMarketer study reveals that the total number of internet radio listeners will grow every year at least through 2016. By that year, 53.7 percent of the U.S. population will listen to internet radio, and 67.4 percent of internet users will listen to some form of online radio.
A large part of the growth will be the increasing mobile trend in internet radio, and Pandora is expected to bounce back from its temporary lag and add more users in 2013 than the 16 million it added last year. Additionally, Apple is expected to launch an internet radio service this year, as well, and as the numbers above show, the company does fairly well in the digital music business.
Even as all these numbers grow, there is still a need for royalty rates to be altered to benefit artists - including independent artists - and not just the major labels. The model in the digital music industry seems to shift every day, and the startups at least seem to have the best interest of the artist in mind , but it will take a shift of the entire music industry before that can be fully realized.
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