Recording Industry ‘Optimistic’ On Its Digital Future With Rise of Spotify, Vevo
The recording industry is “optimistic about its future for the first time in a long time,” said RIAA President Cary Sherman at a Tuesday evening event on the digital future of the industry. He pointed to companies like Spotify and Vevo that have found new revenue streams by bringing music online. That helps to combat piracy and stabilize a drastically changing industry, he said.
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Spotify paid more than $500 million back to rights holders in its first five years, and will have paid over $1 billion to rights holders by the end of this year, said Chief Content Officer Ken Parks. He addressed criticisms that those royalties aren’t going to artists, saying the business is still getting started and its user base is small. In Sweden, where Spotify was founded, it now represents 60 percent of the music economy, he said. “The dollars are real and that’s new money that can be used to benefit artists.” Vevo, which pays rights holders with revenue from ads on their music videos, also is a brand new revenue stream for artists, said President Rio Caraeff. Before Vevo, he said, anyone monetizing ad revenue was making less than a dollar per thousand views. Now they make $25-$30, he said.
Parks and Caraeff said piracy is the biggest challenge still facing the recording industry. Warner Bros. Chairman Rob Cavallo said piracy had cut talent development budgets by half -- giving studios and labels the chance to promote only a fraction of the number of artists they once could. Parks said he had hope, however, since piracy had been fully ingrained into the Swedish culture until Spotify came along and drastically reduced the country’s engagement in piracy. Parks also said the industry should be careful to maintain access to digital platforms that matter, saying “fair access” to the broad array of relevant technologies would be key in maintaining the industry. Caraeff agreed: “It’s not in the best interest of consumers if there’s no choice, no option.” Music programming like Spotify and Vevo should be available on every network and platform, he said.
"There has been a lot of doom and gloom, but there is now a general feeling that we've turned the corner,” Parks said. The scale of the opportunity makes him optimistic, he said, since Spotify could potentially bring legal alternatives to more music listeners than ever before. Before the transition to digital media, he said, a relatively small population of music fans bought CDs and kept the industry afloat. With a service like Spotify, far more people can contribute to the music economy conveniently, he said. “Certainly we can grow this business.” Sherman said the industry had seen a “precipitous” decline in revenue since 1999, but revenue since 2010 had remained stable. He guessed the industry could start to see growth within the next few years. Before the transition to online entertainment, “the entire industry was focused on ‘How do we sell albums?’,” Caraeff said. “Now, it’s ‘how do we connect with everyone out there who loves music?’ … That’s why we're bullish and optimistic about getting access in as many places as possible.” -- Erin Mershon (emershon@warren-news.com)