Songwriters are taking their fight to the legal arena in an attempt to get higher royalty payouts from streaming subscription music services like Pandora, but it’s not clear that such services have any additional money to give. The newly introduced legislation, called the Songwriter Equity Act, is aimed at changing the current royalty system in which a popular song can receive literally millions of plays on Pandora and yet the songwriter might receive as little as one hundred dollars total. Songwriters want a bigger share of the streaming pie, it seems, but there’s a catch: sites like Pandora are still losing money.
Music subscription services have been around for a decade and a half, predating even the iTunes Music Store. Instead of selling songs for a dollar apiece, subscription sites typically charge around ten dollars per month to allow the listener to “tune in” to streaming channels and libraries at any time. They don’t get to own or keep any of the music permanently, but there’s so much music streaming on so many channels that there’s plenty of choice. Do the math and it turns out each subscriber is perhaps a penny or less per song streamed – and the songwriter and artist are only getting a small fraction of that penny.
But most people using such sites have opted for the limited version in which they can only access certain features but don’t have to pay at all. The streaming services hope to turn those non-paying customers into paying ones eventually, and hope to make up for it with advertising revenue in the mean time. But total revenue for streaming music sites is so small that despite their popularity, they’re generally losing money. Pandora turned in one profitable quarter last year, but immediately warned that it was likely an aberration. Its competitor Spotify is only still around because it keeps landing one round of funding after another, often from celebrities, to cover its financial shortfalls.
No one has yet been able to demonstrate that a music subscription site can be profitable. Even the recent entries by Google and Apple into the subscription streaming arena appear to be afterthoughts in comparison to their robust Google Play and iTunes Store ventures in which they sell music on a per-song and per-album basis. Those services make a profit, the artists and songwriters get paid a hefty percentage, and everyone is happy.
But it appears that those users who opt for the subscription services are the ones who were never going to pay for music in the first place; their overwhelming preference for the free version of Pandora over the more functional ten dollar a month option suggests that streaming is associated with cheapskate consumerism. While no one can argue that the songwriters pushing the new Songwriter Equity Act are in the wrong for wanting to get paid for the airplay of their songs, the passing of such a law could well mark the end of subscription services (or at least the free versions) altogether.