It's kind of a love/hate thing: Streaming services account for nearly a third of music industry revenue. But the labels say streaming should have its limits.
Recently, there is increasing talk of record labels pushing back to boost their take from free or "freemium" music streaming services. As the Verge reported, Universal Music Group is pressuring Spotify to put harsher limits on its free service, putting a lower cap on what users can listen to without paying for a $10 monthly subscription. Other companies, including Sony Music and Warner Music, have also expressed concerns.
"This has been coming to a head for a long time," CNET's Dan Ackerman told CBS News. "You go on Spotify, even if you're not a paid customer, and pretty much stream on demand any music you want. You hear an ad occasionally, but that's about it. The record companies are finally saying, 'We've had this open buffet for a long time, its time to put some limits on it because we're not making any money.'"
Well, not enough money, anyway. The Recording Industry Association of America released its latest numbers last week, revealing that while year over year, music retail sales dropped a bit, from $7 billion in 2013 to $6.97 in 2014, revenues from streaming services grew 29 percent to $1.87 billion. Streaming now accounts for 27 percent of total music industry revenues, grabbing ground from downloads and sales of CDs and records, both of which dropped 3 points.
To music companies, the value of paid subscriptions is much higher than that of ad-supported free services like Pandora or the basic Spotify offerings, but according to the RIAA, free on-demand is growing faster.
Will the pushback from record labels lead to more paid Spotify subscribers?
Ackerman said it could go one of a few ways. In the better case scenarios for music companies, Spotify users will get annoyed with the limits and pony up ten bucks a month to get the music they want. Or perhaps they'll feel forced to actually download albums, which is more lucrative for the artists versus the fraction of a penny they might get from each song streamed. But on the flip side, users might just jump ship and go to Pandora.