By Clara Kim According to recent stats from Nielsen Music, digital download music sales are plummeting while streaming continues to boom. During the last week in August, digital downloads in the U.S. plummeted to 15.66 million – its lowest weekly volume since 2007 – whereas on-demand audio and video streams rose to 6.6 billion – its highest weekly volume ever.
Streaming now represents a third of U.S. music revenue; up from just five percent five years ago. Compared to total CD sales, which were down 31.5 percent in the first half of 2015, streaming revenues were up by 23 percent, according to the Recording Industry Association of America (RIAA). For the first time, U.S. sales from streaming surpassed $1 billion in the first six months of the year.
The trend is abundantly clear – as streaming gains favor among consumers, revenues from album sales and digital downloads are drying up. This is an alarming problem for songwriters and composers – the people who are the creative engine powering the entire music industry – because streaming revenue does not come close to closing the gap in physical sales, and certainly does not reflect the scale of music use on these new platforms.
Compounding this challenge is the fact that songwriters are hamstrung by a regulatory process that was written into Federal law more than 70 years ago. The agreements with the U.S. Department of Justice governing this process for both ASCAP and BMI, known as consent decrees, limit how songwriters can negotiate performing rights royalties – a source of income they are more heavily dependent upon as the shift from downloads to streaming continues. According to the National Music Publishers Association (NMPA), in the first half of 2015, public performance royalties made up over 52 percent of a songwriter’s income and mechanical royalties made up 23 percent – meaning three-fourths of songwriter and publisher income streams are heavily regulated by the federal government.
Under the current system of antiquated laws, it takes nearly one million streams, on average, for a songwriter to make just $100 on the largest streaming service. However, songwriters are limited in their ability to negotiate higher compensation in these situations. When licensees and Performing Rights Organizations, like ASCAP and BMI, cannot reach an agreement, songwriters are forced to use an expensive and inefficient rate court process in which a single federal judge decides the rate.
No other industry works this way, and we are way past due for a change. But that will not happen unless songwriters, composers and music fans make their voices heard in the ongoing debate over music licensing reform. If we truly believe that music has value, we must urge our leaders in Washington to make changes that ensure songwriters are able to receive fair compensation for their work in the marketplace.
Fortunately, the U.S. Copyright Office, members of Congress and many industry observers have realized the absurdity of the current regulatory framework and called for reform. Importantly, the DOJ is formally considering much needed updates to the ASCAP and BMI consent decrees that would better reflect the way people listen to music today. As part of the DOJ process, ASCAP has recommended changes that would foster continued innovation and competition, and result in music licensing rates that better reflect the free market.
Songwriters and composers are the lifeblood of America’s music industry – without their work, Pandora, Apple Music, Spotify, Tidal and the like would have nothing to offer new listeners. A music licensing system that reflects advances in technology and today’s competitive landscape would better serve everyone, allowing songwriters to continue creating the music that is loved by so many.
Clara Kim is the executive vice president and general counsel at the American Society Of Composers Authors and Publishers (ASCAP).