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Streaming Is Officially the Biggest Part of the Music Business, Which Wants YouTube to Pay Up

Streaming generated $2.4 billion in the U.S. last year. It should be much more, says the RIAA.

Taylor Hill / FilmMagic
Peter Kafka covers media and technology, and their intersection, at Vox. Many of his stories can be found in his Kafka on Media newsletter, and he also hosts the Recode Media podcast.

The music business has been turning into the music streaming business for several years now, but here’s another indicator of the way things are going: Last year, streaming services generated more revenue than any other kind of music sales in the U.S..

But the big music labels think they can get much more than that, and they want to do it by making it harder to hear free music. Legally, at least.

First, the numbers: The music labels sold $7 billion worth of tunes last year — a 0.9 percent increase. And the streaming music services like Spotify, Pandora and YouTube accounted for $2.4 billion of that — more than a third. That’s a milestone for the industry, which took a very long time to move from CD sales to digital downloads to the current model.

But while the RIAA — the music labels’ trade group — is using the occasion to pat itself on the back, it is also hammering away at a theme we’ve heard from them for a couple of years: It’s time to cut back on free, streaming music.

In a note accompanying the 2015 numbers, RIAA boss Cary Sherman complains that free, ad-supported streaming services don’t generate enough revenue — a complaint we’ve previously heard from everyone who runs a big music label. And while, in the past, the labels have included Spotify as one of the services that gives away too much music, this time around Sherman makes a point of singling out YouTube.

Here’s an extended excerpt from his letter, along with charts the RIAA has helpfully provided:

“The consumption of music is skyrocketing but revenues for creators have not kept pace. In 2015, fans listened to hundreds of billions of audio and video music streams through on-demand ad-supported digital services like YouTube, but revenues from such services have been meager — far less than other kinds of music services. And the problem is getting worse. Check out the alarming disparity between the growth in the number of ad-supported streams compared to the growth in revenues generated from those streams:

“This is why we, and so many of our music community brethren, feel that some technology giants have been enriching themselves at the expense of the people who actually create the music. We call this the ‘value grab’ — because some companies take advantage of outdated, market-distorting government rules and regulations to either pay below fair-market rates, or avoid paying for that music altogether.”

And just to rub it in, Sherman lobs another graphic toward YouTube: One that shows that vinyl sales — vinyl! — are generating more for the business than free music does.

But complaining about YouTube is different from doing something about YouTube. Part of the label’s beef is with the Digital Millennium Copyright Act, which they say makes it too easy for YouTube (or any other service where users upload content) to profit from stuff that shouldn’t be there. But the DMCA isn’t going anywhere soon.

Meanwhile, the labels themselves could pull their music down from YouTube, and that’s a theoretical possibility as their licenses come up for renewal in the next year or so.

But that would mean going without any revenue from YouTube at all. And it’s very hard for a music label boss to walk away from money on the table. Even if they think they’ll get more in the long run.

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