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Streaming music works for us, say US and UK indie labels

Not clear it does for the musician, however

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Analysis Are legal music streaming services just Kim Dotcom on a diet, with a lawyer?

The debate has raged amongst musicians for years now, and really ignited when Cracker and Camper Van Beethoven frontman David Lowery took issue with the “new music economy” two years ago. In what became known as the “Letter to Emily” storm last year, Lowery asserted that music streaming services do pay - just not as much as they could, or should.

"Spotify ... is not a fair system now," wrote Lowery. "As long as the consumer makes the unethical choice to support the looters, Spotify will not have to compensate artists fairly. There is simply no market pressure."

He added: "Yet Spotify’s CEO is the 10th richest man in the UK music industry, ahead of all but one artist on his service."

Twenty million people now pay for licensed music streaming - up from 8m two years ago - and licensed streaming now makes up 13 per cent of all music recordings' revenue, the International Federation of the Phonographic Industry (IFPI) reported recently.

New research from indie licensing body Merlin suggests that smaller record labels are not unhappy with the picture. Indie labels get the undesirable end of the stick in digital deals, as only major labels can afford equity in digital startups - and so can insist on “most favoured nation” clauses (PDF, 3 pages).

Yet 52 per cent of labels for whom Europe is a primary source of revenue found that streaming services make up over a quarter of their income. Where their primary business is in the USA, 54 per cent of labels said licensed streaming now made up over 25 per cent of revenue. Both numbers are ahead of the 13 per cent industry average.

Only 13 per cent of small labels had seen a decrease in a la carte (eg, Amazon and iTunes) downloads, for which they receive more money. A third of indies say they saw revenues double in 2012 over 2011, and 64 per cent saw a rise of 50 per cent.

Traditionally big producers spend heavily on retail promotion, buying shelf space to promote their products - and in the physical music era of CDs and cassette tapes, it was no different. Merlin concludes that given the freedom of “limitless” shelfspace, thanks to digital services, the punter is more adventurous.

"The nature of the new generation services has put a lot of control back into the hands of rights owners," concludes Merlin in its report. "As a result independents have a more open market and are performing far better in the subscription space than they have historically in the physical or download space."

The best-selling album of 2011 and 2012 globally was on an indie label, London's XL Records, part of the Beggars Group: Adele's 21. The label rejected a deal with Spotify and other services with a "free listening" offering, and the strong sales of the album appear to vindicate the decision. XL did license it to Rhapsody, where XL licenses through Columbia. ®

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