RIAA Sees “Market Distortions” in Streaming Success

New numbers from the Recording Industry Association of America show that the industry is adapting pretty well to the streaming-music business.

Streaming music now represents the largest segment  (opens in a new tab) [PDF] of music purchases, overtaking digital downloads for the first time in 2015, with paid services such as Apple Music and Spotify leading the way. The growth represents a success story for the music industry, but Cary Sherman, the president and CEO of RIAA, warned that there are some lingering weaknesses in the digital model, which now represents more than 70 percent of the music industry’s total revenue.

Sherman noted in a Medium post  (opens in a new tab) that the financial benefits of free streaming services, such as the ad-supported versions of Spotify and YouTube, haven’t trickled down to the artists.

“The consumption of music is skyrocketing, but revenues for creators have not kept pace,” Sherman wrote. “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.”

Vinyl records, which have made a bit of a comeback of late, drew $416.2 million in sales last year—the format’s best year since 1988, Sherman noted. But that amount, which represents only about a quarter of overall CD revenues in 2015, still managed to top ad-supported streaming services, which made $385.1 million last year—despite the fact that ad-supported streaming was the most popular way to play music in 2015.

Sherman called that discrepancy “proof that some fundamental market distortions are at play,” which, he argued, have left artists underpaid for creative work while technology firms benefit.

“We call this the ‘value grab’ — because some companies take advantage of outdated, market-distorting government rules and regulations to either pay below fair-market rates, or avoid paying for that music altogether,” he added.

RIAA’s comments on the issue come at a time when pressure is on the music-streaming industry because of underpayment to artists, which in recent months has led some labels to leave Spotify and music-publishing groups to work out settlements over payment issues.