Despite Massive Streaming Revenue Gains, RIAA Still Lying And Crying

by Timothy Geigner
Techdirt
Mar. 25, 2016

The legacy recording industry just has a way with attacking any new technology service that helps it adapt, doesn't it? Whether it's ringtones or video games or YouTube or iTunes, the industry always takes the same basic approach: denounce the new offering as evil. Threaten and/or sue. Maybe take some equity as a way to "settle" the legal threats/suits. And then squeeze the companies for more and more money until they're dead. It's happened over and over again, and we're now witnessing the same thing again in streaming music -- even as it's turning into a major cash cow. For whatever reason, to make this work, the industry wants to turn this cash cow into an enemy.

And a strange enemy at that, as none of my enemies are paying me $2.4 billion a year in revenue. But that's what the RIAA's own data shows came in to its coffers for 2015, representing an enormous upward trend in streaming revenue for the music industry.

In its earnings statement, the RIAA noted that when all types of streaming are combined (subscription, ad-supported on-demand and SoundExchange), it constitutes $2.4 billion in revenue for 2015—a rise of 29 percent over the previous year.

Yet it took exactly no time at all for RIAA CEO Cary Sherman to laugh that revenue off as wholly insufficient.

While today’s data is encouraging, the challenges facing us are significant. 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"Š—"Šfar less than other kinds of music services.

So, revenue from streaming services is growing at a one-third clip over previous years, but that's just not enough. And this statement is made even as the RIAA and some of its member artists do everything possible to hamper, block, and outright shut down the streaming services that are producing this revenue for them.

And then there's this bit of pure bullshit:

Need further proof that some fundamental market distortions are at play? Last year, 17 million vinyl albums, a legacy format enjoying a bit of a resurgence, generated more revenues than billions and billions of on-demand free streams: $416 million compared to $385 million for on-demand free streams.

Want to talk about "market distortions," Cary? How about the fact that you're being blatantly dishonest in presenting these numbers, taking the gross "retail value" on vinyl, but for free streams talking about the wholesale net value to you. You're leaving out a ton of relevant details: First, retail value isn't actual revenue, as it ignores the reality of discounts and other pricing differences. Second, and more importantly, you're leaving out the fact that much of the money from retail value doesn't go to the labels, but to the retailers, distributors and to cover production costs of the actual records. Third, with free streaming, you have none of those costs, and the contracts you have with streaming companies mean a much greater percentage of the revenue actually goes to the labels. Fourth, free streaming does two useful things that you ignore: (1) moves people away from infringement, where you earn nothing and (2) moves many people up the chain to paid streaming.

But, I guess if someone is going to be familiar with "market distortions" and how to misrepresent reality, it would be the RIAA.

Beyond that, the claim here is that artists aren't making as much as was made in the old vinyl and CD eras. First, I don't even know if that's true, but even if we accept that claim...so what? Streaming, by the RIAA's own data, is now the majority revenue producer in the music industry. In other words, that's the direction the market is going. But there is nothing promised in business and if the new model means revenues aren't equal to the old model, that doesn't mean there something wrong with the model. It may certainly mean that there's something wrong with the RIAA's model, but not the one so heavily in demand by consumers and generating the majority of RIAA revenue.

And there is certainly nothing in this to suggest that streaming is harming music as an art form. Far from it, actually. As Cary Sherman notes, music consumption is up, up, up. Does Sherman really mean to suggest either that streaming services aren't contributing to that rise, or that wider music consumption isn't ripe to be monetized by any number of forward thinking business models?

RIAA-2015-Year-End-Shipments-Memo (PDF)