Music fans are increasingly turning to music streaming services like Spotify, instead of listening to pirated copies, however artists are unhappy about their share of the spoils.
The music industry needs to repair the royalties paid by music streaming services such as Spotify and Pandora, or else the shift to streaming will "fail" individual artists even as it benefits the music industry as a whole, Australia's royalty collection agency has warned.
Music streaming services, which are fast replacing music download services such as iTunes, have come under fire from musicians who complain that they're paid a pittance in exchange for allowing their music to be streamed over the internet.
In June, songwriter David Lowery complained he was paid only $US16.89 ($18.34) by Pandora after his song Low was streamed by the service almost 1.2 million times. He made more money from the sale of a single t-shirt, he wrote in a blog.
Andrew Harris, principal analyst at Australia's royalty collection agency APRA|AMCOS, said that while streaming services were doing a lot to fight internet piracy, the way their royalty payments are allocated "needs to be fixed".
As streaming grows, "individual artist returns [will be] diluted and spread over a much longer period of time than traditionally seen - even if they end up being the same in the long run," he said.
"The investment model and the way artists are compensated in such an environment must be addressed if we want to see artists thrive and continue making new music and maintain a long-term career," Mr Harris said.
Spotify, the world's largest music streaming service, with 24 million customers worldwide, says it pays 70 per cent of its income to the music industry - the same rate paid by download services such as iTunes.
"Right now we're still in the early stages of a long-term project that's already having a hugely positive effect on artists and new music. We've already paid $US500 million to rights holders so far and by the end of 2013 this number will reach $US1 billion," the company said in a statement.
"Much of this money is being invested in nurturing new talent and producing great new music."
All artists are paid on an equal footing, proportional to the number of times their tracks are streamed, Spotify says. If one artist were to account for 1 per cent of Spotify's total traffic, that artist would be paid 1 per cent of the royalties.
"As with any major change in the distribution model of music, artists have very understandably wanted to ensure that this growth of streaming services is good for them. We are confident that it is", said DA Wallach, Spotify artist in residence. "The same sort of conversation surrounded iTunes when it was first growing, and the same sort of conversation surrounded recorded music in the first place when musicians previously earned their livings only by playing live shows," he said.
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