April 4, 2013
Sites like Pandora and Spotify have made a significant impact on the music industry with their free streaming music services. Now, these sites may be influencing how well artists do in regards to their album sales. Justin Timberlake, for example, released his new album “The 20/20 Experience” to Spotify, which resulted in 980,000 copies being sold within the first week, according to Nielsen SoundScan.
According to Businessweek, Timberlake sold 63 percent more copies than was expected by his record label RCA, surpassing the first-week results of Adele’s chart-topping album “21.” When “The 20/20 Experience” was streamed to online music services it took up six of the top 10 most played songs on the app Rdio and was streamed almost 7.7 million times on Spotify. RCA also streamed the full album on iTunes before it was available for purchase. It then became the fastest selling and most pre-ordered album in iTunes history.
“It’s sort of ironic that the company that’s streaming albums first is still a digital download site,” says Mark Mulligan, a digital music analyst. “But that’s because iTunes has 400 million active credit card accounts and Spotify doesn’t.”
Even though the music is free for consumers, companies are making significant revenue with advertisements. Businessweek reports that subscription streaming services have risen 59 percent in 2012, jumping from $360 million to $571 million.
The New York Times reports that $500 million is paid for royalties each year. But the artists only get a small portion of that revenue as sites like Spotify pay less than half a cent per listen for each song.
“Artists didn’t make big money from CDs when they were introduced, either,” Donald S. Passman, a music lawyer told NYT. “They were a specialty thing, and had a lower royalty rate. Then, as it became mainstream, the royalties went up. And that’s what will happen here.”