Why The Music Industry Fights Technology That’s Making Them Millions

REUTERS/Mike Segar

Andrew F. Quinlan President, Center for Freedom and Prosperity
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Recently it was reported that streaming music is now the biggest money maker for the music industry, bypassing music downloading for the first time. This has not translated into profits for the streaming companies, because in part, high royalty rates have driven their costs sky high. It does show the promise of music streaming as a profit center both for companies that stream the music and the artists.

If you believe that the music industry is ecstatic that streaming has created billions in revenue, you would be wrong. For half a decade, the music industry, led by the Recording Industry Association of American and the giant music publishing corporations, has conducted a legislative and administrative war to destroy the streaming market.  

Change has always been hard for the music industry. They’ve systematically fought virtually every new invention since the player piano. The collective adversity to new technologies and mediums is rooted in the foundations of the industry itself. Copyrights inherently lend themselves to monopolies. A copyright holder rightfully owns 100 percent of their particular work but when aggregated with other copyright holders, can control an entire marketplace. The two largest performing rights organizations in the music industry effectively control 98 percent of all musical compositions. As such, the entire industry is built upon a series of byzantine laws and rules that seek to balance ownership rights with anti-trust concerns. Negotiations tend to take place in back rooms filled with industry lobbyists and bureaucrats rather than in the sunlight of the market place.

It’s a comfortable system that has consistently worked in the industry’s favor for decades. So every time a new technology emerges it threatens their carefully constructed house of cards. Rather than adapt to new market dynamics, the titans of the music industry run to bureaucrats and politicians and seek to keep yesterday’s business model afloat.

As streaming music became popular, it was seen as a threat to the music industry. That’s why Rep. Marsha Blackburn (R-TX), who represents Nashville’s music interests, introduced legislation known as the “Songwriter’s Equity Act,” a bill whose sole purpose is to increase the fees on music platforms, including streaming services like Pandora and local radio stations that play music. The bill not only threatened but by many accounts was intended to kill the streaming music industry in its infancy.

On another front, the industry has tried to shake down the broadcast radio industry. In the eyes of the law, broadcast radio is the equivalent of hundreds of millions of dollars in free advertising for the music industry’s products. In fact, broadcasters are legally forbidden from charging them to play their records. Despite the fact that this arrangement has put billions of dollars in the industry’s coffers, they want more and unleashed their political benefactors to introduce the slyly named “Free Market Royalty Act” that would require broadcasters to pay for playing songs on the radio, but of course keep intact the legal prohibition for being charged anything by the radio stations.

So far, the industry’s efforts on these two fronts have been stymied. However, their perseverance highlights the fact that the industry as a whole remains recalcitrant to adapting and continues to have a voracious appetite for using their monopolistic market share and political connections to increase their share of the pie, even if it means killing off entire industries that consumers love.

After generations of controlling the crony game, the industry is understandably reluctant to relinquish their golden goose. However, clinging to the old system only hurts consumers and ultimately the industry itself. No matter how much the industry lobbies government, it is unlikely that the vinyl record market will ever grow much beyond skinny jeans wearing hipsters and return it is former glory.

Rather than turn to government to rig the system again, the industry should embrace new technologies and mediums that are now bringing in billions of dollars in revenue. In the long run consumers and the industry will be better off. But then again, old habits are indeed hard to break.