Closing The Value Gap – On Terrestrial Radio?


OldradioFor months, YouTube has been the music service the industry loves to hate. Love, because of its huge audience that can clearly break artists and boost releases.  Hate, because of the comparatively small revenue it returns to creators and rightsholders. But now broadcast radio is feeling the heat, and for exactly the same reasons.

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By digital music strategist and journalist Matt Voyno

Recently at the Music 4.5 seminar at Reed Smith offices in NYC members of music industry from SiriusXM, BMI, RIAA, Nielsen, A2IM and more came together to talk the economics of streaming music and closing the value gap. 

Speakers discussed the issues facing artists and the industry on both the major label and indie side of things. There was talk about all of the varied streaming rates, the evolution of streaming music, and of course YouTube, the biggest free streaming service in the world. While YouTube is still a clear obstacle to higher streaming rates for artists, labels, and the music industry at large, it has made good on it’s promise to bring more of the music industry on-side and tackle the pressing issues. 

But the surprise theme of the Economics of Streaming seminar was how some of the music industry has shifted their attack from YouTube to Radio. Yes, you read that right, Terrestrial Radio or as A2IM CEO Richard Burgess put it “The original streaming service.” At A2IM Richard has touch points with thousands of record labels and hundreds of thousands of jobs directly related to the music industry. Richard talked about how in the year 2020 it will be the 100 year anniversary of radio and during that time it’s mainly been “A CENTURY OF SHAME.” 

Total US Radio revenue last year was $17Billion. How much went to artists, labels, musicians? $ZERO$. Not one red cent. For years Radio relied on the argument that it was a “promotion tool,” well that argument doesn’t hold up in 2017. We have moved on as a listening public. Streaming is the new Radio and it pays 70% of it’s profits to artists. 

“I don’t believe it’s music’s responsibility to manage the growth potential of the business using it.” This argument was from Barry Massarsky, the go-to music industry economist and consultant, who basically shut down any arguments from those complaining that streaming services are being pressed too hard by the music industry. Barry went on to show how in a regulated market economy you do not achieve a fair value for music. Looking at Radio, Satellite Radio, Internet Radio, and Streaming Music you see just how little Terrestrial Radio pays. Under 3% of Radio’s total revenue goes back to the artists—those same artists who are the foundation of their entire industry. It’s incredible that Radio has gotten away with this for so long. Well according to Barry the industry is “mad as hell, and they’re not going to take it anymore.”

Ultimately the attack on Terrestrial Radio is because the digital music service providers are attempting to use historic Radio rates in today’s negotiations. Both Barry and Richard echoed that historic rates cannot be trusted when finding the true value of music. That radio does not pay for music is increasingly damaging in a streaming economy. It amounts to a government mandated subsidy that makes it more difficult to negotiate with digital services providers. 

If artists want a fair play for fair pay from the likes of Spotify, Apple Music, YouTube, Pandora and the rest, then they need to bend the will of the last hold out in the free music game: Radio needs to pay. It feels like this movement is just getting started and as the industry makes critical decisions on the future streaming rates/the livelihood of creators then Radio needs to get the message that the gravy train is over and artists won’t take it anymore.