Business Costs & Regulation

Shouldn't Music Streaming Sites Pay Higher Royalties?

Recording artists both famous and obscure complain about the royalty of less than a penny that they receive for each play of their songs.

Q. My twentysomething daughter is a passionate humanitarian who buys fair trade coffee and champions higher pay for garment workers in poor countries. But for her music downloads—after the legal boom was lowered on the “free” (pirated) music streaming sites—she now patronizes services such as Pandora and Spotify, which pay artists a pittance in royalties. I see an ethical dilemma in this, but she doesn’t. How about you?

A. I’m with you. Your daughter personifies a key contradiction of the millennial generation: Its professed passion for helping "the little guy" sometimes clashes with its embrace of a free-everything, "sharing economy" ethos that tends to lower the pay of traditional workers and enrich the entrepreneurs who devise new ways to slash prices.

Music sites are just one example. Others include UberX (the cheaper, ride-sharing version of the regular Uber alternative taxi service) and apartment-sharing services, both of which, if they become widely used, will gradually undercut the employment and earnings of full-time taxi drivers and hotel staff.

In the music realm, young adults are buying fewer of the 99-cent singles that iTunes sells in favor of cheaper unlimited streaming, either free (with commercials embedded) or for a monthly fee (no commercials). Recording artists both famous and obscure complain about the royalty of less than a penny that they receive for each play of their songs. Even worse, the online streaming services (and Sirius XM satellite radio) refuse to pay royalties for recordings that predate 1972—songs by the greats of jazz and blues, early rock, Motown, and even the Beatles. (Federal copyright law seems to allow this, but the issue is being fought on the state level.) Some current superstars are bypassing the streaming sites for their new CD releases, but few artists have this market power.

This is a fairness issue that should become an appealing cause for idealistic young adults who love pop music and the struggling artists who make it. For more information on the fight for higher artist royalties, visit www.musicfirstcoalition.org.

Have a money-and-ethics question you’d like answered in this column? Write to editor in chief Knight Kiplinger at ethics@kiplinger.com.

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