Music Experts Discuss Why the Internet Is Now Saving the Recording Industry

Mark Sullivan/WireImage (Passman); Courtesy of subject (LaPolt) and RIAA (Friedlander)
Donald Passman; Josh Friedlander; Dina LaPolt

"This is the most profound change in the music business in its history," says top attorney Donald Passman.

The internet killed the music industry in the 2000s but now appears to be bringing it back to life. After a period of decline for physical sales, the past few years have seen streaming music services pump billions back into circulation (with $7.7 billion in total revenue in 2016, according to the Recording Industry Association of America).

Top music lawyers Donald Passman, whose clients include Taylor Swift and Adele; Dina LaPolt, who reps Britney Spears and deadmau5; and RIAA strategic data analysis svp Josh Friedlander talk to THR about how digital is finally doing good things for record labels.

How would you assess the overall health of the music business as we begin 2018, and what's contributing to that?

FRIEDLANDER We’re still working on our 2017 full year numbers, but what we’ve seen so far shows trends continuing with revenues from paid subscriptions fueling growth into 2018. It’s still a fragile recovery, but we’re cautiously optimistic this trend will continue as more and more fans discover these types of services that give you instant access to virtually any song or album. We’re nowhere near where we were at industry peak in the late ‘90s, but it’s still an exciting time that gives us reasons to be hopeful.

PASSMAN The heartbeat is getting stronger. It's all due to streaming, which is finally taking off. Streaming was 51 percent of the business in the U.S. in 2016. In time the revenue will grow exponentially. How long that takes depends on how quickly people continue to adopt the technology.

LAPOLT Streaming is definitely leading the drive, and, specifically, paid subscriptions, as this category brings in a substantially higher ratio of revenue per user compared to its ad-based counterpart. In fact, the only thing holding back streaming from restoring the music business to its former self are ad-supported services like YouTube that pay creators pennies on the dollar compared to the amount of revenue they take in.

How much of the nationwide annual music revenue now comes from streaming and downloads?

FRIEDLANDER More than 80 percent of music’s revenues are derived from digital sources like streaming and downloads. Which, I’ll do a shameless plug, is more than any other major media industry. Music is leading the transition to digital.

 How is streaming changing the way artists begin and grow their careers?

LAPOLT The digital business has been changing how artists develop their careers ever since Napster. Now we are seeing acts aim for releasing attention-grabbing singles without as much focus on the album, especially for up-and-coming acts. Everyone knows that streaming is here to stay and younger artists are really doing a great job of harnessing its power.

PASSMAN This is the most profound change in the music business in its history. Back when the music business started, it was based on the idea that you sell a record and you get money. It didn't matter if someone played it once or a thousand times. Now it matters a lot. The more plays, the bigger piece of pie I'm going to get.

FRIEDLANDER I think it depends on the artist. Most artists still start small, playing at smaller local venues and potentially gaining ground by touring and establishing a social media following. Social media has certainly helped bolster the profiles of many talented artists, and it’s something the labels would likely look at as artists develop their careers.

Has the boom in streaming services and the demand for TV and film content helped the music industry?

PASSMAN There's so much more programming, and the programs are looking for cheap music. If you have a new artist who's looking to get their music out to a new audience, that equals cheap.

LAPOLT There are definitely lots of opportunities for licensing now, which is always great for the artist, both in terms of paychecks and exposure. With tons of content coming out reaching a diverse range of audiences, there are a lot of opportunities here. Music made for television and film soundtracks has made a comeback in recent years as well, like the big-budget soundtrack for Netflix’s recent action film Bright

What's the biggest challenge facing the music business in 2018? 

PASSMAN It’s figuring out how to market and monetize music in this new environment. There’s so much material. How do you break through the noise and get people to listen to your music? 

FRIEDLANDER I’d say stream-ripping is one of the biggest challenges in 2018. There have been successful legal actions against major stream-ripping sites like youtube-mp3.org, which made them and some similar sites either shut down or change their business, but new ones pop up every day. And it’s the fastest growing threat to the music community – current studies show that more than half of all 16-24 year olds worldwide have illegally stream-ripped songs from YouTube or other streaming sites.

LAPOLT Let me tell you instead about the biggest opportunity for the music business in 2018. The Music Modernization Act was introduced in the House of representatives on Dec. 21, 2017 by Rep. Doug Collins and Rep. Hakeem Jeffries. The Senate companion to the bill was introduced on Wednesday by Senator Orrin Hatch and Senator Lamar Alexander. This bill will revolutionize how songwriters will be paid for use of their works by streaming services. It represents an unprecedented consensus between not just creator and copyright owner groups (including NMPA, ASCAP, BMI, SONA, the Nashville Songwriters Association International [NSAI], and others), but also the Digital Media Association (DiMA), which represents Amazon, Apple, Pandora, Spotify, and YouTube. The music industry has been trying for years to reach a consensus on a major legislative issue and we have finally arrived!

A version of this story first appeared in the Jan. 25 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.

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