The streaming services don't make money either. In fact, Spotify makes a loss. A substantial loss. An eye-watering loss [1]. And so does anybody else who tries

The streaming services don't make money either. In fact, Spotify makes a loss. A substantial loss. An eye-watering loss [1]. And so does anybody else who tries to get into this business. The trail is becoming littered with the corpses of plucky companies who've tried to make a buck in this business. Why is that? Quite simply, the music business is a cartel. It used to be the Big Six; now there's just three. Three companies who own the rights to most of the last half a century's worth of popular music. Here's the problem with Spotify's business model: they don't own what they're selling. The labels do. And so if Spotify makes a profit then the major labels can just renegotiate their contracts within a year (they typically have break clauses), and gobble up all those extra earnings. You see the music business is a /nightmarish/ labyrinth of copyright legislation, so to even start playing in this game you need a staff lawyer (or three). There's recording rights, which you have to pay to one arm of the label. Then there's publishing rights, which you have to pay to a completely different arm of the label (or, if you're unlucky, a different label - like with the erstwhile EMI's catalogue), and that's just to play some radio. If you want to do on-demand streaming, of the type that Spotify provides, then you have to pay mechanical reproduction royalties. Whaaa? I hear you say. Well, it takes a while for the law to catch up with these things so they've just repurposed the laws that were already there. Would you believe, you even have a different bunch of people to pay if you want to reproduce the lyrics. Now, take all that and multiply it by the number of countries you want to stream in, because you're gonna need to strike deal with a different branch of each label in each country. It's insanity. The one beacon of light is the much maligned DMCA act, which (aside for enabling content owners to persecute twelve year old children) allows those wanting to stream music in a radio-like fashion to just pay a central collections agency a fixed rate. That simplifies the business significantly - no more negotiation and complex contracts, and no more need to have such detailed reporting (less staff, less code). The only thing is that it's applicable only in the US, as there's no EU equivalent (or anywhere else, for that matter). And it doesn't cover on-demand streaming. But it's a start. Music startups really need to push for an overhaul of the copyright laws because the landscape has fundamentally changed and what exists currently is both arcane and archaic. We need a complete legislative metamorphosis, lest the major labels continue to move their contractual blessing between startups - ideally, of course, shortly after a tasty IPO - which all resembles the classic pump-and-dump scam. I hope it happens. [1] http://techcrunch.com/2012/11/10/spotify-is-having-a-good-2012-revenues-could-reach-500m-as-it-expands-the-digital-music-market/ http://techcrunch.com/2012/11/10/spotify-is-having-a-good-20...