Sales of recorded music crashed in the dawn of the internet age as pirates ruled the digital waves and music lovers found that anything cou▨ld be downloaded for free. Those days are over but the road to a business model that works for internet companies, music producers, an🍌d recording artists remains rocky.

Two Digital Players

Spotify and Pandora are 𒁏two of the big names in internet🍌 music delivery. They used to be quite different.

Pandora focused on free, advertiser-supported music with limited customization. It was basically a radio service delivered over the internet. Spotify was primarily premium radio. It has a free service as well but its purpose is to drive listeners to a subscription.

Internet users expect a high degree of choice and personalization and they're willing to pay for them. Pandora's audience began to shrink as Spotify's continued to grow.

Pandora started playing catchup in 2018 when it introduced a premium $9.99 per month service and a $14.99 family service. The change coincided with the company's purchase by SiriusXM, the satellite radio company. Prices increased to $10.99 and $17.99 respectively as of 2025 but $1 to $3 over seven years is hardly price-gouging. Spotify's services are $11.99 a month in 2025 but it offers the first month for free.

Radio Royalties

Through the rapid growth and expansion of the internet music industry, controversies have flared between artists and the industry over the perceived lack of proper compensation. Platinum recording artist Taylor Swift pulled her music from Spotify’s platform in 2014 to raise awareness of what she deemed to be inadequate artist compensation. She was back by 2017.

The music industry generates a portion of its income from royalties that are due every time a song is played in public. Public performance includes music played over the radio or through internet services. Royalties are payments made to the legal owner of a copyrighted work which may or may not be the artist who created it. Performance rights organizations collect songwriting royalties from music users aඣnd distribu๊te them to the legal owners.

Org💮anizatio𝐆ns that collect royalties from radio performances include , , and .

🌌 BMI classifies a radio performance as a broadcast that lasts 60 seconds or more. Each performance is categorized as commercial, classical, or college radio.

• Commercial radio performances encompass music typically played on FM broadcasts with potential for bonuses based on popularity.
• Classical radio is associated with traditional instrumental and vocal performances. It grosses 32 cents per minute.
• Performances played on stations associated with colleges or universities are classified as college radio. They pay smaller royalties than commercial stations.

Streaming companies have tried to push the envelope a bit. Apple Music offered a three-month free trial of its service in 2015 and quietly told the labels that it wasn't going to pay any rights on their trial use although it later backed down after a public complaint from Taylor Swift.

Digital Royalties

The increased revenue share from streaming can be attributed to greater numbers of people signing on to 澳洲幸运5开奖号码历史查询:subscription services as well as sales from downloads. SoundExchange is a nonprofit formed in 2003 that operates as a fee collector for the industry, charging performance royalties for recording artists and labels whenever music is played through a digital platform. SoundExchange also has negotiating power over royalty agreements. 

Pandora

Pandora makes its money from advertising in the same way just like radio stations. The ads are inserted into the playlist. Estimates are that about half of Pandora's revenues are paid out in licensing fees.

Pandora has 7.85 million paid subscribers as of early 2025. Users have the option to use Pandora for free with limited advertisements or pay a premium for no advertisements. It provides a student or military discount. Pandora offers a royalty rate of $0.0013 per play as of 2025.

Spotify

Spotify offers a free service with advertising and premium services. It had about 252 million premium subscribers as of Q3 of 2024. Royalties have been Spotify's largest expense since its inception in 2008. They accounted for more than $9 billion in 2023.

The company once ranked as one of the industry's worst royalty payers but it increased its payments. Its per-play rate is between $0.003 and $0.005 in 2025.

The Bottom Line

The landscape of the music industry changed from radio broadcasts to mp3s as technology evolved and it's moved on to music streaming services. Artists have witnessed stark decreases in album sales numbers due to the growth of streaming services such as Pandora and Spotify.

We may see more artists follow Taylor Swift’s lead in bucking the ꦚroyalty model as Pandora and Spotify continue their rapid expansion and revenue growth.