Often touted as a game changer in the music industry, growing streaming music services are a bone of contention in Korea as in many other global markets.

Concerned over the idea of “free music” services on the streaming platforms, the nation’s major music copyright groups are not shy in expressing their displeasure, arguing that streaming music negatively impacts the music industry.

The head of Korea’s first and largest ad-supported music streaming services firm said the opposite: The streaming music services are “not free at all,” and will do more good than harm.
 

“Since the launch of the ad-supported music streaming application Beat last year, digital music sales on other platforms have not decreased, but profits that go to music rights holders increased thanks to royalties they received from the Beat platform,” Park Su-man, chief executive of The Beatpacking Company, told The Korea Herald in an interview last week.

Ad-supported streaming music services, still fledgling in Korea, allow users to listen to music without paying, while revenues are generated through selling commercials to advertisers. Streaming music platform operators then pay per stream in royalties to rights holders.

“The nation, which is often referred to as an IT powerhouse, is way behind the curve in the streaming segment,” the CEO said.

While Pandora and Spotify, two heavyweights in the world streaming music market, started their services in 2005 and 2008, respectively, many online music services here still rely heavily on traditional models, including monthly subscription and pay-per-song downloads, which some critics say are outdated and short of meeting the needs of the young generation, who want to be always connected through digital devices and consume services with ease.

CEO Park pointed out that companies here -- both big and small -- were hesitant to jump into the ad-supported streaming music sector, since there was rampant skepticism about sales models.

Anticipating things would change in the Korean market as many global tech companies, including Apple and Google, started to bet big on the streaming music businesses, he said the fledgling streaming business here would gain growth momentum next year with more participants joining the fray.

The revenue of music streams worldwide is forecast to reach $5 billion in 2018, surpassing for the first time that of download revenues, according to accounting and consulting firm PricewaterhouseCoopers.

Among other factors that have hampered the growth of ad-supported streaming music are relatively high royalty rates.

With no related laws existing, the royalty rate, at 7.2 won ($0.0061) per stream, is set based on the rules for download services, putting an unfair and costly burden on Beat, a pioneer in the local market, according to the CEO.

Other streaming services offered on a monthly subscription basis are, however, subject to different rules that require them to pay 3.6 won per stream.

The Beatpacking Company, which now has 6 million users for its Beat services, has attracted 18 billion won so far, but has to pay around 14 billion won in royalties this year alone.

The Ministry of Culture, Sports and Tourism is in discussion with the music copyrights groups, including the Korea Music Copyright Association, to iron out the royalty issues and set up new rules.

“The new royalty rules are necessary for the streaming music industry to grow further, and for consumers to have a wide range of choices in listening to music,” said the CEO, who led the development teams for social networking services Me2day and Line Band at Internet giant Naver.

The Beatpacking Company also plans to start streaming music services focused on K-pop in five nations, including Indonesia, Malaysia and the Philippines.

“Beat will try to be the platform with the most extensive Korean music archive where users in those markets can enjoy K-pop,” he said.

By Kim Young-won (wone0102@heraldcorp.com)