Internet radio is becoming an increasingly lucrative revenue source for musicians and record labels, according to nonprofit group SoundExchange. The company — which collects money from services like Sirius XM Radio, Pandora, and others — has distributed $1 billion since launching in 2000. That might seem like sluggish progress to some, but totals are in fact climbing rapidly. Q1 2012 payments amounted to more than $108.6 million, the first time SoundExchange has crossed the $100M threshold in a single quarter. Compare that to 2004, when it paid out only $15.6 million, and it's clear internet streaming revenues are on the upswing.
Those profits are of even greater importance to record companies as physical CD sales continue on a downward slope. Whereas traditional FM/AM radio largely cuts labels out of the picture (royalties are split between songwriters and music publishers), internet radio serves as a vital extra source of income. Jagjaguwar Records, the home of artists like Bon Iver, Okkervil River, and Dinosaur Jr., has received $95,000 from SoundExchange since 2007.
Spotify is currently expanding its presence in the internet radio market, though we don't expect to see the same level of transparency concerning its payments to the music industry. Much like similar offerings from Rhapsody and Rdio, Spotify pays artists / labels directly without a middleman like SoundExchange in between.