It has certainly taken long enough, but it seems like the recording industry is finally wisening up: people don't want to buy CDs, but that doesn't mean there is no money to be made from emerging online distribution models.
The industry's once draconian aversion to anything digital has given way to greater flexibility, and patience. They know there's money in there somewhere. And, perhaps on some level record industry executives realize technology will always be one step ahead anyway: people will get their favorite songs without paying upfront. So you might as well become a part of that process and capitalize on the advertising revenue.
to The New York Times
, "Analysts say record companies have agreed to reduce licensing costs slightly in recent months, with the typical going rate dropping to about 0.8 cent a track from 1 cent a track. The labels are also striking different kinds of agreements, insisting on equity stakes in some cases, or a share of revenue from advertising or subscriptions, in an effort to ensure that they benefit from the growth of the new services."
Streaming sites only play the song for you, just as a traditional radio station does -- you aren't actually downloading the song file and taking it with you for use at some later date. This allows some of them to operate in a grey area, but it is unclear whether the major streaming sites will remain in business: every time you listen to a song, they are potentially losing money, either in licensing fees or in bandwidth costs. (This is why many of these services are desperate to get you to join their "premium version" -- and it's also why they encourage you to buy the actual song. The more revenue streams, the better.)
In the meantime, though, truly free music without any hassle on the user's end sounds a lot like music to our ears. I'm sure the business model will work itself out... eventually.
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