Music streaming service causing stir

By Bahk Eun-ji

A recently launched ad-linked music streaming app is drawing keen attention ― and controversy over royalty payments.

Users of BEAT, from Korean startup Beatpacking Company, can listen to music free, but have to listen to or watch ads.

This is relatively common in foreign markets, with Spotify and Pandora offering ad-supported streaming services.

BEAT has amassed more than 3 million users since its service started in March. But unlike existing subscription services, such as Melon and Bugs Music, users can choose from more than 70 channels, including “at rest,” “when driving,” and “when sleeping,” and listen to music just like listening to the radio.

Users have to pay for additional services such as searching for particular music or downloading it, but the basic concept of the service is free of charge.

Beatpacking Company recently asked the Ministry of Culture, Sports and Tourism (MCST) to establish standards for royalties on ad-supported music streaming services.

There are two parts to the present system ― 7.2 won a song under usage-based pricing, and 3.6 won a song under flat-rate pricing for those without a limit.

Beatpacking Company CEO Park Su-man said the company’s service had to be labeled as flat-rate pricing.

“Users of our service, BEAT, can choose any music channels they want to listen to, which is similar to a flat-rate plan,” Park said.

BEAT is provided under use-based pricing, but there is no legal ground for this, the CEO said.

Park called on the government to amend the regulations to promote the ad-supported music streaming market.

He said existing rules hindered the development of new business models because the rules were made before services like BEAT were set up.

“Ad-supported streaming is a new business model in the mobile advertisement industry, Park said. “It is also one of the most efficient platforms that can reinvigorate the stagnant music industry.”

New York-based market research company eMarketer believes Korea will become the world’s sixth-largest mobile ad market this year, at 1.7 trillion won. It also said the global mobile ad market will surpass PC ads for the first time.

Musicians and other music-industry related associations have strongly opposed Beatpacking’s call to change royalty rules.

Shin Gun-woon, a director of the Bareun Music Co-operative Union, said ad-supported streaming services will damage the music industry because they can give a false impression to customers that listening to music is free.

“If customers begin to think listening to music is free, the music industry will be messed up and many musicians could start making their work cater to advertisers,” Shin said.

But Park said it was a matter of offering people a choice.

“The various music service platforms will eventually raise the market’s size,” he said.

The ministry plans to revise royalty payment system rules in July, but it has not decided whether to include ad-supported streaming services.

“We are looking into the issue, but nothing has been decided yet,” said Kang Min-ah, a deputy director of the copyright industry division at the ministry.