CNN has written an article illustrating the relationship between online music industry giants, like Spotify and Pandora, and the more traditional music industry, dominated by the labels. The article discusses the general issue with money making in the industry and potential ways for things to improve. Here’s a snippet:

Listening and sharing music online couldn’t be more convenient or crowded. Options are easily found at the swipe of a finger or click of a mouse: the algorithm, radio-style option (Pandora); a social-sharing streaming strategy (Spotify); the download model to Apple-only devices (iTunes) and the download, keep in-the-cloud options from Amazon and Google on almost every other device.  Then there are the smaller streaming and subscription players: Rhapsody (who has missed the social boat so far), Slacker, Rdio, MOG and more. Or, there is straight-up piracy.

There are essentially two business models for online music right now: advertising–a losing model with scale, says Kusek, or subscription, which he thinks has more viability long term.

What complicates the issue further is unique to the music industry: Too many separate, competing interests fighting for a piece of the pie. Music labels, music publishers, and artists themselves (to a much lesser extent) all have certain terms in their favor including most favored nation, minimum payments, per-play costs, percent of total company revenue, and one of the most head-scratching, detailed reporting of the competition.

“Negotiating deals on a global scale is extremely hard,” said Kusek. ” What you used to have was revenue following format changes: From vinyl to 8 track to cassette to CD, the revenue always followed. That didn’t happen with MP3s exactly… “

Check out the full article here. [Allindstrom]