The future of music is streaming. It’s just too convenient for fans and too profitable for record labels to ever think about it going away.
The ability to seamlessly access millions of songs from all of human history – the legendary “heavenly jukebox” predicted years ago – has been a reality for a generation. And they love it with labels that generate over 65 percent of their revenue from streams.
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Just last week, Sony had to raise its annual forecast for music sales by $ 500 million because so many people are streaming music during the pandemic. Universal, the largest of the three majors, makes around $ 20 million a day streaming. If you add Warner, the majors grossed over $ 1 million an hour. (All US dollars)
The problem, however, is that little of it passes to the artist. And with the tour of the pandemic completely cut off, the creators need all the revenue they can find. Unfortunately, little of it comes from streaming.
For this reason, there is a new petition in the USA called “Justice at Spotify”, which tries to increase the minimum payout per stream to at least one cent. This is a significant increase over the current rate of an average of $ 0.004 per listener – that’s 0.4 cents or four tenths of a cents. At that rate, it would take a musician about 250 streams to make just one dollar, or about 650,000 streams per month to make the equivalent of $ 15 an hour. An increase to one cent per stream would – well, count.
Other platforms pay more than Spotify (Napster, Tidal, Apple Music) and some less (Amazon, Pandora, YouTube). But even if you have your song on every single streaming platform (which you should absolutely do to maximize exposure), the payouts are compared to what you might have received when fans bought CDs, records, and tapes , tiny. But Spotify is by far the largest streaming company, so the focus is mostly on this one.
Would it be nice if Spotify paid more to artists? Absolutely. But the reality is … complicated.
All streaming services license music from record labels, copyright owners, and publishers at prices set by local copyright bodies at the statutory level. These fees are worked out through lengthy negotiations. Since no streaming service can exist without these licenses to play music, conversations always start at a disadvantage. The rights holders all have cards.
This means that Spotify isn’t just mean or stingy when it comes to withdrawals. The company’s licensing agreements are determined through these negotiations and legislative edicts with companies that you believe will be in the best interests of the artist.
However, before a check is written to the artists, the labels and rights holders are cut off from the top. What remains – and that will be in a very opaque path – is passed on to the artist. To make matters worse, the big labels hold stakes in Spotify. They all own a piece of the company. You’d think they’d use their leverage to help their artists, right? Apparently not. Here, too, the arrangements are very opaque.
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On the other side of the ledger, all streamers are hindered by framework contracts that make it very difficult for them to be profitable. The more users / subscribers they attract, the more their fixed costs rise in step with new income. The margins cannot be increased by synergies and efficiency, so that the streamers are forced to continuously work at a loss.
This explains why Spotify got into the podcasting game. For example, if Spotify can keep 20 percent of its users happy with podcasts – audio that it doesn’t pay royalties on – it can cut the amount of money it has to pay out for music by 20 percent and bring the company closer to turning a profit. This tends to annoy artists even more because the listening that would otherwise have gone to their music (making them money in the process) goes to content that Spotify gets for free.
Another problem is that people continue to equate streams with sales. When you buy a CD, digital download, or record, you are paying for the right to hear that music indefinitely with no future charges. With a stream, you pay per listener. Big difference.
Streaming is best compared to radio airplay. Let’s say your song only plays once on a major radio station. Hypothetically we will say that a piece will be heard by 100,000 people at the same time. In return, you’ll earn a fraction of a penny airplay license fee. If your song is a hit, you’ll end up with more airplay and therefore more rights reviews.
The same goes for streaming a song, only 100,000 people don’t hear the song all at once, they hear it person to person. For this, you get a streaming license fee of a fraction of a cent.
The problem is, while streaming hurt the high-margin revenue from selling physical products, it hasn’t replaced that revenue. Real income from recorded material has decreased compared to the days before digitization. Performing live and licensing music for commercials, movies, and television is really all you have, in addition to anything you can get out of streaming.
It has become the thought that something needs to be done on the streaming side to prevent artists from sliding into poverty. But given the reality of how streaming works on a business level …
As I said, it’s all very complicated. But there has to be something at some point.
Alan Cross is a broadcaster with Q107 and 102.1 the Edge and a commentator for News Gob.
Subscribe to Alan’s Current History of New Music podcast now on Apple Podcast or Google Play