There have been a ton of articles written about how the current revenue models created by streaming platforms are grossly unjust and woefully inadequate as far as compensating artists. Great sources like Digital Music News have compiled hundreds of pages of Spotify reports in an effort to truly understand how much money an artist can make per stream. Forbes via Quora has probably the best breakdown of how Spotify, Apple, et. al. work with musicians, labels, publishers and “back office services” when calculating the true revenue per stream.
Unfortunately for artists, the result of all of the calculations results in the following analysis: The revenue per stream is really really really low. Like $0.004891 per stream low. Easier math to contemplate is to figure that for every 1,000,000 streams on Spotify, your band will make $5,000.
More crappy financial news for musicians. The fact that music industry is on a never-ending downward spiral is as newsworthy as another allegation that Trump has ties with the Russians. Everyone knows. Yet, a funny thing keeps happening with all of the artists that we work with here at L4M and The Propelr. They all turn to their numbers on Spotify before literally everything else. The success of a project, in their minds, is almost exclusively dependent on the number of streams on Spotify.
So if your music isn’t on New Releases Friday or doesn’t make it onto Rap Caviar, how does an independent artist get significant spins on Spotify?
Not surprisingly “streaming promotion” companies are popping up. Promises are being made that for approximately $5,000 you can be assured of, wait for it…1,000,000 streams on Spotify (no risk offer!). I’m not saying that these companies cannot achieve this benchmark but it leads to a greater question of what is the value in having millions of streams, especially if you have to pay for them.
Paying for spins is not a new idea. Payola ruled the industry for decades. Payments to program managers and dj’s of radio stations were as common as paying for studio time. While Payola was officially made illegal by Congress in 1960 some form of pay for play remained commonplace in the industry for the next fifty years. Rather than straight up paying for radio rotation, promotional payments were made as marketing expenditures and not-so-cleverly identified as artist or record promotion. In 2005 the State of New York settled with the majors to try to put a stop to this practice and loop hole in the law. There was a chilling effect after that out-of-court settlement but those who have tried to get their music on the radio still know you have to pay someone to get there. It’s just the way it is. Want a number one album, plan on spending $200,000 (according to an anonymous label source).
With the advent of streaming officially taking over the value of physical sales for the major labels, the labels are forced to (finally) face the fact that they are in the streaming business rather than the download or sale of music business. (Click Here for a great article about it from Music Industry Blog) That means that there will be far more attention, effort and dollars going into boosting the numbers of spins that a song receives. Labels will most likely swallow up some of these independent spin maximization services and look to infiltrate the algorithm and fan behavior platforms like Pandora and Spotify.
With the labels spending more time, money and attention on the importance of streams is that 1,000,000 spin number even worth it? In short, yes but don’t pay someone to get them for you.
First off, there is no guarantee that these promotional streaming companies can achieve authentic spins. Think of boiler room scenario where computers are set to repeat on your song. Is that worth it to get to 1,000,000 streams? Sure it is worth about $5,000, but that is what it cost you. So did you gain any fans? Will you be able to point to the analytics that Spotify provides and show promoters that your fanbase is active in a certain city? Can you spend money on Facebook advertising your merchandise in a specific market based on the analytics you get from those spins? No to all of the above.
There are ways to get authentic fans and via those fans, authentic spins. One way is to reach out directly to folks at a platform. Spotify employees repeatedly tell us they are far more likely to open a personal email versus a canned announcement or press release form a label or management company. Identify a playlist that you really like and try to find out the editor of that playlist. No guaranty that you will hear back from them but it is definitely worth a shot. Also look to distributors for help. If you have a track record of selling your music independently or getting tens of thousands of streams, you may be able to entice a distributor to put your music out to all outlets. These companies have teams that are in constant communication with streaming services. They will pitch your music to playlists and have the relationships to actually get it done. Finally, when you release your music, make sure you direct everything, your press/social posts/interview answers etc. to the platform on which you want the most spins. Use embeddable codes from your chosen platform on every post to maximize spins. All of these and the help of a solid squad will help to maximize spins, revenue and happiness (well maybe not the last one).
The current hot topic debate in the music industry involves the Internet Radio Fairness Act (“IRFA”). Recently, the debate is getting louder as the top artists in the music world and successful Internet radio companies clash over the bill. Supporters of IRFA say it is vital to the survival and success of all digital music streaming companies to end a flawed royalty system, but opponents claim it represents a disproportional cut in pay that musicians have come to and may eventually rely upon. It’s no surprise this debate revolves around money, but let’s not mute what’s more important: the long-term health of the digital music business itself.
How are the current Internet Radio and Streaming royalty rates set? Music rights owners (publishers, labels and independent musicians) and the digital radio companies do not negotiate the price of a license for streaming digital music. Instead, Congress’ Copyright Royalty Board (“CRB”), a three-judge panel, directly sets the price once every five years after SoundExchange (remember SE represents both master owners and performers which can include labels as well as independent musicians) and the digital radio services (online, satellite and cable radio companies) present evidence about the value of recorded music and the technology for delivering it to music listeners. Then, the CRB determines the royalties each kind of music service will have to pay out for the next five years. SoundExchange is then charged with distributing out those royalties to its members. The Performing Rights Organizations have their own equally confusing method for collecting and distributing royalties from internet broadcasts.
The debate or heavy complaining which led to the introduction of IRFA is coming from streaming services like Pandora. CRB has decided on dramatically different royalty rates: Internet radio companies like Pandora, the IRFA’s most vocal supporter, purportedly pay more than 50% of their revenue in performance royalties; satellite radio companies like Sirius XM pay about 7.5%; cable radio companies like Muzak pay about 15%, and AM/FM radio pays nothing. The result of these high royalty rates have forced most online streaming services out of the music business; most notably some giants such as AOL, Yahoo, and Microsoft.
With the rise of services like Pandora and Spotify, the labels and publishers went to extraordinary lengths to ensure that they would be paid a “fair” amount and the artists lobbied hard as well. Any change, however minimal, will be met with angry voices screaming (or singing) on the other side.
IRFA is designed to give Internet radio stations a fairer calculation process for setting the price of their music and lower this difference. The goal is to put services like Pandora, Spotify, Muzak, SIriusXM, on the same or similar footing. But 125 major label artists including Rhianna, Ne-Yo, Billy Joel, Maroon 5, and Missy Elliot penned a letter opposing IRFA. Their unified voice argues that IRFA will cut deeply into current Internet radio royalty earnings by an estimated 85%.
Who is right? Who is wrong? Who knows? What we are sure about is that, without a doubt, Internet radio is good for consumers. It allows for more music choices with more control for the listener, pushes songs from both major record labels and the nation’s rising independent musicians, and enables greater exposure and potential compensation for thousands of artists who would otherwise never be heard. Rights owners see this medium as a meaningful revenue stream that is only going to grow overtime. And the more listeners and the more plays mean Internet radio companies must pay more in overall licensing and rights fees to stream the music. Supporters of IRFA say that not only will these lower rates drive more innovation in legal music distribution, but also ensure more artists are fairly compensated for the performance of their recordings.
It is hard for us at L4M to pick sides in this fight. We have been writing about the changing music industry for almost five years now. We spotted Spotify as a potential solution and also a potential problem prior to its US launch. It comes as no surprise to us or our readers that there is a fight over how much streaming radio plays should pay out to artists. Obviously, we want to see a fair resolution, but that gets us into the existential debate over what is fair and how much is art worth. We’re not getting into that debate in this entry (save that for a night filled with several glasses of scotch and smoking jackets).
What do you think? Comment, email or discuss over Thanksgiving dinner (please don’t).
This article was penned in part by aspiring L4Mer Jessica Rzotkiewicz
Update: Check out what Coldplay’s Manager has to say about the Spotify Conundrum: CLICK HERE FOR DIGITAL MUSIC NEWS ARTICLE
To stream or not to stream? That is the .0007 cents per stream question.
Recently top name bands like Coldplay, The Black Keys and Arcade Fire have spoken out against streaming. Citing the “gross underpayment” to artists per stream, bands are pulling their music from sites like Spotify or simply prohibiting the placement of their songs altogether.
Let’s look at some projected numbers from streaming on Spotify (courtesy of Digital Audio Insider):
Spotify Per-Stream Payouts August 2009 to March 2011
Smallest: 0.02056 cents
Largest: 1.1456 cents
Average: 0.2865 cents
These numbers are strictly estimates and we have heard that some of the deals that major labels have entered into with Spotify have the per stream at a MUCH lower number then those above. Regardless, to make some actual money through Spotify, an artist will need millions of streams. No problem for Justin Beiber and Lady Gaga, but what about the little guy? Apparently, it’s not just the little guy that is worried/pissed. As mentioned above, Coldplay and The Black Keys have been very vocal about their overall disdain of streaming providers. In a recent VH1 interview, The Keys drummer said the following:
“We decided for this album, to not allow streaming services to stream the entire album,” Keys drummer Patrick Carney said. “It’s becoming more popular, but it still isn’t at a point where you can replace royalties from record sales with royalties from streams. So it felt unfair to those that purchased the album to allow people to go on a website and stream the album for free whenever they want it.”
Independent labels and artists are outraged with the seemingly enormous underpayment to artists and there are consistent stories of indies pulling their music and catalog from the site. The question remains however, will their protest pay off or are they really missing out on a new untapped method of reaching millions of fans?
The founders of Spotify continuously hammer home the message that their’s is a music discovery tool. By having all the published music in one spot, fans will be able to discover deeper cuts or new artists or even new genres of music that they didn’t already appreciate. Following their logic, once you discover these things your are more apt to actually go out and purchase your new discoveries or better yet, go to a show the next time the “new” band is in town.
From personal experience, I actually tend to side with Spotify (probably not the most popular opinion on this site). You can stream virtually every song known to man somewhere on the Internet. Whether it is on YouTube (the new radio for kids), Pandora, blogs, hacker/torrent sites or on artists’ websites, you can typically find a song if you really work Google over for a while. Spotify puts it all in one handy dandy place for you. Then it takes it a step further. In its recently updated version the artists’ radio stations suggest similar music to that of the artist, album or track you originally searched. I have found this to be a great way (much better than Pandora) to discover new music that I like and then support.
This is not the first time that the music industry has had to deal with a game changer (not even close to the first time). As we have mentioned ad nauseum on this site, the Internet fundamentally changed the music industry. Moving at a painfully slow pace, the label infrastructure was not ready for the shift. Look what happened to them. Now that the Internet is out of its infancy and new and creative ways to bring music to fans are being created on a daily basis, will the existing labels and, more significantly, the independent artists be ready to play ball? Or will they stamp their feet and and cry “UNFAIR, DO OVER!”?
Rather than complaining about the system in place and the uber small price per stream (which we agree is way to small and should be changed a bit), we suggest that bands get creative with streaming networks. Give fans extras and incentives to stream. Be discovered and it should lead to better results for your music.
Recently I was on a panel at Northwestern Law School with another lawyer, a musician (who happens to ba lawyer too) and an ASCAP representative. Our topic was the effect that cloud or subscription based music services will have on performers and songwriters. While I definitely had my own opinions on the topic, it was ear/eye opening to hear from my fellow panelists.
Most music lovers seem to have their own private way to listen and enjoy their music. While there is a lot of overlap amongst listeners (iPods, satellite radio, pandora, car radios, home stereos) everyone has their own unique method to purchase, stream, listen and (now most importantly )travel with their collection. In the past we would break out our record collection and play records in the family room. Then came the cassette and the walkman. Our record collections became somewhat mobile and we could grab our favorite tapes and walk around or drive while listening to our collection of music. Technology allowed for better sounding recordings to travel along with us with the invention of the CD. However, like one of my panel compatriots aptly pointed out, a music fan was a prisoner to his cd collection; still rather bulky and highly scratchable, you would have to lug a box/book of cds with you on each road trip and hope that they did not fall between the seats or get scratched on the dashboard.
Enter the MP3. A computer file that is quickly dowloaded and containes cd quality sound. The digital album revolutionized the way we consume music. As with most revolutions, the infrastructure that existed prior to the revolution (the big music label system) fell. Brilliant entrepreneurs and crafty opportunists from Apple to Napster entered the fray and came out making billions of dollars from the shift. For the everyday consumer of music, it became easier to listen to music wherever you wanted to do so. Your entire record collection can now fit into the palm of your hand, be programmed to your car’s stereo or be shared with people in your office with a click of a button.
Now that the digital age of music is over a decade old, there is yet another shift occurring. Technology again is making it easier for people to listen to their music collection regardless of where they are. The clouds have come rolling in.
Pandora has already helped put the cloud on the map with approximately 80 million users (1 new user every second per the www.digitalmusicnews.com). But services such as Spotify, Sony’s Qriocity and Google’s delayed cloud service will take it one step further. While Pandora allows you to listen to music based on bands or songs you tell it you like, the cloud subscription services allow you to pick all of your music. Essentially, you will no longer have to actually purchase a song, let alone an album. Rather, you will pay a monthly fee that will allow you to pick your favorite songs, categorize them, rank them, etc. and, most importantly, take them with you. Whether you are listening on your hand-held device (smart phone or iPod type device), on your computer, in your car or listening to your home stereo system, your music will be there waiting for you. As long as you keep paying the monthly fee, that music will be with you.
As a consumer, I think cloud based systems are the bees knees. Technology should make things easier and better. Allowing me to go from my office to my car without missing a beat of the song I was just listening to (I’m very fast) and without plugging anything in, is amazing. As a lawyer who represents musicians and songwriters, I’m worried. For interactive internet based music providers (where the user gets to select the songs he/she wants to listen to) the royalty rates are negotiated between the labels/publishers and the cloud provider. This means that the labels and big publishers negotiate pre-determined revenue shares for each stream of a song; typically a teeny tiny fraction of a dollar (in England the rate is thought to be around 0.00085 pound). A famous example of how potentially horrible these rates can be is the report that Lady Gaga who had over one million streams of Poker Face on Spotify in the UK earned $167.00 (click here for more on that).
The labels and publishers in the US are fighting for more per stream. But don’t go rooting for them quite yet. They are negotiating deals so that they actually get an equity or ownership stake in the cloud based service. So while it appears as though they are fighting for the artists (which some of them might actually be doing), they are also positioning themselves to make as much money as they can in the process. If the clouds make it unnecessary to ever download and actually own a song, how are the songwriters and artists going to recapture that lost income? As of now, the songwriter lobbyists are doing a good job of asking that question and fighting to establish fair payments for musicians.
The laws in place that cover interactive internet radio and subscription services did not imagine the day when streaming would eclipse downloads. That day has clearly arrived: “Streams of music are eclipsing everything,” Universal Music Group UK chief David Joseph recently told the Guardian. “It’s a different digital currency to downloading. You’re dealing with 175 million single tracks bought a year compared to 7 billion streams of music.” (from The Digital Music News). Just as technology has adjusted, the laws dealing with fair payments to the providers of content need to be modified.
The bottom line is that just as the cassette replaced the record, the cd replaced the tape and the mp3 replaced the cd, the cloud is going to replace the downloaded mp3. The clouds are rolling in and the artists may be left in the impending dark.