What’$ in a Stream?
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).
Internet Radio Fairness Act: Oxymoron?
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