With current contracts set to expire this Spring, three of the biggest labels in the world are trying to secure additional revenue from the fast-growing social media platform.
The big three record labels — Universal, Warner, and Sony Music — are demanding more money for songs played on TikTok and its Chinese counterpart Douyin, setting up a showdown with the hugely popular video apps, according to people with knowledge of the matter.
All three labels have contracts with the app owners, ByteDance, that are set to expire this Spring. Negotiations for new agreements have reportedly been ongoing for months, but little progress has been made.
If a deal is not reached in the near future, the labels may choose to pull their catalogs from the service, which would likely force TikTok and Douyin to remove existing videos and prevent new uploads containing music owned by the companies. That action would ultimately lead to a diminished popularity for the app, which could eventually kill the platform altogether.
Since negotiations are private, it’s unclear what money is currently being exchanged between ByteDance and the labels with music on its platforms. The fight for higher payouts allegedly stem from the rising popularity of the apps, which has “emboldened” the labels to seek better royalty payouts. Figures are, again, not public, but sources claim the big three labels are seeking a big enough change to earn them hundreds of millions in “guaranteed money.”
Reports of the platforms’ popularity are accurate. TikTok alone has over one billion downloads across iPhones and Google devices worldwide.
TikTok’s argument against the proposed changes is that the company is not a streaming service and therefore it should not be expected to meet the standard royalty rates paid by Spotify and similar platforms.
Todd Schefflin, Head of Global Music Business Development at ByteDance, responds to the reports of negotiations with:
“TikTok is for short video creation and viewing, and is simply not a product for pure music consumption that requires a label’s entire collection.”
Speaking to the platform’s ability to help artists, Shefflin added:
“A short video on TikTok can become a valuable promotional tool for artists to grow their fan bases and build awareness for new work.”
Shefflin brings up a good point. The irony in this story lies in TikTok’s ability to raise the profile of up and coming artists on a global scale. Lil Nas X currently has the number one song in America with the Billy Ray Cyrus assisted remix to his viral hit, “Old Town Road.” The song, which was initially released in late 2018, rose in popularity thanks in large part to a series of videos created by users of TikTok. Here are a few examples:
Major labels may see themselves as needing more money from TikTok, but they may need the platform’s ability to raise artist profiles even more. Removing music catalogs from an app with over one billion users would hurt music marketing at every level, but it would especially hurt developing artists.
That said, the industry’s growing reliance on streaming revenue cannot be denied. The music industry grew 9.7 percent in 2018, thanks mainly to the rise of paid streaming services Spotify and Apple Music. That’s impressive, but compared to where the music business was in 1999, there’s still a long way to go before the industry as a whole can reach its former heights of success.
Consumers are replacing pre-orders with pre-adds and pre-saves, but is something important being lost along the way?
Fast-rising pop sensation Billie Eilish will release her debut record, When We All Fall Asleep, Where Do We Go?, this Friday, but the teenager’s album is already being considered a massive success. Despite not yet being released, the LP has already accrued more than 800,000 pre-adds on Apple Music, which allows users to register to add an album to their streaming collection before it ships, with Eilish setting a new record for the service.
That volume of pre-adds for Eilish’s album is a sign of how the industry is continuing to evolve. Speaking to Music Business Worldwide, Apple Music boss Oliver Schusser said:
“While most services focus the majority of their efforts around playlists, Apple Music still emphasizes albums because we understand their value as a storytelling tool for artists to create context around their music.
To that end, pre-adds are great early indicators of engagement around an artist and the intention of the fans. To actively pre-add an album, much like the pre-order we invented with iTunes, means that the fan is excited about the content and wants to be among the first to enjoy it the moment its available. That kind of engagement is very valuable to an artist and to us.”
Spotify offers a service similar to Apple Music. The company’s pre-save feature allows users to register to have the album added to their library and to receive an alert regarding the content’s availability. The reliability of the notifications depend on how many pre-saves a user registers, but the content is always added as soon as its made available.
While the figures for Eilish’s album are great, pre-adds and pre-saves are not a perfect replacement for pre-orders. Schusser was right to say the numbers can tell a lot about excitement for a release, and they can also help predict initial performance, but the tools currently available to artists through streaming platforms do not provide context about their audience.
If a user pre-saves or pre-adds an album, what does the artist get? Do they know my name? Where I live? My email address? Do they receive anything other than a counter that tells them I am one of the however many people that have decided to request notification of their release becoming available?
Streaming services also do not offer any data that informs artists as to whether or not consumers who pre-save their release actually listen to it.
The real winner in the rising popularity of pre-saves and pre-adds are the streaming services offering them. By using that functionality, consumers are providing the platforms with additional insight into their listening habits. Their actions are strengthening the algorithms that recommend content and create playlists. Whether they know it or not, consumers are strengthening the services they use more than the artists they’re hoping to support.
Still, streaming is here to stay and there is no getting around that fact. If the industry is lucky, Spotify, Apple Music, and similar platforms will make more listener data available to them as time progresses. That seems more likely than a rise in royalty rates based on recent events, but it’s still not going to happen overnight.
Following an appeal to stop mechanical royalty rates from rising, Spotify’s latest bundle threatens to take even more money away from artists.
Spotify made headlines this week by announcing Spotify Premium now includes a free subscription to Hulu’s ad-supported plan. The new perk is available now to new and existing subscribers alike, but not everyone is thrilled with the news.
The streaming giant has been battling a string of negative press since coming out against new royalty rates set by the Copyright Royalty Board (Spotify). Spotify was not alone in appealing the ruling, which plans to raise mechanical royalty rates by 44% over the next four years, but the company made matters worse for itself after posting a blog in defense of their decision.
“Does Spotify think songwriters deserve to be paid more?” the post asks. “Yes — this is important to songwriters and it’s important to Spotify. The industry needs to continue evolving to ensure that the people who create the music we all love — artists and songwriters — can earn a living. The question is how best to achieve that goal.”
As we covered last week, the new CRB ruling aims to raise the value of a song from $0.003 per stream to $0.004, but Amazon, Spotify, Pandora, and Google disagree.
In its blog post, Spotify said it is generally supportive of a 15 percent rate, provided the rates cover what it calls the “right scope of publishing rights,” including those for videos and lyrics. Spotify argues that the CRB’s decision limits the type of non-music offerings it can present to potential subscribers.
“A key area of focus in our appeal will be the fact that the CRB’s decision makes it very difficult for music services to offer ‘bundles’ of music and non-music offerings,” the company said. “This will hurt consumers who will lose access to them. These bundles are key to attracting first-time music subscribers so we can keep growing the revenue pie for everyone.”
The music industry, however, is not buying Spotify’s claims.
David Israelite, the CEO president of the National Music Publishers Association, cut straight to the chase on Twitter by saying that it was a “big mistake” for Spotify to “try to deceive songwriters and artists” with the blog post.
In its blog post, Spotify said it is generally supportive of a 15 percent rate, provided the rates cover what it calls the “right scope of publishing rights,” including those for videos and lyrics. Spotify argues that the CRB’s decision limits the type of non-music offerings it can present to potential subscribers.
“A key area of focus in our appeal will be the fact that the CRB’s decision makes it very difficult for music services to offer ‘bundles’ of music and non-music offerings,” the company said. “This will hurt consumers who will lose access to them. These bundles are key to attracting first-time music subscribers so we can keep growing the revenue pie for everyone.”
Many in the music industry were quick to argue against the company’s claims. David Israelite, the CEO president of the National Music Publishers Association, said on Twitter that it was a “big mistake” for Spotify to “try to deceive songwriters and artists” with the blog post.
“I didn’t think Spotify could sink much lower — but they have,” he said. “This statement is one giant lie. I’m sure a PR team spent a great deal of time and energy crafting a statement to try to deceive artists and songwriters. They must think artists and songwriters are stupid. They are not. The CRB ordered a rate increase for songwriters. Spotify is against it. It really is that simple.”
Songwriters of North America (SONA) seconded Israelite’s comments by saying that Spotify, along with Amazon, Pandora and Google, who are also appealing the CRB rates, are clearly in the wrong.
— Songwriters of North America (@wearesonaLA) March 12, 2019
While it’s easy to appreciate the allure of Spotify’s Hulu bundle, it’s also hard to ignore the fact that offering more for less ultimately comes with a price. If Spotify is charging consumers the same amount for its service while offering access to another service altogether the money being spent will inevitably be split between those entities. Whatever share Spotify takes will then be split between the company and the artists who rely on its platform to get their music to consumers.
Spotify may have a point in its argument against the ruling, but the company may also have ulterior motives for wanting to keep mechanical royalty rates low. Musicians don’t care if consumers get access to Hulu with their Spotify account. Some may even argue artists are against it, as it provides more programming that distracts consumers from listening to music.
It’s clear the battle for mechanical royalties is far from over. Right now, consumers seem to care about the needs of their favorite musicians, but will the promise of cheaper streaming solutions be too good for them to resist? Only time will tell.
Four of the largest music streaming services are appealing a ruling that promises to raise mechanical royalty rates by 44% over the next five years.
How much is a song worth? According to most streaming services, the answer is roughly $0.003 per stream. A new ruling from the Copyright Royalty Board (CRB) aims to raise that value to $0.004 per stream, but Amazon, Spotify, Pandora, and Google disagree.
The four streaming giants are appealing the ruling that hopes to raise mechanical royalty rates by 44% over the next five years. Spotify, Amazon, Google, and Pandora have each filed separate appeals, with Apple the only major streaming player choosing to abstain.
The four companies also released a joint statement detailing their decision, which reads, “The Copyright Royalty Board (CRB), in a split decision, recently issued the U.S. mechanical statutory rates in a manner that raises serious procedural and substantive concerns. If left to stand, the CRB’s decision harms both music licensees and copyright owners. Accordingly, we are asking the U.S. Court of Appeals for the D.C. Circuit to review the decision.”
In a statement released today, March 7, the National Music Publishers Association (NMPA) said that a “huge victory for songwriters is now in jeopardy” due to the streaming services’ filings.
NMPA President & CEO David Israelite commented:
“When the Music Modernization Act became law, there was hope it signaled a new day of improved relations between digital music services and songwriters.
That hope was snuffed out today when Spotify and Amazon decided to sue songwriters in a shameful attempt to cut their payments by nearly one-third.
The Copyright Royalty Board (CRB) spent two years reading thousands of pages of briefs and hearing from dozens of witnesses while both sides spent tens of millions of dollars on attorneys arguing over the worth of songs to the giant technology companies who run streaming services.
The CRB’s final determination gave songwriters only their second meaningful rate increase in 110 years. Instead of accepting the CRB’s decision which still values songs less than their fair market value, Spotify and Amazon have declared war on the songwriting community by appealing that decision.”
“When the Music Modernization Act became law, there was hope it signaled a new day of improved relations between digital music services and songwriters. That hope was snuffed out today when Spotify and Amazon decided to sue songwriters in a shameful attempt to cut their payments by nearly one-third.
The Copyright Royalty Board (CRB) spent two years reading thousands of pages of briefs and hearing from dozens of witnesses while both sides spent tens of millions of dollars on attorneys arguing over the worth of songs to the giant technology companies who run streaming services. The CRB’s final determination gave songwriters only their second meaningful rate increase in 110 years. Instead of accepting the CRB’s decision which still values songs less than their fair market value, Spotify and Amazon have declared war on the songwriting community by appealing that decision.
No amount of insincere and hollow public relations gestures such as throwing parties or buying billboards of congratulations or naming songwriters “geniuses” can hide the fact that these big tech bullies do not respect or value the songwriters who make their businesses possible.
We thank Apple Music for accepting the CRB decision and continuing its practice of being a friend to songwriters. While Spotify and Amazon surely hope this will play out in a quiet appellate courtroom, every songwriter and every fan of music should stand up and take notice. We will fight with every available resource to protect the CRB’s decision.”
Nashville Songwriters Association International (NSAI) Executive Director Bart Herbison also responded to the companies’ decision, saying:
“It is unfortunate that Amazon and Spotify decided to file an appeal on the CRB’s decision to pay American songwriters higher digital mechanical royalties. Many songwriters have found it difficult to stay in the profession in the era of streaming music. You cannot feed a family when you earn hundreds of dollars for millions of streams.
Spotify specifically continues to try and depress royalties to songwriters around the globe as illustrated by their recent moves in India. Trying to work together as partners toward a robust future in the digital music era is difficult when any streaming company fails to recognize the value of a songwriter’s contribution to their business.”
If the ruling holds, the 44% increase will be only the second substantial increase to mechanical royalty rates to pass in the last 110-years.
The latest report from the Recording Industry Association of America shows consumer interest in premium streaming music subscriptions is on the rise.
Numbers can be deceiving. When asked to discuss their growth, streaming services such as Spotify and Apple Music will often quote their global user statistics instead of those related to a specific country or continent. That isn’t necessarily wrong by any means, but it can lead consumers and investors alike to perceive a company’s standing in a different light.
In January, Spotify announced it now welcomed over 200 million users every month. That figure, which refers to the platform’s total global user count, included 96 million paying premium subscribers. No further details were given related to where paying subscriptions came from, nor has any similar information been provided to the media since.
A new report from the Recording Industry Association of America (RIAA) has shed a bit more light on the streaming market. According to the study, 50 million US consumers paid for streaming music services in 2018. Use of such platforms rose 33% over 2017’s numbers, and it’s likely to grow further still in 2019.
“Tremendous output from the artist community fueled a historic milestone of 50 million subscriptions to music services, which in turn helped drive U.S. music’s third consecutive year of double-digit growth,” RIAA Chairman and CEO Mitch Glazier said in a statement.
“Rejuvenation in the industry means more opportunities to find and break new artists for fans to enjoy,” Glazier said.
Additional data found in the report reveals that 75% of music industry revenue now comes from various forms of streaming. Physical sales of vinyl records continued to increase, up 8% to $419 million, the highest level since 1988.
Unfortunately, other forms of physical media were not as successful. Revenue from CD sales are down almost 34%, to $698 million; music video sales fell more than 28%, to $28 million; and sales of “other physical media,” including cassette tapes, was off nearly 22%, to $9.6 million.
Total music revenue for 2018 totaled just under $10 billion — a significant recovery from the low of $6.7 billion in both 2014 and 2015 — but the industry is only back to a level close to what it was in 2007 when the total was $10.7 billion.
The RIAA did not comment on how the rising popularity of streaming services is impacting the lives of artists. The most popular performers have reported big earning from Spotify and the like, but many smaller and mid-size artists have found it harder to rely on recorded music to pay their bills.
Regardless, it appears the streaming boom will continue for the foreseeable future. Follow HaulixDaily on Facebook and Twitter for more industry news and insight.
SoundCloud is joining Spotify as the latest streaming giant to offer distribution services.
SoundCloud is joining Spotify as the latest streaming giant to offer distribution services.
A good CEO can change everything. With the right person in power, a company can go from the brink of failure to being widely considered an essential component of its industry in a relatively small amount of time. They can also change public perception, raise awareness, and discover new revenue streams that do not alienate users or further complicate a product.
SoundCloud CEO Kerry Trainor cannot is unstoppable. Two years after reports of the platform’s demise began to circulate throughout the industry, Trainor’s guidance has helped the company bring in over $100 million in revenue annually, as well as many significant updates that have raised the profile and utility of Soundcloud to new heights.
Trainor’s next move may change everything. This week, SoundCloud announced the beta launch of SoundCloud Premier, a distribution service that will allow artists to upload their music to numerous streaming platforms, including Apple Music and Spotify. The company hopes the service, which is the first to be built directly into a streaming platform, will make SoundCloud a kind of ‘mission control’ for artists on the rise. Musicians can now choose from their uploaded tracks and albums and distribute to all major music services while keeping 100% of their rights and payouts (SoundCloud takes nothing) and getting streamlined payments directly from SoundCloud.
SoundCloud Premier is available at no additional cost to all eligible Pro and Pro Unlimited subscribers who are 18 years of age or older, creators of original music, have zero copyright strikes, and at least 1,000 monetizable track plays. Eligible creators can expect eligibility notifications via email and in-product notifications over the next few weeks.
In the meantime, you can learn more here. If you think you’d be eligible but haven’t gone Pro, you can upgrade now, and the company will contact you if/when you qualify. In addition to one revenue stream that reigns supreme, you’ll get the pro tools to level up your career, so that you can grow your audience and make even more music to distribute.
Making a living from streaming has never been easy, but it just got a little harder.
Streaming royalty rates are not rocket science. You can learn rocket science, but understanding how platforms royalty payments is something only a select few industry professionals understand. There are no rates that apply to everyone, nor is there a universal rate paid by every service. Majors have different deals with streaming platforms than everyone else, but even the deal each label makes with each platform is different.
With all that in mind, it is hard to accept any figures given by a single party as indicative of all streaming deals. What may be true for them may not be the same for anyone else. Still, looking at data with all the information behind it understand can shed some light on the realities of streaming royalties in 2019.
David Lowery’s The Trichordist blog recently gathered information on streaming performance and payouts. The data detailed below is isolated to the calendar year 2018 and represents a mid-sized indie label with an approximately 250+ album catalog now generating almost 1b streams annually. from one mid-size label with 250 releases. Here are the top 10 streaming services based on the royalty rate they are paying:
Rank
Name
Royalty Rate
1
Amazon Unlimited
$0.01175
2
Napster
$0.01110
3
Tidal
$0.00927
4
Deezer
$0.00567
5
Google Play
$0.00543
6
Apple Music
$0.00495
7
Amazon Digital Service
$0.00395
8
Spotify
$0.00331
9
Pandora
$0.00155
10
YouTube Content ID
$0.00028
You can view a full list of services and streaming rates on here.
Writing about the current rates and changes, The Trichordist wrote:
The Spotify per stream rate drops again from .00397 to .00331 a decrease of 16%. Apple Music gains almost 3% for an total global marketshare of about just under 25% of all revenue.
Apple’s per stream rate drops from .00783 to .00495 a decrease of 36%. We need to state again, that 2018 saw a massive shift of revenues from downloads to streaming and no doubt this expansion of scale, combined with more aggressive bundling (free trials) as well as launching into more territories was bound to bring down the overall net per stream.
Apple Music still lead in the sweet spot with about 10% of overall streams generating 25% of all revenue (despite the per stream rate drop). Spotify by comparison has nearly triple the marketshare in streams than Apple Music but generates less than double the revenues on that volume.
The biggest takeaway by far is that YouTube’s Content ID, (in our first genuinely comprehensive data set) shows a whopping 48% of all streams and only 7% of revenue. Read that again. That is your value gap. Nearly 50% of all recorded music streams only generate 7% of revenue. Apple Music and Spotify combined account for just short of 40% of all streams and 74% of all income.
Readers should also keep in mind that we as consumers don’t fully understand the cost of operating these platforms. One can argue that artists should make more for their music, and we fully agree, but we also admit to not fully knowing the cost involved with offering on-demand streaming of virtually all recorded music to hundreds of millions around the world. Spotify, for example, has thousands of employees operating in offices around the planet, as well as hosting fees, marketing costs, and development work.
The information above may be disheartening for many independent artists and smaller labels, but that’s not the worst of it. There seems to be no means for those outside the major label systems to negotiate their streaming deals with any of the bigger platforms. That could change if the rates grow even worse, or if a group of artists chooses to band together, but at this point, we know no such efforts in the music ecosystem.
Some can argue that participating in these platforms is not a requirement, which is true, but that idea reveals a key misunderstanding of how the music industry works in 2019. Artists may not be required to share their music on streaming platforms, but those who choose to avoid them altogether have an incredibly difficult journey toward recognition ahead of them. Streaming is now the primary way people stream music, and most listeners do so through one of the portals mentioned in this article.
With streaming’s dominance likely to continue for the foreseeable future, not agreeing with the royalty rate offers made by streaming services is not a viable option for the vast majority of performers. So, what can be done?
If you have a solution, or if you have information related to this story that you feel should be included, please email james@haulix.com. We would love to hear from you.
A recent report from the RIAA revealed that the only area of the music industry experiencing steady growth in 2015 is streaming, which has no doubt been aided by the launch of high profile services like Apple Music. The rise of music streaming services has vastly simplified the music consumption process for anyone with an internet connection, but as the members of Intronaut recently revealed the streaming age still has its shortcomings.
Writing to fans from their official Facebook in advance of their new album release, the members of Intronaut took a rather transparent approach to addressing the pros and cons of music streaming services. They wrote:
Six months of streaming royalties = $3.67. Fuck you, Spotify.
If you care to support Intronaut, preorders for digital and physical copies of our record will be up on Friday! We love you guys and can’t wait to see you on the road this fall!
In all honesty, I think every member of this band uses Spotify because it is incredibly convenient. I think we just want you to know that it would help us a whole lot if you folks actually bought our album and came to a show, if you’re interested in supporting us and enabling us to keep coming around to your city.
This message isn’t all that different from the open letters written by other artists to their fans on the topic of streaming over the past year, but there is an inherent sincerity that really gives Intronaut’s words added depth. The fact they acknowledge they too use these services is important, as they reinforce the idea the band does not look down on anyone who does rely on streaming services to enjoy their music. The band wishes more people would buy albums, and they are certainly urging fans to do so, but they also understand that purchasing new music regularly is not something every one of their fans is able to do. Recognizing the fact streaming is perhaps the only way some people are able to enjoy their music tells us Intronaut are not against the idea of streaming, just the way streaming royalties work, and that is where the true problems lie.
How many more posts like this will we have to see before change happens?
This blog exists to promote the future of the entertainment industry, and to do that we need input from people like you and your entertainment-loving friends. If you have any questions about the content in this article, or if you have an artist you would like to see featured on this blog, please contact james@haulix.com. We can also be found on Twitter and Facebook.
I spent four years in college learning about the world of business, and in that time no one theory was engrained in me more often than the Law Of Supply And Demand. For those of you who need a little explanation, allow me to borrow definition from our friends at Investopedia:
A theory explaining the interaction between the supply of a resource and the demand for that resource. The law of supply and demand defines the effect that the availability of a particular product and the desire (or demand) for that product has on price. Generally, if there is a low supply and a high demand, the price will be high. In contrast, the greater the supply and the lower the demand, the lower the price will be.
It’s important to understand that the law of supply and demand is not actually a law, but it is a well known and understood realization that if you have a lot of one item, the price for that item should go down. That said, if you have a lot of one item, but also a high rate of demand for that item, the price should go up. If supply is low and demand is high, the price soars even higher. Grasping this concept is one of the very basic building blocks to any economic understanding.
When it comes to music, the demand for new content has always been high. As soon as we were able to produce media for mass consumption there was an immediate demand that the creative minds of the world continue to deliver fresh material on a regular basis. Radio introduced people to musicians and singers that they would then seek out at record stores or concert halls. Records and the memories created from concert experiences fueled consumer to consumer promotion, which created new fans for various acts who in turn also demanded new content. That process has continued to build audiences and develop talent for over half a century at this point, with social media and the age of streaming simplifying the process in ways people as recently as twenty years ago never could have imagined. There is a drawback to all this simplicity however, and if you ask me it has led to the law of supply and demand becoming something that no longer applies to the world of entertainment.
It’s no secret that streaming has made the vast majority of the world’s music accessible with a few keystrokes or clicks. One might think that would satiate the constant demand for fresh content, but in fact the opposite seems to have occurred. As soon as people dug through all the albums they had ever loved, they began digging into the records they always meant to listen to and never thought to buy. Once that effort grew tiresome, their focus switched to new content. Within a matter of hours, days, or weeks they have experienced everything they were ever curious about in the world of music and are ready to discover what comes next, all for a price that is – generally speaking – less than $15 a month. If they heard something catchy on the radio today, a quick turn to Spotify or Rdio would allow for endless repeat listens, as well as an opportunity to learn more about the artist’s work without making an additional investment beyond the low monthly service fee mentioned above.
..And therein lies the problem.
There is a large amount of music in the world that is waiting to be discovered, and there are numerous artists with international recognition who hope to continue delivering infectious material to their fans. Likewise, there is a growing user base across streaming platforms, and as those numbers rise so does the demand for new content. What never seems to change however, at least not in a way that offers legitimate aide to those creating the music, are the rates charged by streaming services for access to their vast libraries of music. The people behind these companies seem to view their services as something that aides bands by simply existing, and therefore don’t see the need to increase the rate they are willing to pay per stream. If artists don’t approve, they don’t have to join. They also have to miss out on the tens of thousands who use streaming as their primary means of listening to music, but that’s their choice. It’s not a choice as much as it is a shakedown in my opinion, but those are the options.
Let’s say I have a Spotify account and one day, just by chance, I discover your music. I fall in love with the first single, tweet about my excitement (likely without tagging you), and then browse the rest of your catalog within the span of a few short hours, if that. When I’m done you may have a new listener, but someone with that title is not exactly a fan. I enjoy your music, but aside from a few fractions of pennies and a possible social media mention I have done nothing to support you. There may be a store on Spotify with your merch, but whether or not I make a purchase is going to be based almost entirely on the music itself. There is no opportunity for me to engage with you, the artist, even though I am able to dig through everything you’ve released without taking my hand off my mouse.
It’s not just the music industry that is reaching this conclusion, either. Netflix took on demand movie and TV streams to every device a person could own, but in order to continue growing their user base Netflix has had to constantly update their offerings, even going as far as to venture into creating original content of their own. Consumers applauded their efforts so far and, just like before, there is now an increased demand for the high quality content offerings to continue. The same can be said for any Netflix competitor, be it Amazon, Hulu, or something just now being developed. Every platform needs a constant feed of fresh content in order to retain, let alone develop their consumer base.
With increasing demand there should be increased payouts to talent, but that is not what is happening. In fact, a senior team member at Spotify recently claimed the company has no current plans to change the per stream rate paid to musicians. Even if the company raises its rates, which it will more than likely do over time because – again – the demand for more of what they offer exists, artists will likely not see any additional money being funneled to them. To make matters worse, artists will also continue to see a decline in sales from physical releases as the world of streaming grows in popularity, which will only worsen a situation that has already forced countless creative minds to rethink their dreams of making art for a living.
If you think Spotify and services like it may one day go away, you’re just as crazy as those who hold out hope a decent per stream royalty will be unveiled sometime in the immediate future. With marketing moves like their recent Family Plan, which allows users to add people to their account for at a rate of $5 per person, it’s clear Spotify is settling in for a long stay in the world of music. They don’t want to be the leader of music streaming, they want to be the leader of how people experience music, and there are at least a handful of competitors trying to do the same. Their prices will fall as well, which will make music more accessible than ever while potentially having very little impact on how much artists are from those streams. Does that make any sense?
Let’s play devil’s advocate for a minute: You could argue that lowering the cost of access to music will increase the number of people listening on a regular basis, which would increase the amount of songs being played and the amount of royalties being paid out. That’s absolutely true. More people does equate to more spins, which will – over time – add up. Spotify pays right around $0.007 per stream, which would usually mean it took 143 spins for artist’s to earn a single penny on their work. Spotify does not pay on a per stream rate however, even though that would be easiest to calculate. Here’s an explanation of how their system works as explained on their company website:
Every time somebody listens to a song on Spotify it generates payments, but Spotify does not calculate royalties based upon a fixed “per play” rate. Although much public discussion of Spotify has speculated about such a rate, our payouts for individual artists have grown tremendously over time as a result of our user growth, and they will continue to do so.
The royalties artists see on their royalty statements derive from the formula above on a country-by-country basis, and depend upon the many moving variables specified in the formula. Of course, it is possible to reverse engineer an effective “per stream” average by dividing one’s royalties by the number of plays that generated them, but this is not how we measure our payouts internally nor is it a reliable yardstick for Spotify’s value to artists.
An artist’s royalty payments depend on the following variables, among others:
• In which country people are streaming an artist’s music
• Spotify’s # of paid users as a % of total users; higher % paid, higher “per stream” rate
• Relative premium pricing and currency value in different countries
• An artist’s royalty rate
Recently, these variables have led to an average “per stream” payout to rights holders of between $0.006 and $0.0084. This combines activity across our tiers of service. The effective average “per stream” payout generated by our Premium subscribers is considerably higher.
Again, we personally view “per stream” metrics as a highly flawed indication of our value to artists for several reasons. For one, our growing user population might listen to more music in a given month than the month before (resulting in a lower effective “per stream”), while generating far more aggregate royalties for artists. As with any subscription service, our primary goal is to attract and retain as many paying subscribers as we possibly can, and to pass along greater and greater royalties to the creators of the music in our service. Theoretically, another service could generate higher effective “per stream” payouts simply by having users who listen to far less music. We believe, however, that our service and the lives of artists will both be best if the World’s music fans enjoy more music than ever before in a legal, paid manner.
Beyond the numbers above and the persistent public demand for content, let’s not forget the fact streaming services need musicians as much – if not more – than musicians need them. Spotify and services like it are consumers of music, very big ones at that, and they need a constant feed of new music in order to appease the millions of consumers who are seeking entertainment on their platform. Their demand for content should be met with a demand for higher royalty rates, but thanks to having secured separate deals with various major labels in advance of their launch those capable of causing the most trouble for these platforms remain largely silent while the DIY community are left to fend for themselves. You cannot blame the executives at those companies for doing what they could to make a dollar for themselves before streaming became the normal, but at the same time you have to wonder how many of them thought about the repercussion such platforms would have on the indie bands and tiny labels that don’t have exposure, funding, or widespread recognition on their side.
I want to say that a day will come when the law of supply and demand once again hold some sway in the music industry, but right now that seems almost impossible to believe. As long as the people controlling the way people listen to music are not directly engaging with the indie community there will be little hope for change unless musicians and those that support them rally in opposition. This is not a call for arms as much as it is food for thought, but there is strength in numbers and there are plenty of musicians hoping to improve their position in life. At the very least, artists need to make themselves away of the realities of these royalty agreements before uploading their music. If something doesn’t feel right, artists should feel comfortable explaining their desire to stay away with fans. Fans are there to support bands, not a company that uses music to far more money than they ever care to share with the artists behind it, and they will follow their favorite artists wherever they need to in order to engage with their material. No one is following Spotify anywhere simply because they are Spotify, and the same goes for Apple/Beats Music. Music is the true source of power, and it’s high time people remember that.
