The distribution of music has changed from word of mouth to the apps that we now call Spotify, Apple Music, Pandora, etc. As music stores begin to close at a drastic rate the demand for music has remained constant. The music stores have been replaced by phone apps as our source for infinite amount of music. The music industry has seen a spike in digital revenue sale since 2010. Digital revenue sales are now 50% of music revenue with physical copies and world tours following. Fewer and fewer albums are being sold but rather “streamed”. It used to be very clear as to how the artist made their money; but as their music is being distributed through these streaming services the question becomes: How is the music artist now earning their revenue? With record labels and publishers claiming rights to their money, it seems another middle man is put forth between the artist and their money. How much is the musician making? Are streaming services aiding or hurting the musician as they go throughout their career?
The music industry began losing their money back when a popular downloading and music streaming service called Napster was around. Online piracy became a big problem around the rise of Napster. Napster users were illegally able to download music on their computer, free of charge, at the expense of the record label, publisher, and the artist. Music consumption being as expensive as it is, Napster users found a loophole to acquire all the music they love at no charge to them. With CD’s staying on the shelves record labels sought for a solution. At that moment record labels began suing Napster for copyright infringement. Soon thereafter the record labels won and Napster was shut down indefinitely. Although online piracy hasn’t stopped, the record labels response has been streaming. Streaming is the online distribution, consumption, and playing of any multi-media. Streaming includes Spotify, YouTube, Netflix, Pandora, and any other app or service that allows you to access media that you do not personally own via downloading or online access through payment or subscription. These services allow for millions of songs to be accessed at any time; Spotify alone streams over 40 million songs for users to listen to at any given time. That kind of access is appealing to most music lovers because of the ability to share playlists and listen to new albums as soon as they release.
Streaming services must buy partial rights to the artist music to play that music on their sites. They must buy the ownership not only from the artist but also the publisher and record label; which are two entities separate from themselves. Although some record labels own publishing companies that is not always the case which is detrimental to the artist. With the inclusion of online streaming services the pockets of the artists become more shallow. Fewer dollars is being put into the pockets of the musician rather everyone else at the rate of $9.99/month. There is no projected information pertaining to how the artist is paid but Spotify does show an algorithm that projects that the artist is making on average between 0.006 and 0.0084 cents per stream through these online services compared to a dollar for every $10 album sold in the old model. Streaming services like Spotify are giving less than a penny per stream to artists (How Do Artists Make Money on Spotify & Monetize Soundcloud? 2016, February 18). Free subscriptions garner even less money than that. The money is no longer in the music making but outside of the music. Artists like Drake, Future, Kanye West, Jay-Z, Lil Yachty and DJ Khaled are finding other sources of income through sponsorship. Drake featured in commercials like T-Mobile and Sprite, Lil Yachty has Sprite and Target; meanwhile Kanye and Jay-Z are establishing their own brands. However, the new streaming model works very well for artist like Taylor Swift, Kendrick Lamar, and Katy Perry because of their large fan base and popularity. Although they will not be making as much money as they could by the direct purchase of their album, the millions of streams these artists receive does not phase their income.
In December of 2013, Time magazine recorded the top 10 songs being streamed on Spotify. With this data, they also calculated the total royalty payments each song earned since their release using Spotify’s algorithm. Avicii had the most streams with 152.1 million streams which earned the song anywhere between $913,000 and $1.3 million (Luckerson, V. (2013, December 03). Here’s How Much Money Top Musicians Are Making on Spotify). These payments do not consider the amount of money that the record labels, publishing companies, songwriters and finally the artist.
The four most common music deals known are as the following:
- 100% ownership of master recordings, publishing, and compositions
- 100% ownership of composition and publishing but 0% ownership of the master recording
- 100% ownership of composition, 0% of master recordings and has a third-party publishing company handle distribution
- 25% ownership of the composition, 0% of the master recordings and has a publishing company handle distribution (Q. (2016, October 25). How Much Does The Average Artist Earn Per Play On Spotify?).
From top to bottom is the highest to lowest in which the artists can get paid. An artist’s best bet is to have complete control over their master recordings, compositions (song-writing), and publishing. Realistically, it is very unlikely that an artist can gain traction and popularity to afford to go independent and still gain a sizable amount of money. Regularly, the record label would first take their cut from the money earned from streaming. After the record label takes their cut, then the publishing company takes their cut, then the song-writers and producers; then finally the artists gets whatever is left.
The record label takes all the risk when developing new artists. That is why when signing a new act, the record label ensures that they make a profit or at least break even. They do this by making the artist sign what is called a 360 deal. 360 stand for 360 degrees in which the record label dips their hand in all the artist’s ventures inside and outside of music. For example, an artist that is featured in a Walmart commercial must pay a percentage back to the record label although the commercial had nothing to do with the artist. The music industry is a business; and like every other business, it needs to protect its interest. Its interest is very simple: sales. To protect these sales moving forward into the digital era, music must advance past its archaic form and adapt to its new environment. It is easier to download free music than finding a free version of a college textbook nowadays. The industry is losing money now so they had no choice but to retaliate. Artists like Drake don’t host their own content anywhere but Apple Music or Spotify because of fear of losing revenue.
For the consumer, this is a great precedent set by these streaming services because it offers a cheaper alternative to buying physical copies or buying downloads. If customer satisfaction was taken into consideration, then a lot of what is being done for the consumer as far as the music goes will go a long way. However, a Forbes magazine discusses how music streaming is losing money by giving unlimited music to their consumers at the flat rate of $9.99 a month (Speculations, G. (2017, May 12). How the Music Industry Is Putting Itself Out of Business. Retrieved May 24, 2017). Spotify has lost millions with this new streaming music model along with Apple Music and Amazon music. The only difference is that Apple and Amazon respectively have other branches of their company to maintain upkeep of their respective streaming service.
The old model for money making in the music industry was: drop a single or two, drop the album three to six months later, let the album gain buzz and revenue for another six months, within that time frame you release the tour dates for the tour and by the end of that six months you tour your album nationally and internationally and then repeat. The new model is more quick in which you release the single then release the album a month or two later on Apple Music and Spotify, a few months later you go on tour and release more music while on tour and release the next project and repeat. The attention span of the consumer is continuously shrinking which is why content is being pushed so heavily through that the consumer is eating it up and spitting it out all at the same time. Because of this the most lucrative route for artists is to brand themselves and to go on tour. Less than a penny per stream is not worth the trouble unless the artist is as big as Taylor Swift, Adele or DJ Khaled. With these artists gaining millions of streams per month, their takeaway after everybody else gets their cut is still very profitable. However, for the up and coming artists, the payout relates to the salary of a McDonald’s worker. Nowadays it appears going independent is the best choice if one is looking for full rights and 100% of the profits. However, if an artist is looking for the most amount of exposure along with the endorsements to match then a record label would be the best bet. It is all about preference but record label or independent, the artist loses money with the new music streaming model put forth by the record labels.
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