For my final blog I will be looking at the changing economic model of the music industry and how this affects an artist's ability to earn an income. Despite being the lifeblood of the music industry, artists have been continually taken advantage off since its inception. I will investigate current payout rates from streaming and what that means for artists, 360 deals and unlikely savior of artists.
Streaming payout rates
The current payout rates streaming are as follows:
● Apple: $0.00735,
● Spotify: $0.00437,
● Napster: $0.0190,
● Tidal: $0.0125,
● Google Play Music: $0.00676,
● Deezer: $0.0064,
● Amazon: $0.00402
● Pandora: $0.00133
● YouTube: $0.00069
(Sanchez, 2018)
So, if you had 10’000’000 streams on Spotify it would pay you $43,700. To those reading who are old enough to enjoy the irony, it’s hilarious that Napster the former destroyer of the music industry pays the greatest amount to the labels.
Daniel Elk (who is the co-founder and CEO of Spotify), stated that “at the turn of the millennium, only 20 - 30,000 artists could survive on recorded music income alone” and that now the number is “far greater” (Forde, 2019). Whilst I am glad that the music business has seen “recorded music revenues rose 12% to their highest level in 10 years — $9.8 billion” (Aswad, 2019), there has hardly been an equal distribution of wealth and I think the same people are still making the same money (the label and their board of directors).
If you refer to my calculation regarding 10 million streams equaling a $43,700 payout rate, we
will now look at how that is watered down. Now remember that payout rate goes to the record
label first, “The label, in turn, pays the artist a royalty of anywhere from 15 per cent to, in some cases, 50 per cent of its cut.” (Sisario, 2018). Say your label is generous and gives you 50%, that's $21,850 USD, however, what if you co-wrote the song? Divided it further by two and that's $10,925. The poverty line in the USA is $12,060 (Assistant Secretary for Planning and Evaluation, 2017). Ten million plays of your song will have you living below the poverty line.
Hardly seems fair.
However, it can be much worse.
Meet the new deal, same as the old deal.
(McMahon, 2014)
Above I’ve embedded a video providing insight into record deals and shady business practices of the music industry. It’s from the film Artifact which details Jared Leto and his band Thirty Seconds to Mars working on their third album “This is War” and their bitter legal battle against their record label. It shows how artists are constantly in debt to their record labels, whilst the label continues to make huge amounts of money off their body of work. What I find really interesting is how a product can generate $5’000’000 off of a $250,000 investment and the band will still be in debt to the label (that’s a return of 2000%). Keep in mind this film was released in 2012 and the music industry has gone through many changes since then.
The music industry is currently in its fifth era (that of streaming). Below Forbes magazine has kindly provided a graph detailing the lifecycle of products of music consumption. You’ll see that we are now in the era of streaming and downloads are becoming a thing of the past. “Downloads lasted for only four years as the leading source of revenue in the recorded music industry. That's the shortest era in the industry's history” (Rosenblatt, 2018). “Apple is scheduling a complete phase-out of music downloads from the iTunes Store by early 2019, per sources at the company” (Resnikoff, 2017).
So where are labels now generating their income?
360 record deals are a brilliant new type of scam whereas not only is the record label granted revenues from your music,“the label shares in other income streams such as touring and live performance, merchandise, endorsements, appearances in movies and TV, and if the artist also writes songs, publishing” (Gordon, 2013)Record labels have stated that 360 deals “let them sign different kinds of artists because they don't have to be so focused on recouping their investments from album sales” (Gordon, 2013). It seems to me the truth is streaming isn’t generating enough revenue to cover a labels overheads and staffing costs, so they are looking at additional revenue streams. I would advise against signing these deals.
In the age of the internet and streaming, I’m wondering what purpose these record labels serve anyway? They don’t control the distribution channels like they used to and streaming platforms are signing exclusive deals with artists. I’m predicting music streaming following a similar business model to video streaming, with Netflix (who has a large market share built off of other people's work) now producing their own content and bypassing the movie studios. It may also be of interest to you to know that “Spotify’s CFO used to be Netflix’s CFO” (Kafka, 2018). Feel free to come to your own conclusions.
An unlikely savior emerges!
I thought I’d finish up by giving a mention to Taylor Swift. She has used her influence and power in the music industry to fight for other artists rights. Previously she had fought Apple Music when they launched their streaming service, as they were going to forgo paying artists on their initial three-month free trial to subscribers. "We don't ask you for free iPhones. Please don't ask us to provide you with our music for no compensation” (BBC News, 2015). She also pulled her album 1989 from Spotify during the week of its release stating “I'm not willing to contribute my life's work to an experiment that I don't feel fairly compensates the writers, producers, artists, and creators of this music” (Singleton, 2017)
Taylor Swift recently signed a new record deal with Universal Music Group. UMG also owns a 3.5 percent share of Spotify, which is currently valued at $1 Billion dollars (Ingham, 2018). As a part of her record deal, “UMG must promise to hand over to artists, on a non-recoupable basis, a portion of the windfall from its Spotify shares in the future” (Wang, 2018)That means everyone gets paid, regardless if they owe the label or not. Good move by Taylor that benefits everyone.
Remember the next time you criticize T Swift; she’s fought for other musicians on more than one occasion. Maybe we should stand by her?
Final thoughts
Be careful what deals you sign and who you sign with. You might be giving away thousands of dollars in revenue for no reason. See what offers are on the table and don’t be afraid to walk away.
Bibliography
Assistant Secretary for Planning and Evaluation. (2017). 2017 Poverty Guidlines. Washington:
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BBC News. (2015, June 22). Apple Music changes policy after Taylor Swift stand.Retrieved from BBC: https://www.bbc.com/news/entertainment-arts-33220189
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