Are music streaming services a problem or a solution for musicians and sales?
Ever since Thom Yorke’s Atoms for Peace removed their albums from Spotify, a heated debate has been raging over the value of streaming music services for musicians and the music industry.
The argument may have gone mainstream in recent weeks, but it’s not a new discussion. In fact, the question of how streaming pays off for musicians has been causing ructions within the music industry for a couple of years now.
It’s an emotional debate, and an important one at a critical time for artists and the industry, as they look for the best way forward after more than a decade of declining sales for recorded music, post-Napster.
Yet it’s also a debate dominated by gut feelings and data of varying quality, and a tendency to slip into polarised opinions along the lines of “Spotify is just the latest embodiment of THE MAN!” or “Thom Yorke’s a rich HYPOCRITE!”
Earlier this year, I published a roundup of views and data on the streaming music / artists debate for industry site Music Ally. Now feels like a good time to publish an updated version here, with a selection of 10 pieces for artists and fans alike to read and think about.
Sasha Frere-Jones, New Yorker:
“Streaming suits catalogue but cannot work as a way of supporting new artists. Spotify and the like either have to address that fact and change the model for new releases or else all new music producers should be bold and vote with their feet. Spotify say they have generated $500 million for “license holders.” The way that Spotify works is that the money is divided up by percentage of total streams. Big labels have massive back catalogues, so their forty-year-old record by a dead artist earns them the same slice of the pie as a brand new-track by a new artist.
The big labels did secret deals with Spotify and the like in return for favorable royalty rates. The massive amount of catalogue being streamed guarantees that they get the massive slice of the pie (that $500 million), and the smaller producers and labels get pittance for their comparatively few streams. This is what’s wrong. Catalogue and new music cannot be lumped in together. The model massively favors the larger companies with big catalogues.”
Not Frere-Jones’ words, but a useful collection of the tweeted criticisms of Spotify and the streaming business model by Atoms for Peace’s Nigel Godrich.
Damon Krukowski, Pitchfork:
“One way we could start is to collectively acknowledge that nobody can really claim digital streams as exclusive property. So let them flow freely – from everyone, fans included – instead of only from companies that have cut deals with the copyright holders. Services like Spotify might continue to operate as they are, with their pittance of revenue sharing, but they would have to compete in an open market of free streaming by musicians and fans.
What I am envisioning is something like what has developed for music posting via YouTube, but allowed to proliferate throughout the network, without corporate control over context or quality. Perhaps that kind of competition would spark newly cooperative ideas, and take us away from the antagonistic relationship between much of the music business on one hand, and the network of musicians and fans on the other.”
Independent musician Krukowski (of Galaxie 500 and Damon and Naomi) has already made one influential contribution to the streaming debate with his Making Cents op-ed for Pitchfork last year, breaking down his royalty payments.
That’s an important read, but his new piece has some thoughts on how the music industry might learn from open-source software culture, with musicians finding a new “decentralised” network to distribute streaming music and make money off the back of it.
Robinson Meyer, The Atlantic:
“The income of a non-mainstream artist like me is a patchwork quilt and streaming is currently one tiny square in that quilt. Streaming is not yet a replacement for digital sales, and to conflate the two is a mistake. I do not see streaming as a threat to my income, just like I’ve never regarded file-sharing as a threat but as a convenient way to hear music.
If people really like my music, I still believe they’ll support it somewhere, somehow. Casual listeners won’t, but they never did anyway. I don’t buy ALL the music I listen to either, I never did, so why should I expect every single listener to make a purchase? I think that a subset of my listeners pay for my music, and that is a-ok because…and this is the key…..there are few middlemen between us.”
Not Meyer’s words, but those of cellist Zoe Keating, on whose data the article is based. Keating published a Google doc of her digital royalties for a six-month period, to help people analyse where the money was coming from, and what streaming’s role might be in that. “In the interest of evolving the discussion, I am making myself into a data point,” as she put it.
97% of Keating’s digital income came from sales through iTunes, Amazon and her own Bandcamp page, but as the quote above indicates, she sees streaming in a positive light.
Also read her What I want from internet radio blog post from November 2012 where her views are just as applicable to Spotify and other streaming services: “I wish I could make this demand: stream my music, but in exchange give me my listener data… The new model says that in the future I’m not supposed to sell music: I’m supposed to sell concert tickets and tshirts. Ok fine, so put me in touch with the people who will buy concert tickets and tshirts.”
David Touve, personal blog post:
“Imagine that the world is comprised of only two possible fans, and you get to pick only one of them: One of those fans will buy a download today. The other fan will enjoy your music through a streaming service for years to come.
You would be paid $0.70 — today— from the fan who buys the download today. From the other fan, you would receive payments-per-stream at the end of each year — over time — over the life of your copyright (95 years).
At what price per stream, and number of streams per year, would the two fans — the streamer and the downloader — be paying you effectively the same amount of money in today’s dollars?”
When artists sell music, they get a one-off cut of the selling price. When that music is being streamed, they get a (much smaller) payment for every play. Musician Sam Duckworth recently explained how 4,685 Spotify plays of his last solo album earned him £19.22, but the question is just as much about how much streams of the album might earn him over the next 10, 20, 30 years.
Economist David Touve has been applying his knowledge to exactly this question, in an attempt to provide useful data on how streaming payouts may compare to download sales over time.
Mark Mulligan, Music Industry Blog:
“The net result is, working on a pure like-for-like basis, the per-play value of a download to an artist is $0.033 compared to $0.005 for streaming. Downloads are thus 5 ½ times more valuable to artists than streams. Of course this is still a disparity but it is much, much less than the 150 to 200 times value that has become common currency.
It is also worth noting that the artist streaming pay out rate ($0.005) is actually 45% of the rights owner pay out rate ($0.0112). So artists are earning nearly the same out of streaming as the labels and publishers.”
Mulligan is a music industry analyst with a good, balanced handle on how new business models like Spotify fit into the wider scheme of things. Again, a key point here is to think about pay-per-play over a longer period of time, rather than simply comparing download and streaming payouts now.
He also notes that a lot of data around streaming royalties has “been misinterpreted and stripped of crucial context”, including the contract an artist is on, whether they write their own songs, and how their music is getting onto streaming services.
David Macias, Hypebot:
“The music business is a harder slog than it used to be. Media is fragmented into a million pieces and it’s very hard to achieve the ubiquity that acts used to be able to achieve, and thus sell what they used to sell. Piracy is still rampant. But there are acts that are doing very well, because they are paying attention to where the money goes, and not bellyaching, sans facts, about the music business.
If Spotify is so bad for the music business, why are revenues for the recorded music business in Sweden up 30% (first half of the 2011 vs. the same time period in 2012), when in most other countries, it’s down or flat? Spotify is responsible for roughly half of the music business revenues in Sweden.”
Macias runs US firm Thirty Tigers, which distributes albums for independent artists. This was his response to Damon Krukowski’s Making Cents article, and he suggested that musicians should be asking their labels tough questions about streaming money, rather than just Spotify and rival services.
He also suggested that in the earliest days of digital music, the music industry “conducted their affairs in an atmosphere of fear and lack of understanding, and many bad decisions resulted”, and warns that now more power is shifting to artists and managers, “let’s be careful not to make similar mistakes because we’re approaching the discussion from that same vantage point of misinformation and fear”.
Mike King, Hypebot:
“People need to transition from unit-based thinking to consumption-based thinking in terms of royalties. We feel the metric of success should be based on how many people are listening to your music over a period of years, as opposed to looking at how many units are shipping in one week.
People are used to seeing big numbers from a unit-based model, but that’s really front loading what is happening. Comparing iTunes sales with Spotify payments over a two month period of time is not a great way to look at things.
What we are trying to create is a system in which you earn royalties forever for good music, and the time horizon is simply different than what folks are familiar with now.”
King’s interview with Wallach – a musician who’s also Spotify’s official “artist-in-residence” – is a good primer on how the company is pitching its business model to musicians.
It includes his hopes for the future that “If we can get to the scale of Netflix – which has 20 million subscribers – we estimate we’d be paying out to artists what iTunes is paying out on a year to year basis”.
Although more accurately he means how much Spotify would be paying out to the music industry: labels and publishers, and then onto artists and songwriters depending on their deals with those rightsholders.
Will Page, Spotify:
“The last published study on the relationship between Spotify and piracy was in 2011, when an industry report stated that piracy in Sweden had fallen by 25%.
Looking beyond Sweden and to bring the debate up to date, in this report we focus on Spotify’s recent success in the Netherlands. What does piracy look like there, now?
Working with analytics company Musicmetric, we are able to understand how regularly people use BitTorrent for music piracy and how levels of piracy dier from one artist to the next. Not only has the number of people engaging in music piracy in the Netherlands fallen in recent times, it also appears to be an infrequent activity for most of those who remain.”
This report was published by Spotify’s own director of economics, although it’s not a direct response to the artist payouts debate. Instead, it’s an analysis of piracy, sales and streams in one country – the Netherlands – looking at whether Spotify and its rivals have reduced piracy there, and what happens when artists withhold their albums from streaming services.
No surprise, perhaps, that it suggests the answer to the first question is yes, and that in the second case, artists who withhold see more pirated downloads per legal sale than those who don’t.
Even so, this is a reminder that since they first launched, streaming services have argued that they’re cannibalising piracy more than sales, but have lacked definitive data to prove their case. This report is Spotify’s attempt to make a step forward on that front.
“As much as we disagree with Spotify over their rates and PR spin on several issues, we also recognize that they are legal, licensed and pay out royalties as they have been negotiated. Artists are able to opt out of Spotify individually (and also if their label permits). It is for these reasons that Spotify are NOT the enemy.
However this begs the question, if Spotify are not the enemy, who is? Well, as we stated above it is the massively deceptive Ad Tech businesses who have been financing mainstream music piracy for over a decade. This is the Silicon Valley internet tech lobby (lead by Google) who seek to dismantle and destroy copyright protection for individual creators.”
Google-bashing is increasingly common within the music industry, but this piece from The Trichordist isn’t just about that. The blog, which campaigns for an “ethical and sustainable internet” for artists, has regularly trained its sights on advertising-supported piracy sites, where ads from big brands (served by major ad networks) may be providing an income for copyright infringement.
One facet of this argument: if more of those advertising revenues were flowing into the coffers of Spotify and its rivals, they’d be paying artists more money. A US scheme was recently announced to block ads from Google and other networks from sites offering pirated content, so there is action on this score.
Andy Malt, CMU:
“To be frank, any new self-releasing artist who thinks Spotify alone will provide them with a living is a fool. Or is being advised by a fool. Indeed, any musician who thinks that sound recording revenue alone will provide a viable income stream is living in a dreamland. And that’s not a particularly new phenomenon – even in the height of the CD boom, record sales income was only one of a number of revenue streams for artists, and in the early years of their career it wouldn’t be a key income either.
Artists need to build themselves a business that incorporates records, songs, merchandise and/or tickets, and look for simple ways to maximise all those revenues.
Crucially, they also need to start developing premium products and services for core fanbase – fans who have always been willing to buy more than a gig ticket every year and a record every other, but who were often left under-supplied by the old music business. Which is why, for artists, the real revolution caused by the web isn’t the emerging streaming market, but the boom in direct to fan and pre-order sites.”
Out of the many thousands of words written about Spotify vs Atoms for Peace, this article on trade website CMU has the best blend of balance and constructive suggestions for the future.
The point is not just that artists can sell tickets and t-shirts so shouldn’t worry about how high (or low) their streaming payouts are, though.
It’s a pointer to a healthier relationship between services like Spotify and musicians, where the former find more ways to help the latter make money by pointing fans towards tickets, merchandise, box-sets, crowdfunding campaigns and so on.