I found an interesting article posted on ukmix today, in which a variety of songwriters, artists and even label owners speak about the money they make from streaming. It paints a very negative picture I must admit, to the point where a world where streaming replaces sales in their entirety could have pretty dire consequences. Take a read:

 

By Erik Sherman | MoneyWatch | July 23, 2014, 6:00 AM (CBS News)

 

Technology has changed few industries as thoroughly as the music business. But the ballooning increase of convenience for consumers has rapidly become a bust for musicians trying to make a living. A number of prominent names have published their actual incomes from streaming, and the money doesn't even match what they'd get from a paper route.

 

For example, Bette Midler has written some popular music. She recently tweeted that she made $114.11 on 4,175,149 plays of her work.

 

Grammy-nominated composer, keyboardist and recording artist Armen Chakmakian, once the keyboardist for the band Shadowfax, tracked his earnings from 14,227 plays. He received $4.20 from songwriting royalties, and because he was the recording artist, he also made $11.50. The record label is also his, and it took in $19.39. The total was $35.09, which works out to about a quarter of a cent per play.

 

"Someone's making money, and in true fashion with the music industry, it's not the artists," he wrote. "Business practices like this are one of the reasons I jumped ship and only write for television now."

 

The problem seems to be in the mechanics of how the streaming is structured. Royalty rates are tiny for all types of music. Cellist Zoe Keating, who releases her own music, regularly tours and has a strong following, told Salon that only 8 percent of her earnings on recorded music came from streaming.

 

Life isn't any better working with the big labels, according to composer and musician David Byrne, of Talking Heads fame. He wrote that the royalty rates are "miniscule" and that the labels "usually siphon off most of this income, and then they dribble about 15-20% of what's left down to their artists."

 

Another musician, Damon Krukowski, estimated that it would take "songwriting royalties for roughly 312,000 plays on Pandora to earn us the profit of one -- one -- LP sale." He went on to explain that the royalties he would see from one CD sale is the equivalent to 47,680 plays on Spotify. He'll get additional payments for his work as a performer with the two other members of the band Galaxy 500. The group registered 64 recordings with Pandora. For one fiscal quarter in 2012, that came to an additional $64.17.

 

Is there more money to share in this branch of the sharing economy? Publicly held Pandora (P) has some numbers available. For years the company lost money. But its fortunes seem to have changed. According to its 2013 annual report, its profit was roughly 2.2 billion Danish kroner, about $400 million. However, in its latest notice that it would raise its subscription rates, Pandora mentioned the price of royalties as one reason subscription fees had to jump by a third or more.

 

As Byrne notes, some musicians can still make significant money in other ways, like live concerts to large numbers of people or through licensing. But he said the current structure could hurt up-and-coming performers, composers and writers who won't have those alternatives for extended periods. And, as jazz pianist and music historian Ted Gioia told Salon, because the terms of deals with labels aren't publicly available, it could be that young musicians are in an even bigger bind:

 

"The record labels could make a case that they don't need to share royalties with artists whose sales don't cross a certain threshold. If you're Lady Gaga or Justin Bieber, you have no problem. But otherwise, you would get no royalties. The nature of these deals are that the rich get richer and the poor get poorer."

 

Streaming music can be a great deal for the avid listener. The question is whether we'll continue having an emerging supply of new musicians if streaming takes over, or will everyone have to get accustomed to one oldies station after another?

 

© 2014 CBS Interactive Inc.. All Rights Reserved.

 

I think it perhaps a tad over-dramatic in all honesty, but the points towards the end are worrisome if you believe digital sales are likely to be entirely replaced by streaming in the future. The less profitable the industry is, the harder it is for new artists to establish. The less money artists make from their hits, the less likely they are to even be financially capable of sustaining a career in music. Some would say that the decrease of revenue in the music industry has contributed to the industry being more cut and dry than ever before: two decades ago if you flopped you'd get a couple more chances; now you get one chance and that's it. It seems like even more people won't be getting that one chance in the future if streaming takes over.

That's a really interesting read actually - so little money coming from these streams! Could be quite detrimental to artists if streaming becomes the main way of consuming music in the future (still not entirely sure it will but that's for another thread).

The good news would definitely seem to be that a world where digital sales are 0 is not really on the horizon right now. Sales may be decreasing by about ~10% per annum right now but they still hit a really high level. It'll be harder for local (non-US/east Asian) artists I'm sure, but if you get a global hit there's still a huge amount of money to be made from digital sales and that will surely be the case well into the future. After all, part of the reason physical singles were wiped out so quickly was due to the cost of production/stocking for shops versus low demand, whereas the cost to all involved of putting a single on iTunes is borderline non-existent in comparison.

Well with regards to East-Asian performers, they don't make money from streaming anyways. Most artists establish themselves with popular hits through means of digital services and then branch out to several areas such as endorsements, commercials, acting and other areas which are non-musical related to earn big money. In Japan, streaming itself is not prominent in any ways as far as I can tell.

That seems really really low and it does paint a rather depressing picture.

 

I assume Spotify and the like aren't intentionally screwing these artists over. Streaming is a low-profit market though so this problem was going to show up sooner or later. I can't imagine it'll ruin the market as market forces will always demand more even if the artists are less likely to sustain a career but it's something that should be kept an eye on as streaming becomes bigger and bigger.

 

Makes the 100 streams = 1 sale thing seem really generous to streaming vs actual revenue.

Well with regards to East-Asian performers, they don't make money from streaming anyways. Most artists establish themselves with popular hits through means of digital services and then branch out to several areas such as endorsements, commercials, acting and other areas which are non-musical related to earn big money. In Japan, streaming itself is not prominent in any ways as far as I can tell.

East Asia is always behind the trend anyway, who knows when streaming will take off over there. The whole fanbase culture helps sales stick around as a force too.

 

That seems really really low and it does paint a rather depressing picture.

 

I assume Spotify and the like aren't intentionally screwing these artists over. Streaming is a low-profit market though so this problem was going to show up sooner or later. I can't imagine it'll ruin the market as market forces will always demand more even if the artists are less likely to sustain a career but it's something that should be kept an eye on as streaming becomes bigger and bigger.

 

Makes the 100 streams = 1 sale thing seem really generous to streaming vs actual revenue.

The thing is Spotify have yet to turn a profit too. I think streaming at present is too cheap, the low subscription prices mean the digital market can't win the price war but also means the digital revenue being lost isn't being replaced. Subscription fees might need a rise.

The thing is Spotify have yet to turn a profit too. I think streaming at present is too cheap, the low subscription prices mean the digital market can't win the price war but also means the digital revenue being lost isn't being replaced. Subscription fees might need a rise.

 

So, all the non-Spotify related ads playing (for non premium-members) aren't making much returns either?

 

To the topic, I find it appalling that artists and songwriters gets paid virtually nothing for their stream royalties. Bette Midler getting paid a measly $114 for over 4 million streams is really a kick in the teeth. I'm also shocked to learn that Spotify has yet to turn a profit. It is also another case of record labels (esp. Sony, as there was an article relating to this a few months back) taking advantage of the profit shares because streaming is still the "new media".

It's really depressing looking at those figures - certainly figures I've seen suggest around $.001 (or 0.05p) per stream, which means that in the UK - the most streamed song last week Ariana Grande's "Problem" which streamed 1.2 million times, generated just £600. So it seems that as we move to each new and more efficient way of consuming music, the amount of money it costs to distribute goes down but so too does the money the artist gets.

 

It could be argued of course that Spotify and other streaming sites give users more opportunity to try and listen to albums or singles before buying, and may bring more exposure to certain less mainstream artists, but it certainly seems to favour the bigger acts (like Coldplay or Lady GaGa for example) and leave very little for the smaller artists.

 

Fortunately as stated in this thread it seems that digital sales for singles at least are close to their peak and not collapsing anytime soon, but by the end of the decade we will certainly see a dramatic change in how revenue is generated - and that this may be massively detrimental to newer artists trying to break out!

Edited July 30, 201410 yr by Doctor Blind

One way of looking at it, might that companies who make no profit are deliberately trying to undercut already very-cheap music historically to get people used to the idea of something for nothing much cost-wise. Then when they are rich and powerful from people switching, they have an opportunity to increase prices, make a profit and screw artists who have no alternative other than stay independant and refuse to play along.

 

Of course, I could be seeing bad motives in powerful media players who have yet to make a profit but seem to be able to dictate what creators of it's product are entitled to. Almost as if those poor struggling record companies, practically begging in the streets for money to keep going during a time of near-peak sales figures, are being forced to go along with streaming for some inexplicable reason. Blackmail? Forward-looking business planning? Or more to do that once a format has been around a while industry likes to invent a new one and kill off the old one?

 

How curious - I wonder if there are any deals going on behind the scenes......

So, all the non-Spotify related ads playing (for non premium-members) aren't making much returns either?

 

To the topic, I find it appalling that artists and songwriters gets paid virtually nothing for their stream royalties. Bette Midler getting paid a measly $114 for over 4 million streams is really a kick in the teeth. I'm also shocked to learn that Spotify has yet to turn a profit. It is also another case of record labels (esp. Sony, as there was an article relating to this a few months back) taking advantage of the profit shares because streaming is still the "new media".

Not enough to cover hosting the music and royalties it would seem. As of the end of 2013, Spotify has generated $200 million worth of losses (other major streaming services have similarly been in the red) and there are questions over whether their current business plans will ever turn a profit.

 

It's really depressing looking at those figures - certainly figures I've seen suggest around $.001 (or 0.05p) per stream, which means that in the UK - the most streamed song last week Ariana Grande's "Problem" which streamed 1.2 million times, generated just £600. So it seems that as we move to each new and more efficient way of consuming music, the amount of money it costs to distribute goes down but so too does the money the artist gets.

 

It could be argued of course that Spotify and other streaming sites give users more opportunity to try and listen to albums or singles before buying, and may bring more exposure to certain less mainstream artists, but it certainly seems to favour the bigger acts (like Coldplay or Lady GaGa for example) and leave very little for the smaller artists.

 

Fortunately as stated in this thread it seems that digital sales for singles at least are close to their peak and not collapsing anytime soon, but by the end of the decade we will certainly see a dramatic change in how revenue is generated - and that this may be massively detrimental to newer artists trying to break out!

I was saying to Joseph yesterday that I doubt 'Fancy' has made much more than $10k to date from streaming. It was probably too negative a figure, I could see it making $20-30k so far, but it's still a tiny figure for one of the biggest of the year's hits and when you consider the cost of producing the song, the video and promotion, a tiny profit if not a loss.

 

But yeah, it's not too worrying just yet. Single sales haven't fallen that far, so there is plenty of time to avoid the disaster scenario predicted in this article.