A friend recently shared this article in Mashable. As expected, it sparked a conversation around the unfair model of streaming and how it pays so little to musical artists. But this article made me think… maybe this is the actual value of recorded music? There’s a lot of recorded music out there, and it’s really easy and cheap to consume in mass quantities. Therefore, according to supply and demand, it makes sense that recorded music has a very low valuation.
According to the Mashable article, streaming does generate a lot of money and the big three labels each earn about $19M per day. They claim the reason songwriters don’t see much of those earnings is that their labels keep 50%-80% of what they collect in royalties.
Labels do keep a lot of earnings and they always have, but they also do a lot of work to create licensing deals and make sure their cash-cow artists continue getting media attention, social visibility, and streaming plays. In an industry where mass consumption is critical, visibility is the actual value, not the music itself.
Streaming is not a sale and it’s important to note the difference. Clearly, the model still generates billions. Arguably, enough to support the commercial part of the industry. Artists just do terribly because their individual portion of the pie is insignificant. Combine all of those individual artist-portions, as a label does with its vast catalog, and you start to see lots of money — and the three major labels control the bulk of all distributed popular product.
I’ve blamed streaming for contributing to musicians’ downfall for years, but I don’t think that’s the case anymore. Artists can upload directly to most platforms and retain everything they earn. Controlling 100% of your royalty earnings is easy. It’s just not worth anything by itself because it’s harder to find. Recorded music is only valuable if consumed in mass quantities and it still helps to be associated with a label, even if it’s tiny.
I actually think streaming is a great distribution method. It’s convenient, eco-friendly, easily accessible, and it works great. The valuation is flawed because it’s largely controlled by businesses that manipulate the market to control all the earnings. No other medium will be consumed enough to challenge streaming. Not vinyl. Not a resurgence of CDs. Streaming is the winner and what most consumers want. Almost everyone in the world has a phone or device that can stream.
One friend mentioned a song he wrote has about 200k listens to date, and with his piece of total royalties (50% split with their label), he earned $500. The math is simple: it’s $0.005 earned per listen which is split 50/50.
Is that bad? Decent? Good? What should 200K “listens” even earn? And at what point does listening replace purchasing, and is there a way to offset that?
If I were to put actual cash in an artist’s hands, how much would I feel is fair to give them just to listen to a recorded song one time? How much would you give them? Would we agree on the same amount? It feels impossible to answer. Some songs are great. With other songs, I feel like I should get paid to sit through them.
Technically, streams are classified as on-demand single-consumer broadcasts. They are not sales, and the value of a “listen” is based around the model that rights holders and PROs (performing rights organizations like BMI, ASCAP, and SEASAC, and other international groups) collectively agreed on a century ago for terrestrial FM/AM radio broadcasting. These rates have been adjusted over the years, but they are intentionally very low.
For contrast, a commercial FM radio station in Los Angeles could play the same song that my friend wrote 5–10 times and potentially report an estimated 200K listeners. Same overall exposure, but it would actually earn less than 200K individual online streams.
This is because terrestrial FM/AM broadcast rates are intended for bulk consumption — like buying 36 rolls of toilet paper at Costco for $11. When on-demand streaming came along, the broadcast rates were adjusted to pay higher amounts because songs were expected to be consumed by single-consumers…but it was still a cheap rate. It’s more like buying a 4-pack of toilet paper at a deli for $4. Either way, both terrestrial broadcast and streaming models require bulk amounts of playback to generate any kind of significant earnings.
Looking back 20, 30, 40 years or more, broadcasting to 200K radio listeners was not considered a huge number. Some radio stations in populated markets could do that in a single play. Getting a song played on radio stations across the country would generate multiple millions of plays a day. That’s why it was so competitive for artists to have singles played by radio stations— and that’s why labels would pay for it. Labels knew that when people heard songs they liked, they would buy the album. The difference is that today’s streaming consumers don’t need to buy if they hear something they like; they are perpetual on-demand radio listeners and can add it to their streaming “library.”
This brings me back to the question: what is the value of recorded music anymore?
It’s a little dark, but I am leaning towards the sentiment that recorded music inherently doesn’t have a lot of monetary value, and maybe it never really did. It may have always been visibility that sustained album retail valuation. Listening to music is about as complicated and expensive as having an email account (it’s free). There is real value in music… but today it’s more intangible than ever. Listening to music is something you can do, like walking down a sidewalk or breathing. Is air valuable? Yes, very! It’s also just kinda there, all around us, at all times.
I think over the last century, we inflated the value of recorded music based on artist “visibility” and created a 100-year market bubble. I think when audio recording was invented and refined, it opened the way to change music into a product for mass consumption, and the marketing game that ensued was easily manipulated and exploited by throwing huge sums of cash around. Mainstream musical acts are just “visible” products to be marketed, and their albums are like the toilet paper at Costco. Cheap and paid for in bulk. It’s a race to the bottom to see who can dominate with the smallest margins and move large quantities.
Major labels survive this by essentially perpetuating the cycle, almost like engaging in market manipulation. They inflate the value of their contracted artists by dumping vast amounts of funding into playlist domination, social promotion, and social visibility, and then reap 80% of the rewards. There’s no room for a smaller label or independent artist to compete because they will never be visible and gain control of a significant portion of market share. For example, the last commercial recording I worked on ended up costing about $5000 to complete between studio time, mixing, and mastering. Without factoring physical merch costs, at $0.005, this album would need to get 1 million listens to pay for itself. The quality of the music does not matter; it will never get enough visibility because we cannot finance that kind of forced exposure.
It’s easy to blame streaming platforms. It’s really easy to blame the major labels. I don’t see enough blame being pointed at PROs. They are making a killing in this landscape and act as the mafia-muscle protecting the legality of the whole process. The fact that a physical business like a restaurant or bar can pay $10 a month to Spotify or another service and stream a playlist throughout their entire establishment is a huge problem.
Primarily, this is a problem because it’s illegal, it’s not allowed, and nobody is doing anything to prevent it. Secondly, PROs were basically founded on the single task of tracking recordings that are performed in public spaces in order to collect royalties on behalf of the artists or publishers that control those rights. It’s not an easy task, sure. Some international PROs actually try to do this and attempt to audit venues so they know which artists to pay, and how much is due. But for the U.S. PROs, they are able to force business owners to pay for a blanket licensing fee instead. They don’t care what the venue actually plays. To determine the recipients of that license fee, PROs rely on surveys, charts and Billboard data. This means major labels are essentially collecting money for music that is potentially not even in their catalog. Your album could be played in a bar, and Lady Gaga would get paid instead. In my opinion, this is the biggest and most corrupt racket in the entire music business. It’s even more disappointing considering that modern music consumption via streaming creates all the necessary data needed to accurately track what is actually played. It’s literally a playlist.
In light of these thoughts, here’s my wishlist.
- I believe businesses should be allowed to use streaming services on the condition that streaming platforms provide specialized apps which report playlist data directly to the PROs. They already pay the licensing fees; this would provide PROs with data to accurately delegate royalty earnings to the right places.
- Royalty rates for terrestrial broadcasts were intended for bulk consumption, but the songs played were always curated by the radio station or DJ. I think free use of streaming platforms modeled after this broadcast method should be limited to play only curated playlists (like the Spotify mobile app). If a user intentionally favorites an album or saves a song into a personal playlist to be streamed on-demand, that action can be considered in place a sale and should pay a higher royalty rate because it is no longer part of a curated group listening experience.
Of course, these are just my ideas. You will probably have completely different ideas. I don’t expect anything to change because I wrote a blog post.
I do expect all of this will continue without change for a long time. PROs have powerful lobbyists in DC to ensure the major labels survive while the industry is milked for all its worth. Perhaps changes will occur if there’s a collapse of the few remaining labels. Maybe Spotify will become the music version of Netflix and start financing its own content to bypass labels, thus sending them tumbling, or maybe the labels, streaming services, and songwriting organizations will eventually turn against each other in a fit of greed and sue each other into oblivion…. Or they will sue each other just to drive up market prices for consumers:Spotify and Amazon ‘sue songwriters’ with appeal against 44% royalty rise in the United States …
A recent Copyright Royalty Board (CRB) ruling brought great news for songwriters in the US — with royalty rates for…www.musicbusinessworldwide.com
Within a few days of reading the Mashable article, the above article started to circulate as well. According to it, the Copyright Royalty Board, representing songwriters, is pushing for a 44% rise in royalty rates. Apparently, they managed to determine the value of a listen, and it’s just 44% higher than the current rate.
My friend would earn $720 for his song instead of $500. I guess that’s progress?
Of course, it may not happen. Spotify and Amazon are worried about complaints from customers, and they are appealing to prevent the hike. Apple Music declined to take a stance just yet; Google is asking the case to be reviewed and seems to be waiting to see who comes out on top.
And again, musicians are angry with platforms like Spotify, Amazon, etc, calling them greedy for not wanting to pay higher royalty rates. I get it. They are the face of the issue and easy to blame. But the major labels and PROs will also earn that 44% bump, and in the case of the labels, it’s an increase from earning to $19M a day to $27M. I guess we now know who this hike really benefits. Clearly, for the labels and PROs, this is significant progress. Pats on the back, all around!
Correcting the music market will be harder than convincing the entire world that using plastic straws is wrong. I don’t know what to expect, but I do know the earning potential of recorded music is pretty much nothing as long as we treat it as a bulk commodity.
Time to lower your expectations. It’s that simple.