FEATURE:
Pay Dirt
PHOTO CREDIT: @markusspiske/Unsplash
Why Music Streaming Sites Need to Re-Evaluate Their Fees After the Coronavirus Pandemic
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THIS is a subject that I have covered…
PHOTO CREDIT: @markusspiske/Unsplash
a few times before but, rather than bemoan the relatively low fees artists earn from streaming their music, I wanted to ask whether things will change in the coming months. At the moment, the money that artists receive from streaming sites is pretty low. It makes for some eye-opening reading:
“PRS director Tom Gray shared a chart of the data, which was collated by The Trichordist, on Twitter yesterday (April 18) as part of his #BrokenRecord campaign.
The numbers show the average payout per stream, the number of streams needed to earn £1 and the number of streams needed to earn one hour of minimum wage pay in the UK (£8.72) for each major streaming service, including Amazon, Tidal, Apple Music, Spotify, YouTube and more.
With an average payout of £0.009 per stream, it would take 970 streams on Amazon two earn minimum wage – the lowest amount needed out of all the streaming services represented. Artists uploading their music to YouTube would need to get the most streams to get £8.72, with 7,267 required at an average rate of £0.0012. Apple Music users would need 1,615 streams, while those promoting on Spotify would need 3,114 plays.
Last month, musicians called on Spotify to triple their royalty payments to cushion their loss of earnings caused by the coronavirus pandemic. Musician Evan Greer set up an online petition asking the streaming giant to boost its royalty rates for artists permanently, as well as donate $500,000 (£400k) to music charity Sweet Relief”.
PHOTO CREDIT: @belart84/Unsplash
I can understand why artists are struggling right now. Because so many people are not releasing albums, there is less opportunity to earn money from music streaming sites. It is a very challenging time. I guess streaming sites’ prosperity and profitability relies on every aspect of the music industry being in place. As The Guardian explains, physical sales are also slowing down:
“The music business is a highly interconnected ecosystem. Remove one part and everything else sways like a Jenga tower in a hurricane. Months of teasing, dropping singles and doing interviews are carefully synchronised to set up a release, and the next year-and-a-half is spent whipping along that momentum with more releases, touring and TV promotion. But now those failsafes have crumbled. It is partly why Dua Lipa brought her album forward before the promotional bridge completely collapsed. It is also why Lady Gaga and Sam Smith pushed theirs back in the hope that things will return to something resembling normal when they finally drop.
With physical sales now at a slow dribble, first-week chart performances – normally boosted by limited-edition, fan-seducing formats – are entering the 100m dash with their ankles tied to their wrists. Dua Lipa’s album was beaten to No 1 in the UK by 5 Seconds of Summer, who had pre-sold a glut of cassettes to fans and nosed ahead. That marketing trick will not happen again for a while”.
PHOTO CREDIT: @thibaultpenin/Unsplash
Maybe we are watching more T.V., and that is contributing. Although streaming sites are earning less money at the moment, maybe there are fewer new people subscribing to join sites like Spotify too. I can understand why streaming fees are low, but it has been this way for a long time. When the music industry returns to normal, I do think there needs to be consideration regarding increasing payout. I am someone who pays a monthly subscription fee for Spotify, but I do not subscribe to other platforms like Apple Music. I guess it is hard to recruit people to use multiple platforms. For me, Spotify covers everything I need. I would be happy to pay more than I do for subscription, and I think there should be a review of subscription fees in a few weeks or months. Although Spotify only started making money last year, it is making a lot more profit now. Whilst Spotify has competition from other platforms, the growth of podcasts and people subscribing to listen to podcasts has made a big difference:
“One of Spotify's most impressive areas of recent growth has been in user engagement with podcasts. In its Q3 2019 letter to shareholders, the company noted that it saw the number of podcast hours streamed grow at an exponential rate and that certain aspects of the increased engagement were "extraordinary, almost too good to be true." During that three-month period, subscriber growth, gross margins, and operating profit all exceeded Spotify's own expectations”.
IMAGE CREDIT: Apple Music
I know that big artists are earning enough to get by whilst we are in lockdown but, with slower streaming figures, it is a very hard time for smaller. Subscription figures suggest that no streaming service is in trouble or cannot afford to pay artists more. With podcasts booming and advertising revenues fairly stable, I wonder what the solution is. Increasing subscription costs would be one way, but I do think dividing more of the profit to all artists should happen. I want to quote from an article of 2016. Things have not changed dramatically in terms of fees to artists, and the article uses Spotify as an example – the theories and conclusions can apply to other streaming sites:
“At the moment, Spotify and every other major on-demand music streaming service pays according to a certain formula. Out of the service’s total number of plays, they figure out the percentage of plays that represented each artist. That artist gets that percentage of Spotify’s total revenue minus Spotify’s cut.
That means, if Calvin Harris receives 1 billion plays out of a total 7 billion plays on Spotify, 14% of your $9.99 subscription (after Spotify takes 30%) goes to Calvin Harris’ record label regardless of whether you actually played his music or not. These are not real numbers and Calvin Harris is actually very vocal about fair compensation for artists, but you get the point.
This royalty distribution model does not reward artists for the quality of their fan base but instead their quantity of streams. If one lone listener listens to Calvin Harris 1,001 times, Harris will make more money than if 100 fans listened to him 10 times each. If a niche artist has a very loyal following of listeners that generate 10,000 song plays but Drake gets 1.8 billion plays (actual), their royalty share is literally 0.0005% when only put up against Drake. Now imagine competing against Rihanna, Bieber, and every other artist on the service.
IN THIS PHOTO: Drake/PHOTO CREDIT: John Phillips/Getty Images
Is there a solution that can be applied to streaming sites moving through 2020 and the future?
“There is an alternative way to distribute royalties. It doesn’t have to be done the way it’s being done now. Those familiar with this issue call the current model the “pro-rata” model. Here is a new model: the “user-centric” model. Here’s how it works:
Instead of every paying listener throwing their money in a pool and divvying up the percentage of royalties that goes to each artist based on their amount of song plays, you take the songs each listener listens to, calculate the percentage of time they spend listening to each song, and then distribute their monthly subscription based on those songs they actually listen to.
So, when I listen to a song from an independent niche artist, 80% of my subscription isn’t going to Universal because 80% of everyone else listens to Fergie. If I were to only listen to my favorite niche artist 100% of the time, they would get 100% of my subscription, presuming it’s about $10. This really isn’t a complicated concept, and in fact, many people assume this is how it works already. But it doesn’t.
Changing to the user-centric royalty distribution model would reward those artists with a loyal following versus just a high play count. But most importantly, it removes the competitive factor in royalty distribution. Indie artists are no longer competing with Fergie, Rihanna, or Justin Timberlake. They are betting on themselves, and other artists can’t drive down the purchase power of a single listener. There is no inflationary effect. Support is again tied directly to the listener, as it would be if you purchased an artist’s music. And it is about the quality of music versus quantity”.
Maybe things are not as simple as changing business and distribution models – if that can be considered simple?! -, but it is clear the biggest artists benefit more than those artists who are struggling more. I think there does need to be emphasis on the quality of music rather than commercial appeal; artists who have a very loyal fanbase, rather than huge artists who might appeal because they are trending. So many artists are making virtually nothing from streaming, so I think the bosses of the platforms need to…
PHOTO CREDIT: @plhnk/Unsplash
MAKE that change.