Streaming has become increasingly popular in the music industry, but it has also changed the way members of the industry are paid.
The way most people listen to music today is probably not the same as it was ten years ago.
Streaming platforms like Spotify, Tidal, or Apple Music have made it easier than ever to listen to and discover music, but they’ve also disrupted the way people in the music industry make money.
Today’s “Pop Quiz” question: Who gets paid when you stream a song online?
The answers to this question span the seedy age of music piracy to today’s headlines about artists like Bruce Springsteen and Stevie Nicks selling their music catalogs for millions of dollars.
To begin, let’s break down what happens when a user presses play.
Every time a listener streams a song online, royalties are paid to several different parties: music publishers, songwriters, performers, and record labels, who negotiate their rates.
Apple Music says it pays about a penny per stream, but Spotify pays per “streamshare”.
In other words, let’s say a song is streamed 1,000 times in a month on Spotify. Payout is determined by the entire stream pool. So 1,000 streams for an individual song in a pool of 100,000 streams will earn more than 1,000 streams in a pool of 1 million.
Spotify says it paid out $7 billion in royalties in 2021, with over 1,000 artists earning over $1 million each and over 52,000 artists earning over $10,000 each.
Financial experts say this market is growing.
“There will be more and more streaming revenue, and the number of streaming users is expected to triple over the next five to 10 years,” said Terry Johnson, director of revenue and strategy at Generational Group. .
That sounds like a lot of money for the music industry as a whole, but how much money actual artists are making, especially compared to the days of album sales, is where the frustration seems begin.
“It used to be that if you bought a record or a CD, or downloaded a song, it was a one-time purchase, and artists were paid in bulk, or you know, a relatively larger lump sum payment all at once,” said Liz Moody. , an entertainment lawyer.
“What happens with streaming, though, is that it gets paid every time you play music. So there’s not that, in general, especially for smaller artists, there’s no There’s no big upfront lump sum payment; it’s more annuity where they’re paid over time.”
Moody’s said artists might see bigger payouts in the long run than they would with traditional album sales, but it can still be frustrating for new, smaller musicians because they won’t see that money right away. after.
Now, part of the reason the industry got here is that for a while a significant number of people weren’t paying for music at all.
“The reason a lot of these companies were started – Spotify, Pandora – they were started because they wanted to help artists, okay, to find another way for artists to get their music out to fight the hacking that was happening at the time, so it shouldn’t always be maybe us versus them,” Moody said.
“When it started to become a thing, it’s like I could just listen, like, I paid a monthly fee, and I could just listen to anything as many times as I wanted?” said Tristan Bushman, a Nashville-based musician. “It opened up the world of just, you can just put on a playlist and discover 10 or 12 new artists.”
So streaming solved one problem, but the disruption of companies like Spotify brought other problems.
“Musicians on Spotify don’t get money from their streams until they hit thousands and thousands of streams,” said Chicago-based musician Jennifer Femme. “It’s really frustrating to work so hard to increase the amount of streaming you have and see no compensation for it.”
Taylor Swift has boycotted Spotify in the past over unfairly paid artists, and other bands like Belly, Letters to Cleo and Eve 6 have voiced their own concerns over compensation.
Spotify is said to pay some of the lowest rates to musicians of all streaming platforms, likely due to its sharing system, so musicians have expressed the fact that they cannot survive streaming alone.
“Making money from people listening to music is nearly impossible right now,” Bushman said.
“I think it’s a bit unfair to smaller artists,” Femme said.
This, coupled with the fact that it now takes a lot more work for musicians to stand out from the noise of the internet in order to be discovered, almost forces musicians to do a lot of their own promotion and marketing work to attract a public.
“It’s almost essential for an artist to have a good social media campaign and a good team behind them,” Moody said.
“It’s unfortunately like that when you start out,” Femme said.
Along with this marketing work, they also have to think critically about their digital presence, their financial plans, and even the value of their works or global catalogs.
“They have options, and probably a lot more options than they’ve had in the past,” Johnson said. “More than 5 billion [dollars] in catalog value changed hands last year; It will probably be more this year.”
For all the frustration streaming has caused for musicians, it has also dramatically increased the commercial value of music as a whole, especially for private equity investors who now view music as a recurring source of income on which to rely. can count for years.
For this reason, more and more artists are considering selling their music catalogs as a way to fund their careers and avoid waiting for streaming royalties altogether.
Experts say it’s a market for musicians, but like anything impacted by streaming, payment is going to take a little more work.