Making Cents – the meager royalties paid out to bands by streaming services
pitchfork.com
pitchfork.com
except that's always what the record industry has been selling. at least Pandora and Spotify are honest about what they are. If i bought your vinyl record, do i actually own that or is really just a proxy for personal usage license? Can I play that record at my wedding, or in my office, or at a party with more than some arbitrary number of people?
Intellectual property is not a physical good. The recording industry has coasted along for the last 50 years or so on this strange phenomenon that allowed their IP to be sold as though it were a physical product while at the same time getting IP protections in addition to the revenue of a physical good, and they've made a ton of money doing so - more money than they ever should have. Now the gravy train is ending.
Getting paid per-play rather means that artists are finally seeing how people actually value their music. You can't use law to make your music more valuable. If you want to earn more then make more music, or go on tour, or put some effort into selling your music for soundtracks and the like. The rates spotify pays represent the actual value to the consumer - they aren't making a profit, and if spotify were any more than what it currently costs, i wouldn't pay for it. You might think your song is worth more than $10/mo in streaming royalties, but you might also be wrong.
That doesn't mean much, without the context of what you would do instead. Listen to CDs? Stop purchasing music? Torrent it?
And, of course, what you're saying about the market valuing music is that the market values music at zero; the price of music on streaming services is simply the premium people pay over free pirated tracks in order to have a nice user interface.
Traditionally radio stations account for their playlists in much the same way as Spotify and other streaming services, which is of course why it's a fundamental expense to them.
What has changed for one thing is the change in profitability for the myriad of smaller organisations, like diverse radio, each having an income stream from sometimes equally diverse, even regional, advertisers, from which they payed these dues. And of course, demand for music was met from these lines of supply. It wasn't legislated, just the normal supply demand scenario.
This model, where media outlets competed for listeners to maximise advertising dollars meant that consumers were implicitly engaging in wealth creation for these artists. While consumers behaviours haven't changed that much, after all most would simply listen and not buy product, their position as a factor in this has.
This is more or less what Thom Yorke is saying I think. The economics have changed, and overall capital had migrated to the cartel like few.
You see the music business is a /nightmarish/ labyrinth of copyright legislation, so to even start playing in this game you need a staff lawyer (or three). There's recording rights, which you have to pay to one arm of the label. Then there's publishing rights, which you have to pay to a completely different arm of the label (or, if you're unlucky, a different label - like with the erstwhile EMI's catalogue), and that's just to play some radio. If you want to do on-demand streaming, of the type that Spotify provides, then you have to pay mechanical reproduction royalties. Whaaa? I hear you say. Well, it takes a while for the law to catch up with these things so they've just repurposed the laws that were already there. Would you believe, you even have a different bunch of people to pay if you want to reproduce the lyrics. Now, take all that and multiply it by the number of countries you want to stream in, because you're gonna need to strike deal with a different branch of each label in each country. It's insanity.
The one beacon of light is the much maligned DMCA act, which (aside for enabling content owners to persecute twelve year old children) allows those wanting to stream music in a radio-like fashion to just pay a central collections agency a fixed rate. That simplifies the business significantly - no more negotiation and complex contracts, and no more need to have such detailed reporting (less staff, less code). The only thing is that it's applicable only in the US, as there's no EU equivalent (or anywhere else, for that matter). And it doesn't cover on-demand streaming. But it's a start.
Music startups really need to push for an overhaul of the copyright laws because the landscape has fundamentally changed and what exists currently is both arcane and archaic. We need a complete legislative metamorphosis, lest the major labels continue to move their contractual blessing between startups - ideally, of course, shortly after a tasty IPO - which all resembles the classic pump-and-dump scam.
I hope it happens.
[1] http://techcrunch.com/2012/11/10/spotify-is-having-a-good-20...
It's amazing what kind of culture has sprung up in the selling/delivery sphere. All these companies spring up to "empower" the indie musician and they invest in all sorts of signaling to make sure we know we had better sign up for their services or else we're not taking our career seriously. Examples:
CDBaby: keeps $4 of every cd sale, even though you've already spent $1-$3 per every cd you manufacture. As opposed to just setting up a paypal link or merchant account on your website, and shipping it yourself. 2.9% + $0.30 sounds a lot better than $4. (Shipping costs are additional either way and passed on to the user.) I have trouble imagining at what point I'd want to spend $3.41 per cd to save myself the effort of just sticking a mailing label to a padded envelope and dropping it in my mailbox.
Bandcamp: keeps 10% (by way of keeping every 10th chunk of revenue for itself). It's based around the belief that people will pay more if it's freely available, or will tend to pay more than the "suggested" price. I haven't really dived into their studies but I just cannot believe there isn't a flaw in them. A lot of it seems based off of the logic that if it worked for Radiohead or NIN (with their already built-in audiences) then it should also work for small indie musicians. (And Radiohead and NIN have also since stepped away from the free/pay-what-you-want model.) At any rate, 2.9% + $0.30 sounds better than 10%, since I have to do fulfillment on my end either way.
iTunes/digital media: $0.99 no matter what. $6.93 for a seven-song album, and you can't set your own price. If you have a major label you can apparently set your album price higher but smaller indies don't seem to have access to that privilege. Plus, if your digital album costs $6.93, then you've basically destroyed your options of selling your hard-copy.
And everyone knows the common complaints about spotify and pandora.
At any rate, I'm considering going through a lengthy staged release process, in an effort to measure all sorts of conversion and gather data along the way.
1) Release physical cd only, with no music previews. At this point, the few hundred people on my mailing list are already interested in the cd anyway, so we'll see how far that goes, along with recommendations to friends. Maintain a list of addresses for people who indicate they won't buy until it's released digitally.
2) Marketing music previews of each song and on an album level, through promoted Facebook posts (friends-of-friends) and advertising. The general principle here is to still not ever release the entire full-length tracks, and funnel people to buying the physical cd.
3) Release digitally to services that are not on-demand and can't be downloaded. This means Jango and Pandora. Jango also allows me to buy paid plays and get a bunch of demographic data points to see which tracks are popular with which groups. I can then use that to do more targeted ads over at facebook or maybe through google.
4) When things are really dying down physically, finally release through iTunes and bandcamp (allow full previews) and other sites where you can actually buy the tracks digitally, and see what happens with "discovery"
5) When I'm finally ready to just trash the whole project, release it on Spotify and forget about it to start working on the next cd.
On not releasing full-length tracks: if there is demand, someone will do it for you. You get to choose if interested listeners get it from piratebay or your own website.
As for piracy, it's a good question. Keep in mind I'm pretty small-potatoes. The question is, for a largely anonymous indie-artist, is the piracy risk of releasing physically-only greater than or less than the piracy risk of releasing digitally? My hypothesis is that it's less. But I'd have to find a way to measure availability and popularity of my tracks on pirate sites. If there's a way to measure a spike of demand, and ascertain that it's from people that would buy the digital tracks if they were available, then yeah, it would make sense to speed up the time frame of the digital release. But I don't really have any thoughts yet on how to measure that kind of thing.
I agree, I think that expecting fans to buy your album twice is unrealistic. But there is a middle ground in the approach that mp3.com pioneered (and was mortally wounded in court for) -- sell the physical disc and include an immediately available digital download as part of the package.
I expect that you could put both options up on your website - $10 for CD only or $13 for combo CD+MP3 and you'd probably sell just as many of the combo as you would have sold of just CDs if that were the only choice. There's been a few studies of the psychology of pricing and marketing on HN that would probably help inform your decision.
1) If you aren't selling digitally, piracy can hurt your album sales (if your music becomes well-known enough).
2) If you are selling digitally, piracy doesn't really hurt your digital sales, as the piracy will generally be from people who wouldn't otherwise sell your music.
3) Making your music available on streaming sites has a measurable but very small positive effect on digital sales. However, it's unclear if they're trying to measure the people that would buy digitally if they weren't streaming, but don't since they can stream. (This my reason for being interested in jango/pandora but not spotify - on jango/pandora, the stream is presented to the consumer but not on-demand, so if the consumer wants to hear it again, they can't just stream it again like on spotify. So they'll still have an incentive to buy.)
4) Streaming might not have a positive impact on physical sales, although this might be because they're assuming that songs are digitally available.
Even if you were able to make $10 per cd, you're still in the hole. Maybe better to chalk the whole recording thing up to marketing expense and use it to give you better leverage in the future.
I know it's common for people to believe that these days the secret is to use the recording as a marketing expense for touring ("where the real money is") but it is a myth. Yes, there exist groups that make good money touring, but even among groups with good music and good recordings, they are the exception more than the rule. The musicians that I know that are paying their way as a musician are invariably also doing things like pit musician work in theatrical productions, or teaching... or a bit of graphic design work for other musicians, while convincing themselves they're earning that money as a musician... - and they're generally not saving for retirement or paying for health insurance.
Also, I think there's this common belief that if musicians give their music away for free, they will get this massive visibility bonus that will translate into significant monetization. I think that's a myth, too. From a consumer's perspective, if a musician is giving away their music for free, it's not valued. And there are a lot of musicians trying to give their music away for free. In that approach, you have a hard enough time getting people to listen in the first place, let alone come to a determination of whether it's good or not.
Anyway, I don't have music career goals. (In my case, it'd be silly, since I have a successful programming freelance career.) What would be great, over time, is if my music habit paid for itself largely from recordings, maybe $10k a year and enough time to release a cd every year. Not in the cards for this release unless I sell out, reprint, and make good money on the digital side. Maybe a few cds from now things will snowball a bit.
Pfff, you can buy that for $50 and the labels know it.
Even if you were able to make $10 per cd, you're still in the hole. Maybe better to chalk the whole recording thing up to marketing expense and use it to give you better leverage in the future.
Something tells me you're not a musician,
Pandora should help smaller bands line up shows in towns where they are popular, and help them promote those shows to interested fans. They have the data and the consumer relationships to do it.
Bands would appreciate this service far more than a meager check. And it would be much cheaper for Pandora (those song royalties eat up all their revenue). I listen to hundreds of bands on Pandora, and I'd definitely attend more shows if only I knew when they were playing locally.
EDIT: Even $100 is far better than a check for cents. And such a service would increase attendance at shows. They key is that bands would _appreciate_ it, whereas they feel angered by insulting little checks.
The thing the retail model seems to have done is provide predictable income streams to artists. What seems to be looming after the retail model, between streaming services and Kickstarter, is a model that provide patchy and unpredictable incomes to well-known artists and a hobbyist position for virtually everyone else.
Yes, and they charge so much that it leaves people with less money to attend concerts by smaller acts.
http://abcnews.go.com/Business/story?id=87981&page=1 http://www.digitalmusicnews.com/permalink/2012/120525tickets
Anyway, I've definitely discovered multiple bands through Pandora, and then bought their albums/seen them in concert/etc.
Pandora and Spotify are being fleeced by comparison.
With the shift to Internet / satellite, the licensing companies made a huge land grab on the fees. The radio business has a few large organizations that go to bat for the whole industry. They're old lobbying groups with quite a bit of leverage, having been entrenched in DC for decades, and it's one of the reasons licensing fees have remained reasonable for radio. Internet radio / streaming has no such lobbying groups (yet).
In the streaming market you have very few good choices, the market is serviced by a few massive companies providing a very wide selection of music.
In the radio market that same concept is accomplished by over 6,000 commercial FM radio stations, with a diverse playlist. To get a different playlist, you change stations. Indeed every type of music is covered by those 6,000 stations. And of course it used to be even more diverse, in the days of the purely live DJ, before the radio business began to fade and broadcasters cut expenses by moving to networked systems like the former Westwood One.
You also used to be able to call up just about any station and make a song request. I'm sure you won't like that comparison to picking a song digitally, but it's the same, and it was very archaic, but no different than some of the other technological leaps we've made in which old technology seems very embarrassingly primitive. You often had to use a phone to make those requests, and a phone was a marvel in its day.
The technological difference can be compared, in regards to distribution, ease of access, etc. In that case, Spotify / Pandora win, that's obvious. It's not that you couldn't access every type of music via radio stations, it's that it was a lot less practical. Technology leaped forward and vastly improved the situation.
Spotify is very easy to compare against the radio business. What they've done is consolidate the radio market down into one platform. The Internet ate the broadcaster, very simply, just like it ate old Ma Bell. I can also compare IP telephony against the old telephony system.
In contrast, Pandora is much closer to radio in how people approach it. (You can use Spotify like that too, but at least among my friends its not the primary means of interaction.)
You can't compare on-demand services to radio.
Spotify is very different, of course, and that's why they have a different royalty structure.
I own radio stations and I have insight into the fees paid by radio stations for licensing.
And of course I can compare them.
5,000 plays on Spotify or Pandora is not equal to a single play on terrestrial radio. A single play on terrestrial radio probably reaches closer to 10,000 listeners, depending on how large the market is. In other words, 5,000 plays on Spotify is less than a single play on terrestrial radio.
That one got featured in the NYT, prompting a couple of follow-ups: http://zoekeating.tumblr.com/post/41955905309/a-blog-about-a...
http://zoekeating.tumblr.com/post/42057406771/where-does-the... (I loved the internet-expertise implied by Several people advised me to consider touring as a revenue stream since “that is where artists make most of their money”.!) More pertinently though: "Live performance is usually my revenue stream with the highest expense ratio: flights, hotel rooms, commissions, crew, advertising, etc…"
Live performances will always be the profit center. Recorded music is only good for promoting a band's concerts; you can't copy the live concert experience.
Recorded music will always be the profit center. Live performances are only good for promoting a band's records; it's easier to sell 1,000,000 records than it is to sell tickets for 1,000,000 seats.
http://www.techdirt.com/articles/20100712/23482610186.shtml
Which among other data, points to a detailed breakdown from Courtney Love (2000) about how the recording industry screws the musician:
" megastars like Lyle Lovett have pointed out that he sold 4.6 million records and never made a dime from album sales. It's why the band 30 Seconds to Mars went platinum and sold 2 million records and never made a dime from album sales."
Jaw-dropping...
The technical changes seem to be making musicians into traveling minstrels once again--not a good thing. Studio recordings are better 99.99 percent of the time.
It's hard for me to believe, but I still have albums that I bought fifteen or more years ago that I still listen to on a regular basis. That's more valuable to me than a concert experience.
I am tired of hearing this mantra repeated as fact. There are significant up-front costs to live performance that are not at all sure of being recouped. If you make some sort of niche music whose audience is highly dispersed, then you might not be able to get enough people together in one place to support a tour or more than one or two performances a year.
Have you ever worked in a band or as a producer or some similar role?
That's too bad, because there are opportunities. You could completely discount the revenue most artists get directly get from streaming and look at the services as the free option of the freemium model. They're getting their product to a far larger audience than they would have if there was a cost right out of the gate, and some of those free users will turn into paying ones. I know I have purchased albums (from iTunes) of artists I've discovered on Spotify. I'm positive that for Galaxie 500, some of their Spotify streams generated additional revenue in other channels.
Last week I was in a musicology conference where several professors from Oxford commented on how there's a glut of not only self-taught musicians, but universities and learning academies teaching music production courses that are saturating the market.
Even as a follower of very specific sub-subgenres of music it's almost all saturated, impossible to follow the latest developments in every area.
This is indicative that the value of most music nowadays is really, really low.
You could spend an eternity listening to freely-published, really good new music in Soundcloud and not spend a dime.
Consent makes all the difference in the world.
The market has spoken; recorded music has almost no value. Learn to profit from other avenues, don't whine and scream that its not fair the market value has been driven down to zero.
If you had 13 million streams, you would easily sell a few thousand albums. The internet is a bonanza for artists - it gives you exposure and allows worldwide sales at very low cost.
I don't care who the person in question is. Albert Einstein should still be challenged on his calculations.
Krukowski knows what he's talking about? Good, then he has nothing to fear from a little debate.
http://www.hypebot.com/hypebot/2012/08/a-look-inside-zoe-kea...
$85k in sales over 5 months, 1.5 million plays on Spotify.
Another thing that prompted my comment is an apparent disregard for scale in the article - 7000 plays is nothing. Kids playing acoustic guitar get 500k views on youtube every week (not a qualitative judgment, of course).
The economics of the nternet are very unforgiving for small bands, or even small genres. I listen to/used to DJ a flavor of music a called goa trance, which was obscure enough that the typical sales on an album were about 2-3000 units. If you sold 5000 albums you had a modest hit. The best-selling record in the genre sold 85,000 copies. Nobody got rich of it but you could put out an album and travel a bit on it, and it would at least keep a roof over one's head and maybe pay for another synthesizer - the typical album cost $20, which is not unusual in specialist genres. So an artist who sold 5k copies of an album could make $25-50,000 with a bit of luck; at worst getting your album out meant some additional part-time income that you could put back into your studio gear, plus some bookings.
Nowadays, you're lucky to sell a few hundred copies of an album. When Napster came along it crushed most of the labels, which were not parts of some big corporate conglomerate but were most co-ops run by the musicians themselves. It's much harder for new acts in this genre to get traction because there isn't as much capital floating around to organize parties and do basic marketing. As has been pointed out elsehwere, touring isn't free - and this is true even though the goa community had a lot of similarities to the hippy community in terms of couchsurfing, networking and so on, but things like plane tickets and so on still cost cash up front.
A lot of musicians wound up abandoning it to work in more commercial styles. Now, nobody was owed a living for working in this genre, but here was a nice little international scene that had seen several years of healthy organic growth over the space of a decade, and the 'music should be free' approach caused it to virtually collapse outside of Europe.
Most of the time for my paid Rdio account, I listen to stuff I know I already like. Sometimes I don't, and I don't listen to more than 10-30 seconds of a song. Does that count as a play? Other times I'll go find tons of stuff within the app, but it's still all within Rdio-land.
Also the stuff I stream on Rdio, I already paid for much of it within iTunes, but I prefer to have everything under the same hood. First world problem, I know. Do I get a discount for everything that I bought on vinyl, cassettes, CDs, and mp3s on other formats?
I play thousands of songs each month, should I be paying 1 cent each?
Assuming a song is 3 minutes long on average, and assuming you play 1000 songs (including maybe 1000 others that you didn't like and only listened to for a couple of seconds), that's 50 hours of musical entertainment, which at a penny a song would be $10.
So yes, you should.
I definitely don't listen to one sucky song for every one that I like.
Sitting at a desk coding and listening to music in your free time is an easy 200 hours a month.
So all your assumptions are false.
They sound like someone who started a blog a decade ago, stopped after a few years, only updated it twice since, and are upset their AdWords income is low.
Good music is really hard to find. I search around iTunes all the time and come up with nothing. So ANYTIME I hear a song that I like I buy it within the same day (usually the whole album).
For bands that aren't seeing this sort of conversion on sites like Spotify and Pandora, this might tell you something about the demand for your brand of music.
https://itself.wordpress.com/2013/03/27/like-a-business/
Spotify appears to be an organization related in some way to music, but in fact its purpose is merely to turn money into more money. This is not the way many businesses in the real world actually operate, and a good thing, too, because operating that way is pretty toxic.
the music is a means to an end, the end being making money for the shareholders...
Many businesses do not have the goal of simply turning money into more money. For a long time, the goal of GM was to make cars. It would be insane to open, say, a used bookstore if making money were your sole goal. But some people are really into books and want to buy and sell them, not necessarily even running their businesses in the most ruthlessly efficient way for making money. That's not what they're into. There are businesses whose goal it is to make, say, quality hand tools, or knives. There are businesses that deliberately manage how many clients they take on in order to ensure that they can turn out a quality product, even though a less good product would probably not be detectable by their clientele and would increase their profits. This is known as having pride in one's profession or in one's craftsmanship. Of course they also have to make money to stay in business.
There's a famous example of a largely technological company rejecting the mantra that their purpose is to turn money into more money---Craigslist.
There's also a famous if apocryphal example of an individual programmer having the kind of pride in craft that would lead to the decision not to do something that would increase profits, namely the Story of Mel.
The whole shareholder thing is a stupid myth that needs to die, anyway.
It's likely they 'salted' the suitcase with cash, but even so, it looked like they made some decent cash for a couple hours work.
I bought one, and really enjoy it. The band is PLUDO, btw.
The closer you look at record labels, the more they look like venture capitalists.
(If you wanted to make a pointed critique of venture capitalists, I suppose you could also invoke the comparison in the other direction.)
The first sentence is only (occasionally) true in the cases of artists signed to big-label contracts - very out of date in today's day and age, where most indie musicians don't even consider trying to get signed to a label. Meanwhile, the labels DID get money from record sales.
Piracy hurt labels and not artists because piracy hurt record sales, which went towards the labels' bottom lines and not the artists. But in a world where the record sales actually go to the artists' bottom lines, piracy does hurt the physical sales of the artists.
The real money does not come from live shows and merch. This is generally debunked elsewhere.
Since we own our own recordings, by my calculation it would take songwriting royalties for roughly 312,000 plays on Pandora to earn us the profit of one-- one-- LP sale.
A two-story house is not worth 300k times more than the monthly rent on a small apartment. 300 times yes, 3000 times make. Not 300,000 times.