The race for streaming service domination has been a hot topic in the music industry of late. Spotify, Apple Music, Pandora, Tidal, and even Amazon have been vying for streaming market share, and it remains unclear who will come out on top. Spotify is the current world leader, with 40 million of their 100 million users being paying subscribers. The application, though widely popular amongst consumers on account of its large music library and low-priced monthly subscription rate, has had issues retaining artists and the rights to stream their full catalogues. Musicians such as Beyoncé, Prince, and Taylor Swift have chosen to withdraw all or some of their pieces from the service.
Most artists that refuse streaming services the rights to their work continue to cite low royalties as one of their main reasons for withholding content. Artists earn between a tenth of a cent and a half of a cent per stream, meaning the service really only becomes profitable for artists that can rack up millions of song plays. For an artist like Beyoncé, however, that should come as no problem–of the music she does have on Spotify, her top five most streamed songs have been played a conglomerate 1 billion times and counting.
Perhaps a more pressing issue for artists (aside from, ahem, the interest of supporting their husband’s failing streaming service) is the vast amount of Spotify profit that is funnelled back into the industry by way of record companies. Labels such as Sony and Universal have a near 20% stake in Spotify, with an estimated investment worth of over $1 billion. This is likely an important factor for many major artists, as musicians have a historically strained relationship with the labels that carry them.
Though largely unbeknownst to the general public, artists typically do not own the rights to the music they create. Instead, the rights belong to the record companies that sign them. Thus, the record labels care less about how the music is distributed and more about who they are signing. Labels collect royalties on albums over fifty years old– and this “back catalogue” of music alone accounts for over $1 billion of Sony’s revenue each year. This money is then invested in scouting new musicians, some of whom will hopefully be the royalty moneymakers of the future.
Expectedly, most artists are less than thrilled with deals they wind up with. It was not until the digital age, however, that they began having their opinions heard. In October 2007, the English rock band Radiohead (“I’m a creep, I’m a weiiirdooo”–trust me, you know it**) cut out the recording label middlemen and released their album “In Rainbows” direct to consumers on their band website. Fans were allowed to select the price they wished to pay, between $0 and $20, and the album immediately became available for download onto their computers. The release was a success, as the album sold over 3 million copies worldwide (both digital and physical–it was 2007, after all), and the digital sales alone were higher than the total sales of their previous album “Hail to the Thief“.
In the near decade that has followed Radiohead’s essential invention of digital music marketing, the industry has been consistently disrupted by the growth and implementation of digital technology. Spotify made Pandora irrelevant, Beyoncé changed the game with that digital drop, and the power of social media gave the 17-year-old Jacob Whitesides enough leverage to negotiate a record label deal in which he owned all the rights to his music.
So where do artists go from here? Possibly to Kobalt, the Swedish music company you have definitely never heard of. Kobalt aims to revolutionize the music industry by charging artists a fee for using their production and marketing services while still allowing them to retain all rights to their own music.
“The old model is on the way out. We are building the new music industry structure” -Willard Ahdritz, Kobalt founder
The company strives to achieve sustainable trust and transparency between artists and their firm. For artists in recording contracts with content in streaming services, they offer technology that ensures that artists receive all royalties they are entitled to. The band Snow Patrol reports that Kobalt found them over $1 million in unearned revenues based on streaming royalties they would have otherwise missed. Unaffiliated artists without contracts are able to use Kobalt’s recording technologies and services to produce and distribute their music, all while retaining the rights to it. Kobalt’s current clients include Sir Paul McCartney, Lenny Kravitz, The Foo Fighters, and unsurprisingly, Radiohead.
As time goes on, it seems likely that artists and record labels alike will move towards the Kobalt way of industry. Though the system is currently imperfect, it will be interesting to hear how digital music technologies evolve to bridge the gap between artist and consumer–better listen closely!
**you might recognize the Vega Choir version of Radiohead’s “Creep” from this trailer for a movie about a guy you might have heard of: