The Music Industry Is Screwed

Musician’s ability to make money off of streaming services is something that is widely reported about and speculated upon. While exact payouts per play for songs are not made available by streaming services, several artists have released their financial statements to show just how cripplingly little they are actually receiving from streaming services. Every few months, a headline comes out that says something like “Indie Artist With 4.3 Million Spotify Plays Receives Check for $5078”, and we are able to glean some insight in to how the payout structure from streaming services really work. While there are wildly varying reports about what the actual per play payout is from many streaming services, the commonly held opinion is that it is not nearly enough.

This infographic that just came out a few months ago does a great job illustrating what the main streaming services are and how they pay their artists.

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There are some streaming services, like Jay-Z’s Tidal and the revamped Napster, that are trying to pay artists more than the norm. But the main streaming services, like Apple Music, Spotify, Pandora, and YouTube, are all near the bottom of the payout scale.

According to the most recently available data from 2017, Apple Music pays unsigned artists $.0064 per play, and signed artists $.0073 per play. This is, unfortunately, near the top of the pay scale for major streaming services. With this payout structure, and unsigned artist would need 230,000 plays per month, just to earn minimum wage ($1472). Spotify pays unsigned artists $.0038 per play, and signed artists $.0044. That’s less than half a penny for every time a song is played. At this pay scale, an unsigned artist needs 380,000 plays a month to earn minimum wage, and a signed artist needs 340,000. I have a cousin in a band (Make Do and Mend) that has music on Spotify, and I went to their artist page to do some calculations on how much an up and coming artist will actually make from Spotify. Their most-played song has 327,438 plays, which at the current price level for an unsigned artist, would bring them $1,244.26. Split among the 4 members of the band, their best song on one of the world’s most popular streaming services may have bought them each a week’s rent. For their most recent album, which has 11 songs and was released over 2 years ago, Spotify would have paid them $1,969 total.

Services like Pandora and YouTube are even worse. Pandora pays $.0011 to unsigned artists, and $.0013 to signed artists. YouTube pays unsigned artists $.0006, and signed artists a whopping $.0007. Vinyl records still pay out more in royalties per year than musicians receive in royalties from YouTube, despite songs on YouTube receiving hundreds of millions of plays. Vinyl records are about as ancient and as niche of a medium that still exists in music today. Last year, YouTube paid out a total of $385 million in royalties. Vinyl records paid out $416 million.

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Now I’m not suggesting that we abandon streaming services completely, or that we should all go back to playing our music exclusively off of CD’s and vinyl records. I love Spotify way too much, and if any company were to ever ask me to pay on a per song basis or buy a full album again I would laugh in their face. The user has certainly enjoyed many benefits of streaming services, but the industry is taking a beating. Revenues in the music industry dropped from $12 billion in 2006 to $7 billion by 2010, as streaming services gained popularity and the sale of CD’s became less and less common. In 2006, record labels generated $9.4 billion from CD sales. In 2015, total revenue from streaming services was $2.4 billion. Even though we have more exposure to music and are listening to more music than we ever have before, the money is quickly disappearing from the industry.

The process of switching the music business to digital has had a major impact on record labels and artists alike. In addition, Spotify, Pandora, YouTube, Tidal, and Napster all reported millions of dollars in losses in the past year, with Apple Music and Google Play not reporting. So it’s not even as if the streaming services are robbing from the labels or from musicians and making a killing. The business model needs to change, because right now no one is making money.

Right now in the music industry, you need to be a top level artist to be making good money from streaming services. To Spotify’s credit, according to these calculation levels they would have paid Justin Bieber almost $4 million already for his song Despacito. But the money dries up not too far down the line. Artists, who usually received approximately $1.00 per CD sold at retail, used to only have to sell about 1000 CD’s per month, worldwide, to make a livable wage. Now they need 340,000 plays a month.

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The music industry is a prime example of an industry that got totally flipped upside down in its switch to digital, and maybe did not adjust as well as many other industries. While there will always be glitz and glamour at the top of the food chain, second tier musicians will continue to struggle to make a profit, even with increased exposure to their music. Record labels will struggle as well, as money within the industry has disappeared. And streaming services will continue to report losses as they cut prices lower and lower to attract larger user bases. Music listeners will never go back to the way things were, but the industry must adjust how everyone gets paid as digital users clamor for more music at lower costs. How do you think the industry can adjust?

10 comments

  1. andrewmanginelli · ·

    There’s a few things I’d like to throw out there in response. The first is that it’s now easier than ever for anyone to get their music out there. This provides a platform for new and rising artists to potentially be found on the internet. The second is that while I do agree the pays per play are low, do you think a small band along the lines of your cousin’s would be able to easily sell 1000 CDs in a month? Beyond the core friends/family willing to shell out money to help, do you think a random person is just as likely to buy a CD as they are to check out someone’s music for free? Would you be more inclined to click a link to a not so close high school friend’s SoundCloud, or go on iTunes and buy their album? Isn’t the option of being able to check it out for free something that can help grow the artist’s popularity?

  2. mattwardbc · ·

    Great post! I agree with @andrewmanginelli comment about the ease of releasing music and think that should be a factor in the pay for plays. I wonder if artist’s expected to sustain themselves off streaming services alone. Record deals are definitely a major factor in artist payment and live shows are often a major component of their salaries. I feel like music is a passion thing and it really shouldn’t be all about money.

  3. sherricheng5 · ·

    Really interesting post! I agree with many of your points- digital has changed the music industry for sure. However, I think that digital has changed the music industry for the better. I’m definitely a big fan of music streaming services like Spotify. It’s just way more economical to pay for a monthly subscription as opposed to individually purchasing every song. I also read somewhere that Spotify and other music streaming services decrease piracy and illegal music downloads. While the music industry definitely needs to figure out other ways to generate profit, music exists the purpose of listeners. Spotify and other streaming services allow many musicians to share their music to a wider listener base. Musicians like Taylor Swift initially boycotted Spotify at first, but her recent move back onto Spotify just shows that streaming is here to stay, and the music industry and musicians to adapt accordingly. Even if musicians aren’t paid as much as they were in the past, live shows and concerts are still in high demand and oftentimes are more profitable than selling music. Up and coming musicians can turn to outlets like YouTube or live venues to make money. I think there are definitely other ways musicians and the music industry can continue to be successful in the future.

  4. Hilary_Gould · ·

    I loved the graphic you put showing how the cost structure works for each of the platforms. That was really helpful to be able to understand the comparison of each. With the rise of these subscription based streaming services it seems like it puts artists in a tough position. The majority of users only subscribe to one platform of their choice (excluding YouTube maybe), so if they choose not to put their music on there they risk loosing a large audience. I know Taylor Swift pulled her songs from Spotify for awhile and it was a big deal when she went back. She didn’t seem to struggle with this, but for lesser known artists they can’t afford to potentially lose an audience or fans just because they are unhappy with how the streaming service works. It just seems like since CD’s and buying by song or by album has almost disappeared, artists have less control and make less money off of their music (but they still make a lot of money so I really don’t feel that bad…).

  5. The recorded music industry is definitely screwed. The live music industry, however, is doing relatively well I think. The branding and promotion opportunities for the top stars are also huge.

  6. Nice post! I think music streaming has definitely impacted the recorded music industry and artists signed to those labels but you could also argue that they have been facing this issue even when music was limited vinyl records and CDs. When those were popular, we had P2P platforms like Limewire or Bittorrent to “freely” download a .mp3 file format of a track that we liked. Many people abused these platforms and built huge collections of music without having to buy a single CD. So in a relative sense, music streaming platforms have created a universal standard for obtaining music where people won’t feel as much of a need to game the system. In turn, this helps artists know that they’re guaranteed a constant stream of revenue as long as their EP/album/single is good. If these music streaming platforms don’t change their payout structure, artists would need to understand that the platforms are at best a branding opportunity with petty cash flows and focus their profit-driving strategies elsewhere.

  7. ojeagle121 · ·

    I feel pretty strongly about streaming services killing a revenue stream for artists. To disagree with @andrewmanginelli about how good exposure is, streaming services have made albums and record contracts obsolete. His cousin’s band only made ~$2000 from spotify but I would be willing to bet that the recording costs and mastery is over $2k. So if making an album is a negative sum game, record labels won’t sign anyone if they can’t make that profit back. Which leaves small/med size band’s only revenue to live shows. So, great. I can listen to some new band for free and I can tell my friends about them and we can all listen to them for as long as we want and the band only receives a few pennies/dollars. But chances are I’m never going to see them live, but I probably would have bought their album if that was the only way I had access to their music.

  8. camcurrie99 · ·

    I agree with Owen’s points above. Exposure is only as good as you can afford, especially with how expensive recording time costs. Professional studios cost anywhere from $50-$500 per hour, and with the amount of time that needs to be put into a whole album, that can end up costing thousands. Streaming services are here to stay for now, but like Professor Kane said above the recorded music industry is in serious trouble. Streaming services continue to lose money, but they have set the price level to be so low that any increase in price will be met with controversy. That said, Netflix has increased the price of their most popular service twice in the last three years and I don’t think they have seen major drops in usership. Here’s an interesting thought: as streaming services mature, and initial users like current college students graduate to the regular price streaming tier, their average user age will increase and thus they have potential to take in more revenue. Will they use that to pay artists more? Time will tell.

  9. ericiangesuale · ·

    Very fascinating to see these developments in the industry. I think Tidal had a good mission but when you look at how it came off to consumers- no one cared. That’s because the common perception is that musicians make enough money as it is, so why do I need to switch to a service that helps make them more? It doesn’t help that the people who were pushing it were already incredibly wealthy and well-known musicians. I truly don’t know how this industry will ever recover to be profitable for everyone, because as you stated consumers are not going back to the way things were and in the digital age that is a pretty sound argument.

  10. paulandresonbc · ·

    Very well done post Brian. It is very interesting to see the way the music industry has been changed and shifted with technology. As an avid fan, I love the current reality of streaming music whenever I want, however it is sad for the artists behind these recordings. It seems that the only real way to profit in the space is through live performance, which makes it difficult for emerging artists.

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