I really like Aimee Mann’s music, but her recent interview in which she gave her views on streaming music bothered me. “My record isn’t on Spotify,” Mann told the Telegraph. “People may be outraged, but artists don’t make money from Spotify.”
Artists don’t make money from Spotify. A phrase that crystallises what may be the most important debate in the history of digital music: whether streaming music services can pay off for artists – and more widely, whether they can turn a profit and build a sustainable business for themselves and the music industry.
It bothered me, because it was just tossed out there with no backup. Why does Mann believe that? What data is she working from? As an artist who set up her own label some time ago and has blazed an independent path since, Mann should have an informed view, but details were frustratingly absent from that particular interview.
Leaving that piece aside, though, far too much of the public debate around streaming music services and artist payouts is dominated by gut feeling, partiality and Chinese whispers. What’s needed is more proper data and informed opinion.
So, I gathered some.
A quick note before diving into it: this article isn’t trying to prove that streaming is marvellous or dreadful for artists. It’s not taking sides. Some of the pieces referenced below are heavily critical of Spotify and streaming payouts, others are very supportive, and others are simply trying to get to the bottom of the actual numbers.
The point: spend an hour or two reading all these pieces, and you’ll hopefully have a lot more information to base your own opinions on. It’s something I intend to keep updated too, so if you’ve seen an article or data you think should be included, post a link in the comments section, so it can be incorporated into the piece.
On with the show!
ARTIST/LABEL OPINIONS AND DATA
It seems sensible to start with artists who’ve come out and talked about their streaming payouts, often sharing their data.
Cellist Zoe Keating published a Google Doc of her recent earnings from Spotify, iTunes, Amazon, Bandcamp and other digital income streams in August 2012. In the accompanying notes she praised Spotify – “awesome as a listening platform. In my opinion artists should view it as a discovery service rather than a source of income” – while also offering constructive criticism: “I wish Spotify would do more to facilitate the connection between listeners and artists – i.e. show that the artist is playing nearby, or add links to buy music.” It’s also worth checking her earlier post from January 2012.
David Harrell / The Layaways
More useful raw data comes from David Harrell of The Layaways, published on his own Digital Audio Insider blog. In July 2011 he published data on his band’s per-stream payouts from Spotify, then followed up with an analysis of Apple’s first iTunes Match payments in June 2012, and an updated post on Spotify’s per-stream payments in August 2012.
One of the most recent artists to put his head above the parapet – and just to be clear, this is a really welcome trend – was Damon Krukowski from Galaxie 500 and Damon & Naomi. In an article for Pitchfork, he gave stats on his payouts from Pandora and Spotify, and offered his own views: “Pressing 1,000 singles in 1988 gave us the earning potential of more than 13 million streams in 2012.” Krukowski actually pays for Spotify, yet he was matter-of-fact in his verdict: “I have simply stopped looking to these business models to do anything for me financially as a musician.”
The Cracker and Camper Van Beethoven artist has become a prominent spokesperson in the artists/streaming debate. His Meet The New Boss, Worse Than The Old Boss? presentation from the SF Music Tech Summit in April 2012 is a really important read – “With exploitative record contracts The Old Boss tried to take your songs a dozen at a time and pay you pennies. The New Boss wants to take ALL of your songs, past present and future and pay you nothing.” – but also see his recent (January 2013) interview on Spinner, which shows his nuanced views: “My only criticism of Spotify is that the rates right now are too low. It’s entirely possible that it scales and we get a better rate.”
Increasingly-required reading if you’re looking for artist-centric views on digital music business models. I’d suggest you start with Music Streaming Math, Can It All Add Up? (key quote: “Maybe we’re missing something. If streaming is the future how does $2.5b in revenue from a massively successful Spotify replace the loss of $8.3b in annual earnings?”). But also see its Streaming Serviced Ranked By ‘Artist Friendliness’ post.
Black Keys / Jon Hopkins / Blu Mar Ten
The Black Keys are one of the most high-profile artists to have taken a stance against streaming – “For unknown bands and smaller bands, it’s a really good thing to get yourself out there. But for a band that makes a living selling music, it’s not at a point yet to be feasible for us.” – while Mercury Prize nominee Jon Hopkins was early into the battle in November 2011 with his “Got paid £8 for 90,000 plays. Fuck spotify” tweet. The same month, UK trio Blu Mar Ten published their own figures and linked to the pithily-titled fuckspotify.com website.
Erik Nielsen / Kudos Distribution
As a response to the Hopkins debate, Erik Nielsen – manager of UK artist A Genuine Freakshow – published his act’s (higher) Spotify payouts, suggesting that poor payouts “highlights the crippling terms of record contracts, not necessarily of poor payments from Spotify’s end”. He was backed up by a blog post from digital distributor Kudos Distribution’s Danny Ryan, expressing his puzzlement at some of the figures being quoted. “When I query further, I discover that the artist in question is on a points deal with his record label, in which he earns less than 10% of digital income. This is an argument the artist needs to have with his label, not with streaming services.”
D.A Wallach is an artist – he’s one half of US duo Chester French – but he’s also Spotify’s artist-in-residence. He’s one of the key figures in the company’s outreach to artists. This interview with Hypebot is a good primer on the arguments Spotify has been using in its (often behind-the-scenes) discussions with artists. “People need to transition from unit-based thinking to consumption-based thinking in terms of royalties. We feel the metric of success should be based on how many people are listening to your music over a period of years, as opposed to looking at how many units are shipping in one week…”
Indie label group Beggars Group’s chairman Martin Mills weighed into the debate in August 2012 with this point: “Some of our catalogue artists earn more from streams than downloads of individual tracks [or] any other format. If we didn’t have digital, we wouldn’t have a business.” More recently, in January 2013, he told The Guardian that 22% of Beggars’ digital revenues came from streaming in 2012, with the majority of its artists now earning more from streams than downloads. A crucial point, too: Beggars pays all artists 50% of streaming revenues. “The right thing to do in this nascent stage of the market,” according to Mills.
Independent label Glassnote Records is currently riding a Mumford & Sons-powered wave, with acts including Phoenix and Temper Trap also signed. Founder Daniel Glass has regularly contributed to the streaming debate, with positive views. “To be aggravated right now and to be obsessed with the monetization is the wrong place for us as a business to go. Every time we do that, we shut people down, and we stop something that could be good,” he told Spinner in January 2012. In October that year, after Mumford & Sons sold 600k ‘Babel’ albums in the US in its first week of release, he followed up with Billboard: “When you have quality and you’re in the sophomore stage of this band’s career, I think the fear of holding it back is worse than letting it go. Opening up the faucet and letting people hear it, stream it and all that stuff is definitely very healthy.”
Another independent artist’s view, this time on Why I’ve Taken My Music Off Spotify. He outlines two main complaints: first, the fact that major labels have a stake in Spotify – “a controlling say in how it all works, how the payments work, and who gets what”. Second: a lack of transparency around their deals with rights organisations. “Spotify won’t tell anyone what they pay. Their payments are obscured, and they defer to the labels saying that artists only get paid by the labels and collection agencies anyway. It’s bollocks. If they are paying x-amount per stream to the PRS, we should be told that. If there’s any more that goes straight to the distributors/labels, we should be told that too.”
ECONOMISTS AND ANALYSTS
Now for some real data-crunching. A number of economists and industry analysts have been trying to get to grips with the streaming payouts debate during the last couple of years. Here are some of the most useful sources.
Will Page / PRS for Music
The research paper How to dance to ARPU, when licensees call the tune (PDF) was published way back in November 2009 by British collecting society PRS for Music. It’s an early attempt to gauge the value of streaming music, compared to the average spend of existing music buyers. “In the context of £63 per music buyer, a subscription service that attracts a loyal following at £10 per month, totalling £120 per annum, is nothing to ignore… The difficult question however would be: who opts in to such a service – she who was previously the £63 per annum “average” buyer, she who was previously a £150 per annum buyer, or she who was previously a lost soul who rarely ever purchased music at all?”
Former Forrester analyst Mark Mulligan published his own How Much Streaming is Really Worth to Artists: A Consumption Analysis in December 2012, noting that the streaming payouts debate’s focus has been “on quantity of data not quality and, most importantly, data has often been misinterpreted and stripped of crucial context”. He took a different approach, producing a Consumption Analysis to create a like-for-like comparison between the value of downloads and streams to artists. The conclusion: “Streaming services are clearly much closer to download services than the current debate suggests.” Also see his earlier We Need To Talk About Streaming (again) post.
If you’re at all interested in the streaming debate, economist David Touve’s blog is a must-read. Example posts include Rockonomic: £0.000073 ($0.00012), the value to labels/artists/performers of a spin per Radio listener in the UK(an attempt to calculate the value of a radio play for artists, and thus compare it to streaming payouts); It may take 35,000,000 active users in the USA for the yearly royalties paid by Spotify to equal those paid by iTunes? (which digs into Spotify growth projections); iTunes downloads versus Spotify streams, a comparison continued (another comparison post); and for some broader context on the streaming/subscription model: How the first subscription-based music service was built online, and why it’s time to move on. Long titles, but long on insight too.
A lot of the debate around streaming music is being driven by the current size of Spotify and its rivals in the US, where it’s still early days. But what about countries where streaming has been around longer, and has become more popular. Can the model scale? Recent figures released by the IFPI in Sweden and Norway suggest it can.
Overall Norwegian music sales rose 7% in 2012, with subscription streaming services worth nearly as much as all physical music sales. In Sweden the picture is even rosier, with total sales up 14% in 2012, with streaming accounting for 90% of digital music revenues – which in turn were 63% of overall sales.
These figures aren’t proof that similar growth can happen elsewhere, and they only deal with revenues paid to rightsholders (as opposed to artists). But they are a glimpse of a world where streaming is mainstream, and where it’s increasing the overall size of the music market after years of decline.
MORE OPINIONS / DATA
If that wasn’t enough for you, here are some more articles to read. Start with an opinion piece by Nashville label-services company Thirty Tigers’ president David Macias: Making Dollars: Clearing Up Spotify Payment Confusion. It’s a detailed response to Damon Krukowski’s Pitchfork article, going into the income splits from Spotify. “ The economics of Spotify conform to the economics that have existed in the music business for some time. It’s just a perceptual shift in the transactional relationship…”
Also good: SpotiDJ’s roundup post on Spotify payouts. “Stop staring at the rate per stream. The more important part is the number of users and the effect that has on the number of streams.”
The recent New York Times article As Music Streaming Grows, Royalties Slow to a Trickle is a good primer on the state of the debate in January 2013, working in Pandora as well as Spotify. A notable quote from Metallica’s manager Cliff Bernstein on streaming cannibalising downloads: “There is a point at which there could be 100 percent cannibalization, and we would make more money through subscriptions services. We calculate that point at approximately 20 million worldwide subscribers.”
Good stats from the BPI on streaming in the UK: It claims that Brits streamed more than 3.7bn songs in 2012, and that “the music streaming market is now worth more than £49m to British record labels, accounting for 15.2% of digital trade income”.
Some final figures and context on Spotify include its 2011 financial results (revenues of €187.8m with 83% of that coming from subscriptions, but a net loss of €45.4m); the company’s recent claim that it expects to pay out $500m to music rightsholders in 2013 (we did the maths to work out this would mean revenues of around $715m); and this interview with CEO Daniel Ek and this one with chief content officer Ken Parks to gauge the official line on Spotify v Artists.
More will follow here, according to your suggestions. Let us know what other sources should be added!