What happens to the pool of money when more people start to adopt a streaming service?
You see, when more people are listening (either to ad-supported free or subscription services), more money is generated. The higher the amount of money generated, the better the payouts.
What did the music industry have before streaming?
They had the iTunes store and the record labels were still hoping that people would go back to buying CD’s. Otherwise, there was a lot of copyright infringement which led to $0 in income.
So in comes streaming via YouTube at the lowest entry point.
Free for the customer.
The aim of the service is easy. Get millions upon millions of people to use it.
Streaming is a disruptive technology. YouTube demonstrated this and in its early beginnings it didn’t care about copyrights at first. Remember back in 2007 when Viacom sued YouTube for $1 billion, because they claimed that YouTube was nothing more than a piracy site. Sort of like how the VCR was nothing but a piracy tool by the MPAA, or the MP3 player. Yet, all of these services, once they had a chance to grow proved to be a profitable tool for the entertainment industries.
So from YouTube, other streaming services enter the market. They all pay the record labels a license to have music on their service. Freemium was enabled to compete and kill off piracy.
Every stream (regardless if it’s on the free platform or the subscription platform) generates a royalty payment back to the labels. The more people who stream, the bigger the dollars going back to the record labels, copyright collection agencies and the publishers.
If freemium goes away, it doesn’t mean that people will start to pay again. Sort of like how people stopped to pay $18 for CD after Napster and in the process, killed off Tower Records and other brick and mortar shops.
The recording business side of music has already hit rock bottom.
Now the only way is up.
Recorded music revenues are increasing due to the monies coming in from streaming services.
Our move to an on demand culture means that streaming has won.
There will always be the 10% who will never pay for anything. But 90% would. Sometimes they will pay more, sometimes less, sometimes none.
And the artists complaining of getting screwed need to re-negotiate with their labels, who are using the artist catalogue as leverage to;
- obtain high license fees from the streaming service
- obtain a share/stake of the streaming service, so when it goes public the labels cash in
- be paid the 70% royalties from the streaming service
So it’s no surprise that a Publishing company owned by a record label is up in arms over royalty payments that haven’t come to them.
Especially when the record label and publishing company in question, Victory Records are well-known for not paying artists their royalties. I am sure there are accounting issues with the royalty payment system and there are many reasons for that.
Did you know that a lot of money just goes missing in the music industry?
A report from Berklee College of Music estimates that 20 to 50 % of royalty payments get lost in transition and do not make it to the ones who created the songs. The same report puts a $45 billion value to the music industry. When you do the math, you realise that is a pretty big sum that just goes missing.
As the Fusion article states;
“Companies that stream music—like Spotify, Pandora or Apple—pay artists in exchange for playing their songs. Somewhere between the company cutting a check to cover the music and the artist— be they a performer, a songwriter, a sound engineer, or a producer— depositing money into a checking account, dollars are disappearing.”
It’s a well-known fact that the record labels are very creative when it comes to their accounting, and until the industry increases its transparency, there will always be misuse of royalties.
Which leads to stories like this?
In case you don’t want to click on the link, it is the story of James Blunt, who claimed via Twitter that he gets paid £00.0004499368 per stream (converted to dollars he’s getting $0.0006968992 per stream). If it relates to Spotify streams only, then the final payment that Blunt is finally getting is pretty low and is further evidence of the record label and collection agencies skimming a lot from the initial payment.
And if you think you can’t make money from streaming, then read this article.
And where does all of this leave the music fan, cranky as hell as they hear over and over again how they need to pay for music, when in fact we overpay for concert tickets and merchandise. A successful act today is making more dollars than they’ve ever made, however it is less from recordings. And we are looking for ease of use first and foremost. That’s how Spotify killed P2P to begin with, through convenience. And convenience is going to generate a lot of money for the recording industry. Let’s hope they put that money back to the people who deserve it, the creators.