A reader writes:
I see that in the context of your Spotify conversation, a reader has claimed that musicians make “all their money from touring, and to a lesser extent, merchandise.” The music industry is sort of unusual in that many people have strong opinions about how musicians “ought” to be making money, despite not having any first-hand experience in how musicians actually DO make a living. We actually surveyed over 5000 musicians about their income and among the things we’ve learned is that only 27% comes from touring - much less than many people assume. And only 2% comes from merchandise, like t-shirts, posters, etc.
With regard to Spotify and streaming services, an important thing to understand is that what works for some artists may not work for others. In particular, streaming services are set up in a way that makes sense for labels and artists whose goals are based on mass-audience assumptions, like the major labels (which own equity stakes in the services). They may not work as well for artists who are trying to build sustainable careers on a more intimate scale. Here’s a blog post we wrote on the subject. In general we’d like to see systems that allow people who aren’t Justin Bieber or Taylor Swift to make a living.
Update from a reader:
The statistics offered by your reader are very misleading.
It would appear that the 5,000 musicians surveyed include very few who actually record and release records as featured artists for a living. The survey appears to be dominated by orchestra players, music teachers, studio musicians, and others. None of this is relevant to the issue at hand, which is whether Spotify and the other streaming services reduce the income recording artists make from their recordings and whether or not this is significant.
If one were to survey recording artists, I think you would find that a much larger percentage of their income is derived from live performance, particularly since record sales have declined in the last decade.
Your reader also misunderstands the nature of the relationship between major record companies and the streaming services. Sure, the three majors have equity interests in Spotify and in some other services. But they also have licensing agreements with the services under which the labels are paid royalties. I have some familiarity with this area and I can tell you that the equity interest owned by the major record companies doesn’t lead to a lower royalty rate under the licenses.
The real divide is between current artists who release new albums and so-called “catalog” artists. Anecdotal evidence suggests that streaming services have had a negative impact on sales of new releases. On the other hand, for older artists who have aging catalogs of recordings, sales of physical records and downloads have in many cases withered away, and for those artists, streaming services, as well as digital radio services, provide a new source of income.
I found the discussion of artist royalties very interesting. Two years ago I earned my masters degree in music business and focused my final paper on independent artist and what the business looks like for them. I’ll agree that royalties earned through Spotify, Pandora, and other similar free services are very low. But I’d argue that the alternative to those services isn’t people purchasing a download, but finding other free ways to access the music.
The bottom line for artists is that the cat is out of the bag with regards to getting music for free. It’s been over a decade since the Napster years, and the consumer expectations have changed drastically. Big-name artists like Thom Yorke can get away with pulling their music from Spotify because dedicated fans will pay for it anyway. For new artists, though, it is unlikely that unfamiliar fans would be willing to invest money up front in something they haven’t heard before. They’ll look for it for free, and if it’s not on Spotify or YouTube then there are other means to get the same thing without even a fraction of a cent going towards the artist. There are still dedicated music fans out there willing to invest their time and money to find the music they want, as the niche vinyl market shows, but they’re the minority.
I do feel sorry for people working to make it in music today. Technology has made it easier to record music and distribute it worldwide instantly, but harder to get noticed. Few artists have ever been able to make their living only through music, but more people than ever are trying to with little success. I’m currently working at SoundExchange, a performing rights organization that processes royalties for public performances of sound recordings on digital radio stations, so I know what those numbers look like.