Music Industry

I’ve Been Thinking a Lot About Artists Complaints When It Comes to How Much They Make from Streaming. Here’s What I’ve Come Up With.

Whether people want to admit it or not, we’re moving deeper and deeper into a world where access to music is more convenient than possession.

Streaming music is the way we’re headed.  Get used to it.  If I have listen to any song I want, anytime I want, wherever I am on whatever device I choose, why should I ever need to possess a physical (digital file or something solid) of that song?  You don’t.

Let’s leave aside the issue that many of us will always want that physical artifact for personal, emotional, financial and philosophical reasons.  I’m in no way advocating that all physical product be eliminated.  What I’m saying, though, is that streaming allows us to sample and listen to more music than we could ever afford, on our own terms and for a cost approaching (if not literally) free.

Music consumers love this model. Artists? Not so much.  People like Thom York, David Byrne and others have come out against streaming, saying that artists are not being fairly compensated for their work.  The latest missive against streaming is from Armen Chakmakian, a Grammy-nominated composer and keyboard player.  He shared a recent royalty statement totaling a whopping $4.20 resulting from 14,277 performances heard through streaming music services.

On the surface, that sounds horrible.  A fraction of a cent per play?  What a rip-off!

Well, not really.  Here’s why.

Artists get performances royalties from a variety of sources, from streaming services to radio to television to being heard in the hair salon.  Those fees are determined by a variety of methods.

For radio, performing rights organizations such as SOCAN and Resound collect a fee based on a percentage of a radio station’s gross revenues.  The more the station makes, the more it has to pay for the privilege of playing music as part of their business model.  The same applies for television.  There are separate licenses for public performance that must be paid by arenas, stadiums, clubs, stores, spas–anywhere copyrighted music can be heard by the public. Again, if you’re using someone’s music as part of your business, the rightsholders of that music need to be paid.  It’s only fair, right?

But back to radio for a second.  Here we’re dealing with a blanket license.  That means it doesn’t matter how many people listen any time a given song is played over the air.  It could be 35,000 people.  Or it could be just one. Either way, the artist’s fee will be the same.  This has been the situation since the 1940s.

Streaming is different.  Artists are paid according to the exact number of people who listen to a given song.  That payment is usually a fraction of a fraction of a cent–but it’s still something for each and every play a song gets.

So let’s compare.  ONE spin of a song on a radio station might be heard by tens of thousands of people all at once, resulting in a payment to the artist of  a few cents.  A stream of the same song might be heard by the same number of individuals but spread out over the course of a week or a month.  Hit songs get lots of spins/listens/streams, meaning greater payments from both radio and streaming services resulting in higher royalty payments. However you slice it, the net result is the same.

In other words, streaming is the new radio.

Click to make bigger. (Via Hypebot)

Where it goes off the rails for artists is when the conversation turns to how streaming is killing physical sales.  According to this week’s numbers, album sales in the US are down 17% from this time last year, led lower by a 20% drop in physical CD sales.  Much of that can be hung the rise of streaming music services.  In Canada–ranked 86th in the world when it comes to streaming music–things aren’t quite as dire.  We’re 7% behind 2013 with CD sales down 7%.

Margins on CDs, vinyl and paid downloads are pretty fat when compared to streaming (or radio) royalties.  That has been very, very good for many, many artists for decades.  The fact that we, the music consumer, can now access any song we want without having to buy anything is great for us but lousy for the artist.

There are other things we can debate about the rise of streaming and its effect on artist incomes, but my goal here was to draw and apple-to-apples comparison with the way things are with radio.  So the next time an artist complains about how little he/she is making from streams, remember how the numbers and payments work.  Where we can sympathize is how they’re not making money by selling us pieces of plastic and digital files.

(More at Hypebot)

Alan Cross

is an internationally known broadcaster, interviewer, writer, consultant, blogger and speaker. In his 40+ years in the music business, Alan has interviewed the biggest names in rock, from David Bowie and U2 to Pearl Jam and the Foo Fighters. He’s also known as a musicologist and documentarian through programs like The Ongoing History of New Music.

Alan Cross has 38343 posts and counting. See all posts by Alan Cross

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