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Music Business

Streaming revolts and artist cuts

Did you know that 2002 was the peak of the global music industry in terms of revenue generated? Even more interestingly however is that last year the global industry generated somewhere in the region of 85% of the money it did in 2002 at its peak. The Recorded Music Association of America (RIAA) revealed that overall revenues in the US recorded music industry grew 12% to $9.8 billion last year, driven heavily by Spotify, Apple Music, Amazon Music, Pandora, TIDAL and other streaming platforms. Things look like they are on the up for artists and music makers, but in reality are they?

Recently in Germany a group of managers and lawyers representing some of Germany’s biggest artists have written a joint letter to the leaders of the four largest music companies in the world – Universal, Sony, Warner and BMG. The letter demands more money from the booming business created by the streaming platforms. Interestingly the letter doesn’t attack the digital platforms, but instead attacks record companies and implies that these record companies are taking too much of the streaming millions.

The artist’s representatives say that there is “an urgent and fundamental need to review and, if necessary, restructure the billing and remuneration model in the area of streaming”. BMG to their credit responded saying “we do not find it justifiable in a world in which record companies no longer have the costs of pressing, handling and delivering physical products for them to hold onto the lion’s share of streaming revenues”. The silence from Sony, Universal and Warner is somewhat deafening.

Just focusing on the streaming platforms for the moment, below is a list that shows which services pay the most from top down. Napster currently sits at the top and pays most per stream at $0.01900. The far right column shows how many streams would be needed to make the US Minimum Monthly Wage of $1,472. 

So the obvious question is where is all this money generated from streaming actually going? It’s hard to shed much light on how much major labels are retaining versus what they actually pay out to artists from their streaming revenue income but we’ve scoured the net and have got some indicative figures below.

Looking at recent investor filings from Universal Music Group’s parent company Vivendi, as well as Sony and Warner, it was found that the companies are totaling $19 million in daily streaming revenue. Yes that is a lot of money! Broken down even further, this trio of labels generate nearly $800,000 per hour just from music streaming services alone. According to the RIAA, streaming now makes up to 75% of these label’s revenues. 

Here’s the sad part though – record labels take as much as 80% of those earnings, as part of traditional record deals. Bigger stars who negotiate a more favourable royalty split still usually have to share around 50% of music revenue. 

This disparity has led to some music legends and pop stars complaining about how little they make from music streaming. If you remember, not so long ago Taylor Swift even went as far as removing all her music from streaming services at protest of the small percentage that artists receive. To her credit she forced Apple Music to renege on the refusal to pay artists for plays during free trial periods. She also forced UMG to agree to share it’s $1 billion stake in Spotify with artists when the label re-signed her.

It’s obvious the major labels and the tech companies are prospering in this new music streaming ecosystem. But it’s now time artists receive their fair share of the pie also, as at the end of the day, they are the ones who create the art we all love. Spotify has an admirable mission statement – ‘to unlock the potential of human creativity by giving 1 million artists the opportunity to make a living off their art’. It sounds great, but I believe they, as well as the other major streaming services, need to work with the major labels to make sure that they provide artists with a fair percentage of profits so they can actually make a living from their art. Otherwise we just run the risk of watering down the actual art, artists taking less risks and music becoming less inspiring as the music makers gravitate towards sounds that are more popular and generate more streaming revenues. I think I would seriously consider being an Independent artist in this day and age!



About Pal

Co-founder @ SendMusic

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