The Music Business Has Changed
When Napster hit the scene in 1999, it completely changed the music scene. Suddenly we didn’t have to wait for new CDs or pray our favorite song came on the radio. Other companies soon caught on to the growing trend and began their own music streaming. Pandora, iHeartRadio — Spotify.
With more and more streaming services coming online, suddenly it wasn’t just record companies and famous musicians capitalizing on listeners’ desire for instant gratification. Independent artists and musicians had a brand new market too. They could access a wider audience than ever before, more than local bar crowds and friend-of-a-friend EP sales.
With this new market, however, there came pitfalls. How do you get paid as a musician when you aren’t selling concert tickets or CDs? Streaming services like Napster and Spotify and Apple Music pay the musicians who provide their content on a per-play basis. While this formula sounds simple, it’s everything and anything but.
Pay-Per-Play, how it works (or doesn’t)
Not all streaming services are alike, however. Non-interactive or webcast services, like Pandora, cost less and make less than on-demand or interactive services, like Spotify. This in turn means webcast companies pay their content providers less per play than on-demand companies. Other factors in determining payouts for artists include premium/paid subscribers vs. “freemium” or ad-supported subscriptions with paid subscribers generating more revenue than “freemium” services.
In 2017, these were the pay-per-play payouts at some of the biggest streaming services in the game:
To put these numbers in perspective — to make even just minimum wage at YouTube’s rates, musicians and artists have to register upward of two million plays. To make minimum wage through Spotify, they’d still have to get more than 300,000 plays.
Breaking down the Breakdown
If these numbers seem low to you, consider this: The Big Three, Universal Music Group, Sony Music Entertainment, and Warner Music Group, made $14.2 million — per day — solely from streaming services like Spotify.
Most of the money earned through streaming is made up of a sound recording royalty which goes to whoever owns the recording; usually record labels, film studios, or investors; but occasionally independent artists. The actual songwriters are allotted performance and mechanical royalties. However, mechanical royalties are typically collected by publishers through mechanical licensing administrators, like HFA (Harry Fox Agency), and what the publishers keep as a fee before paying the songwriters varies from company to company. Performance income usually goes to a performing rights organization. In the US, between 10-18 percent of royalties are deducted by ASCAP and BMI before paying writers and publishers. International organization like SESAC, GMR have entirely different rates. And, just to make a complicated situation even worse, revenue breakdowns for artists under a major label, indie artists, and self-releasing artists are all different.
Confused yet? The payout breakdown is even further complicated when you take into account how much of the market each streaming service actually serves. For instance, while Napster had the highest pay-per-play in 2017, it also controlled less than two percent of the market. This means that while artists get paid marginally more for their work, the number of plays is drastically smaller than more popular services like Spotify.
Fighting for the Future
As depressingly low as current payouts are, the future of independent artists and musicians is not a bleak one. More and more of the music community is pushing for fairer pay and reform within streaming services. To make the future one worth looking forward to, artists have to keep advocating for themselves and their peers. Put your music out. Collect your royalties. Make sure you’re up-to-date on your earnings and publishing paperwork. Apps like Songtrust [https://app.songtrust.com/signup/] can help you keep track of your royalties.
Please comment with your suggestions for fixing Pay-Per-Play… Your songs are worth it
By Hope Wager ~ FusionBuzz