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How Will the Wolf Survive: Can Musicians Make a Living in the Streaming Era?

I have written elsewhere that it looks doubtful that musicians will be able to make much of a living from their recordings given the kind of pittance that trickles down from streaming services after record labels and others have taken their pieces of the pie. It appears that it will be harder and harder for musicians to even get to the level of audience where they can make a living based on income from live shows. My assumption in coming to this conclusion is that the impact of these services will be this profound because they might soon be the way most folks consume recorded music. Music consumption through streaming grew 32% from 2012 to 2013 in the U.S., while overall music sales fell 6.3%. (Source) At present these services are, in some countries, a small ancillary revenue stream for musicians, and in those cases they’re viewed as another welcome revenue stream. But I’m curious as to what happens to musicians when these services become more ubiquitous—when streaming becomes the new download (just as the download took over physical CD sales)—which is what the owners, partners and investors in them intend.

Defining terms

When referring to music, people often conflate the word download with piracy—which is incorrect. Lots of music files on iTunes, Amazon, Soundcloud and iMusic are downloaded legally and paid for, while other downloads might be offered for free directly from the artist. That’s the artist and their labels’ decision if they want to give away a song. I’ve done this plenty of times. It works—folks are more inclined to give a whole album a try if you give them a free sample. Would I want to give away the whole album? Most likely not, unless it was a loss-leader for something else that I figured was a surefire money-maker. I’m not all about money, but, like most musicians, I am about survival. 

Similarly, an artist might decide as a marketing strategy to stream some songs or even a whole album on their own website (or on NPR or on a music blog). There are also radio stations that stream their live broadcasts online. (KCRW is a good one, as is WWOZ in New Orleans) Then there’s Pandora, Samsung’s Milk and similar online or mobile services that are like radio in that you cannot simply play whatever song or album you feel like hearing, but do have the control to play music within some sort of genre. Artists get tiny amounts of income from these sources. ASCAP just lost a major court case with Pandora—ASCAP ( a performing rights collection agency) wanted the amount to rise up to 3%, but the judge did not agree. 

Artists, ASCAP, and BMI (another performing rights agency) may gripe about the small percentages they get from these sales and streams, but it’s not as likely to ultimately have the same impact on an artist’s pocketbook as future as streaming-on-demand—which is what I’d like to address.

Streaming-on-demand services like Spotify, Rdio, Beats or YouTube’s forthcoming version (or even YouTube as it presently exists) allow one to play exactly what you want, when you want it—as if you own the record. And—excluding Beats, which one has to pay to access after a free trial—you can usually have that access for FREE. This reinforces the idea that music is something you can (and should) get for free, even if now it’s “legal.” For consumers this is a pretty amazing deal—it’s like Napster, but legal! The government tends to view things that way too—what’s good for the consumer is theoretically encouraged and supported. Sadly, consumers and businesses that cater to their demands don’t often take the long view; they’ve been known to overfish huge swaths of the oceans, spill oil over and over, chop down all the trees in a forest and then wonder why the topsoil that would support reforesting has washed away. So, I wonder similarly if streaming-on-demand might be similarly a business model that will deplete the resource—we who create music—that it depends upon. Many industries have depleted the resources they depend on, it’s not like it hasn’t happened before.

I might be wrong, however. I hope I’d be willing to admit it if I am. There are a few counter arguments that I’ve heard in response to my concerns. They’re similar to arguments one has heard from the digital world when one wonders about the future of writing, journalism, filmmaking and many other creative activities that require a lot of time and work and are similarly being offered cheaply on subscription or can be found for free. The Internet has laid out a cornucopia of riches before us. I can read newspapers from all over the world, for example—and often for free!—but I have to wonder if that feast will be short-lived if no one is paying for the production of the content we are gorging on.

Anyway—here are the main counter arguments I get when I raise these questions. Some of them are valid and others are… well, maybe self-serving is a nice way of putting it.

1. Recorded music—and especially the idea of making money from it—is so 20th century. Suck it up and move on.

Valid point and true maybe—the first part especially, but the question remains for musicians what is the alternative model for making a living? I have a feeling this comment (and it’s fairly common) doesn’t actually imply that recorded music or journalism or movies should be heaved into the scrap heap, but rather that the physical versions will in all likelihood vanish (which I agree is probably true) and therefore the idea of making any money at all from recordings should be abandoned.  Somehow the argument jumped from the death of a specific format or delivery system to the idea that the whole art form of recording has no financial future.

For arguments sake let’s assume that there will be no significant money to be made from recordings, despite the leap in logic. As a result all musicians and recording artists will have to be “good at the live thing” and those recording artists who don’t perform, like Brian Eno, Kate Bush (woops, she’s going on tour!) and quite a few others, will never come into being. It won’t be the end of the world, but it would be a considerable loss. (Yes they could still make recordings, but how long would they continue slaving away for “exposure”?)

Recordings have another cultural consequence- they are a way of hearing music that is not physically available where you live—music from other cities or even other parts of the world. I can buy recordings by African bands because they were recorded. If we go back to the way things were 100 years ago, if no one makes recordings because no one is buying them, we’ll become culturally isolated again.

So, while I might agree with the notion that physical manifestations of recordings are so 20th century, I do wonder how musicians and composers and singers might continue to fund future recordings that best represent their creative thoughts without revenue from the sale of those recordings. 

2. The move to streaming services as the principal means of music consumption inevitably does some damage. That's how the world works and how things progress. Progress is disruptive. One simply has to adapt to the inevitable. 

Sounds like Donald Rumsfeld saying, “Shit happens!” This is the mantra of the digital and technological inevitablists, and those folks often use this mantra to justify crushing smaller folks so their own business can be king of the hill. Yes, Walmart and Amazon offer cheap prices and a wide selection, so—like a lot of these services—they are attractive to us as consumers. But there are consequences: small, family-owned and -run businesses are destroyed by Wally World and the quality of life in those communities is then reduced significantly. A mall is not the same as a main street—unless you measure quality of life by cheaper prices.  Co-existence of various retail models isn’t considered an option. It’s dominance or nothing. It isn’t a meritocracy as they claim either. Amazon doesn’t always succeed because they’re better—often they succeed because they intentionally and ruthlessly drove their competitors out of business. Google does the same thing, as did Microsoft. Revenge of the nerds, indeed.

Inevitablists feel like all technology unleashed on the world is progress, and therefore unstoppable, and we shouldn’t fight it or complain. It’s Darwinism—we should adapt or perish. Indeed, the ability to adapt is something we all need, but this argument has its limits—one can’t expect people to unquestioningly adapt to anything that technology or greedy industrialists unleash on us. Are the Chinese expected to grow some kind of bioengineered air filters because their air is now so polluted? Are people in West Virginia supposed to magically adapt to be able drink poison?

In this view the people who complain about the impact of technology and the giant corporations who control it are like those who complained about the printing press, the mechanical loom and videotapes, and by complaining about the long term impact of online music streaming, I am revealing myself as an old fart who can’t or won’t adapt.

However, I'm not sure those complaints about printed books and VHS tapes were always coming from the artists and creators who felt they weren't being adequately compensated. I think the complaints might have come from the church and the governments who saw the dissemination of information and media as a dangerous and threatening thing. We musicians love having our work disseminated. And wasn’t it the movie studios who worried about the impact of VHS tapes and VCRs? Not the filmmakers. I don’t remember too many musicians getting behind the “home taping is killing music” initiative that the record companies tried to establish with regard to cassette tapes. That was an industry thing. We musicians aren’t responsible for the insane copyright extensions in the last 50 or so years, either. Now, significantly, the industry is in actual partnership with the streaming services, so we don’t hear them complaining at all.

Musician Marc Ribot responds to the idea that these services are ‘technological unemployment'—the process by which a new technology makes an old one obsolete and inevitably puts some folks out of work:

“This is NOT the case with music: neither the software nor the employees of Spotify, Pandora, YouTube, or Pirate Bay have replaced the service that musicians and recording artists provide: creating recorded music. Not only has the product of our labor not been replaced, it’s generating more profit then ever: just not for the people whose labor creates it.“

If consumers and corporation owners are benefiting from this technology—which seems to be the case—but artists, the people who actually create the stuff, are losing out—then the current model wouldn’t seem to be sustainable: the content will run out eventually. To go further with Ribot’s argument—on-demand streaming in its present model is like a better, cheaper, faster food distribution network that not only eliminates small delis and grocery stores, but eliminates the farmers as well. 

3. Scale will make the difference. Your concerns and fears are premature because if these services are allowed and encouraged to grow and reach their ultimate potential- they will be 20 times larger than what they are now in North America—then artists will indeed make a decent living from this music consumption model.

I poked around and here are some reports from places where these services have already achieved some sort of ubiquity. From Stuart Dredge:

Norway showed startling 17% growth year-on-year for the first half of 2013, with streaming accounting for 66% of all recorded-music revenues there. This, on top of 7% year-on-year growth for 2012 as a whole. Swedish music industry body GLF has announced that total recorded-music revenues are up 12%… Digital accounted for 75% of those revenues, and streaming now accounts for 94% of that digital income. Physical sales fell by 24% in the first half of 2013 (although vinyl was up 50% as part of that) and downloads were down 20%.

In summary: streaming music HAS cannibalized downloads in Sweden, but grown the overall pie again, although the growth in the first half of 2013 is slightly down on 2012 as a whole, when recorded-music revenues rose by 13.8%.

This seems like very good news! Maybe I should shut up right now?

A few of us have done as much (online) research as we can and here’s what we found out: Sweden is held up as model for what the transition to streaming can do. Music fans there never bought into paid downloads—they sort of transitioned straight from Napster to Spotify (which originated in Sweden). 95% of the digital music revenue in Sweden comes from streaming services. (They don’t buy many CDs, by the way—as digital makes up 70% of the overall music industry revenue there.) There are external factors that made this possible—excellent broadband everywhere, for example—so it’s not like every place can automatically be Sweden. The record company income is actually growing there, so they seem to be fine with this as far as one can tell—but my question is how are musicians doing?

From Digital Music News:

The Swedish Musicians’ Union are bringing a lawsuit against the record labels there, alleging that the labels are not only screwing artists, but extending digital streaming rights that they don’t have.

Spotify asserts that they can’t be screwing artists because they ‘pay the labels’.  Which is why labels are the target. Musician Billy Bragg points to possible legal action against Universal Music Group and Warner Music Group, both majors that have received massive advances and equity shares from Spotify while passing little on to artists. It’s estimated that artists capture between 6 to 10 percent of revenues received from companies like Spotify. You can’t live on that.

This is a pretty big issue—are the labels who are in league with Spotify and the like keeping way too much of the payments for themselves? 

The Democratization Of Music

One of the knock-on effects of ubiquitous streaming is the democratization of music. That sounds like a wonderful thing. But, just as in a governmental democracy, you tend to get a medium level of everything, at best—so seems to be the case with consumer’s music budgets, too. When, in the past, you had your limited pocket change to spend on music each month, you’d carefully choose a CD or a handful of (legal) downloads. With a subscription model, you aren’t limited to a handful anymore—you pay your fee (if you’re not going the free route) and can sample loads and loads of songs and artists. Theoretically the payments are spread amongst all those artists. 

Now, I don’t know if this is a real long tail phenomena—I seriously doubt if most subscribers are using their freedom to explore and seriously check out artists they’ve never heard of. I’m not sure the obscure artists on the end of tail will benefit and the tail will grow longer and more even. More likely the handful big names get checked out by a wider variety of folks. The democratization seems to imply that folks will indeed check out a wider variety of artists—but within a pretty proscribed pile, is what I expect. As a result the income from streaming services is spread around a bit more, and there is definitely more music to check out than ever. That is indeed good news… and it is good that some who might have been left out given the formerly limited discretionary funds now receive a trickle. But it also seems that the spreading out will mean that no one except the big names will ever get enough to make a living (from their recordings).

In Spain, another country where on-demand streaming has become the dominant form of music consumption, the artists and small labels aren’t so thrilled either. This from a friend, Javier Liñan, who has a small label called El Volcan (check out their new record by an artist called La Negra!):

“I´m sure that streaming as a way of listening to music is here to stay… the thing is that we all pay a lot of money to have fast internet at home, cellular phone service and computers. And thanks to this new way of consuming music, books, and films there are people earning a lot of money—especially the big telephone companies... but they are the wrong ones... we live in fast times and the law is very slow. I collect very little money from Spotify.”

If scale is what will ultimately make these services sustainable for artists, then are we being asked to endorse a monopoly? It seems that way. Right now a few on-demand streaming services are battling it out—YouTube/Google, Apple, Spotify, Beats—but can multiple services co-exist? If a few companies could co-exist that might be a good thing; not just for artists, but also for competition and future innovation.

Some of these giants have shown they don’t play well with others, so co-existence seems doubtful. Many web businesses only work once they reach ubiquitous scale—if they’re the only game in town. There’s only one Amazon, one PayPal, one Facebook, one Google, one eBay and one Fresh Direct. Monopoly, however, has not historically been good for consumers or for innovation—regardless what tech companies say. Power corrupts; it’s a given.

For this scale argument to work there would have to at least be transparency in accounting. Money will only flow to artists in the agreed-upon percentages if there is transparency. If the accounting remains hidden, secret, obscure—as it is now—then so does the money.  We have tried for about two years now to obtain some figures that would give a clear picture of what a medium-level artist might reasonably expect to make in these various scenarios. Granted there are lots and lots of factors to figure in, and any figures would be ballpark estimates, but even that seems to be impossible to obtain. I would LOVE to be proved wrong here, and shown how this can work and how musicians can make a living—but that hasn’t happened yet.

I suspect labels won't automatically agree to transparency. I already have to audit Warner every time I want to know my sales, downloads and streaming metrics. Spotify, for example, is currently only required to account back to labels not artists (not surprisingly, and maybe reasonably, as the labels control the copyrights on the recordings—the artists traditionally don’t). Streaming services hold valuable data on fan and consumer behavior that would be beneficial to labels and artists in order to market recordings, sell concert tickets and identify where they are strong. (Spotify has made some signs that they might address this transparency issue a little bit and I am communicating with folks at Beats to determine how their accounting might work—it’s encouraging that the lines of communication are still open—but still no easy formula or estimates in sight.)

To sum up, the scale argument scares me because it smells like monopoly. And if it were to work, there will need to be transparency, which is difficult to get corporations to agree to.

4. The Internet has been good for artists’ independence. They are freer now than ever before—they can record more cheaply and even control their distribution, if they want to. 

Yes, anyone can post their music on the Internet. The previously prohibitive costs of making physical copies can now be bypassed. Musicians can sell their music on digital platforms like Bandcamp or on their own websites. Personally, I use Topspin as an e-commerce platform to sell recordings and products via my own website: Topspin takes 20% of everything sold through their platform, which seems like a fair split to me. But artists can't really do a homegrown version of the on-demand streaming model. So if that’s how folks will consume music, artists will have no choice but to cave in and accept the terms of other platforms—which have not proven to be very fair thus far. (As of this writing, Topspin has been bought by Beats.)

There has been a flowering of creativity and possibility somewhat thanks to the web— an incredible variety of music has always been there, but now it’s easier to find stuff located away from the spotlight. There’s so much weird and wonderful music out there; as a music fan, it’s exciting. In recent years you occasionally see what would have once been fringe artists, formerly with miniscule audiences, now reaching sizable numbers of fans—it’s encouraging!

But then, to harp on this again—how do those who make this vast amount of amazing musical stuff derive any significant income from the results of their new creative freedom? Getting your music out there is important, but it’s different than making a living on it. Sometimes there are fluke hits and those one shot artists do actually derive some serious income from their work. But this new freedom hasn’t manifested in a sustainable financial boon for artists:

“We’ve had 10-11 years of American Idol, so you’ve had 100 or 110 top ten people, and you can count on your hand the number of careers that have sustained off of that,” Irving Azoff said late last year.  ”So that just tells you that even with the massive exposure of network TV, how hard it is to make it in the music business.” 

So, while the Internet may be the Wild West for musicians, with open range all around, that myth butts up against the “independent” artist who’s unaffiliated with a commercial or corporate entity. The question remains—how will the middle range of musicians manage to have a life? Sure, absolute fringe artists who write oddball stuff will always have to supplement their income and there’s plenty of crap music that deserves to stay invisible (and we’re lucky we aren’t subjected to most of their efforts). The big commercial artists will have the opportunity to shill for Doritos and perfume lines to compensate for their declining recording sales, but how will the “middle class” survive? Where’s that long tail?

Years ago, Chris Anderson proposed that one side effect of the new technologies would be that artists in the middle ground would have a better chance of surviving in the new era, as they would be part of a “long tail.” Rather than being booted off the shelves for the latest hit, their work would remain forever available on the new virtual shelves and would receive a steady never-ending trickle of income from hither and yon. He claimed that the tail might end up being more lucrative than the head. Eric Schmidt of Google claims otherwise:

“So, while the tail is very interesting, the vast majority of revenue remains in the head,…And this is a lesson that businesses have to learn.  While you can have a Long Tail strategy, you better have a head, because that’s where all the revenue is.”

5. Streaming services are like broadcast radio, which music folks worried about at first, but eventually decided that it actually helped promote musicians work—so some fees were waived.

We’re back to defining what is a streaming service. Yes, Pandora, Milk, and the online streaming of terrestrial radio stations are indeed like broadcast radio. The on-demand services like Spotify, Beats, Rdio, Deezer and YouTube are different—they are the equivalent of owning the recording. The surprises one hears on radio—in whatever form the radio takes—are wonderful, and they are how many of us get introduced to music we don’t know about. I have a streaming radio station on my website that I or friends of mine curate every month. I pay Live365 for hosting and music licensing, and they in turn handle the paperwork with ASCAP, BMI, SESAC and Sound Exchange—just like NPR and every other broadcast or online radio does. It’s not cheap for me and sadly I doubt much of what I pay trickles down.

In the U.S., commercial radio doesn’t pay royalties on performances—so, famously, Aretha doesn’t get paid when “Respect” gets played on U.S. radio, as she didn’t write the song. Most other countries do pay performers, except Iran, North Korea, China and a couple of others, and this is something that some U.S. musician rights groups are trying to change.

You might listen for quite a while on a streaming radio service and not hear the act you hanker for (and you certainly won’t hear their whole album on demand or be able to listen off line), but you might hear something wonderful you didn’t know about. On-demand steaming is virtually equivalent to ownership—so why would you ever buy a CD or pay for a download again if you can have it whenever you want it, for a small monthly fee—or absolutely free?

Do I have any suggestions?

Well, yes, not that they will sort everything out.

1. What if there was no free on-demand streaming (unless the artist is directly controlling that access through their own site or as a publicity endeavor)? In other words, the free ad-supported Spotify version should go away, as would free music on YouTube—everything would transition to be a subscription-only service. If you want to hear a song or album whenever you want you need to pay a monthly or small one-time fee—just like with Netflix. Beats actually does this—or almost does—there’s no long-term free option on their platform.

2. Artists should get 50% of the income streaming sites now pay to labels—this usage of recorded works is a license and that’s the way licensing works. That would quadruple what artists get now, and though the amount of income still might not be sustainable—it goes part of the way there. This is not the responsibility of the streaming services, but is mostly a matter between the artist and their label.

There is good news in this department, as I recently discovered through an audit. I found that record labels are quietly changing their policies in this regard. Warner Bros, which controls many of my older recordings, has modified their split of streaming income to a 50/50 share. Maybe they saw a LOT of lawsuits heading their way and decided to, well, do the right thing. Others suspect that because they are partners with Spotify they can do some creative accounting and still appear to be doing the right thing. Have other major labels done this? I don’t know. Maybe the fact that they are partners in the streaming companies means they see the bulk of their income coming from co-ownership? This seemingly altruistic decision remains a little mysterious to me.

3. As with any other license, the artist should have approval whether his or her work can be used. We don’t require this for sales, but with licensing it’s customary. This is actually controversial—as ASCAP and BMI are the administrators of a lot of this performing rights income and they negotiate bulk deals as best they can. If everyone reserved the rights to make their own deals then it could be chaos—but the right to opt out would be nice.

4. Transparent accounting and data sharing. There should be transparent accounting to artists as well as their representatives. Big data and the gear that crunches it make this a technical possibility. Artists can use some of that information to become better at reaching their fans and marketing their music. That would be to the benefit of everyone.

My guess is that these issues don’t just apply to music—that as streaming and subscription models proliferate (movies and TV and newspaper and magazines we know about, and there already are subscription models for books!), these issues will become increasingly relevant to writers, filmmakers and soon even people who make and design 3D objects… which, unfortunately, will be the next frontier for piracy and “disruption.”

I know this all can sound a bit pessimistic, which can seem odd as there is such a lot of great music out there. I go out and hear music all the time and I’m constantly buying new things I’ve heard about. In that environment one might ask, “So, what’s the problem?” When I zoom out and try and do the math, that’s when these thorny questions get raised. People accept things the way they are (and I include myself in that category), until they collectively realize they don’t have to be that way.

DB
NYC

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