Twelve Percent Of 43 Billion Dollars

Artists earned 12% of the $43 billion generated by the music industry in 2017 in America, according to a report by Citigroup.

I can think of many reasons why this is unsurprising, but it’s still an uncomfortable statistic to be faced with- I’ve read the report, and it’s honestly quite damning. A couple thoughts;

  • The US music copyright laws need a drastic overhaul. In 2001, Rob Glaser, former Chairman of MusicNet, said this about U.S. music copyrights:

“It’s as if Franz Kafka designed this system and employed Rube Goldberg as his architect.”

  • Record labels have been running an outdated business model for quite some time, and nobody seems to have noticed. Pre-digital, it was almost impossible to tour or publish independently, simply because the production costs of printing and distributing were so enormous. With the advent of the internet, it’s possible to completely cut out the middle man.

  • Spotify pays $0.0007 per stream. This came up recently in the Astor Sessions, and I maintain my position; if you are expecting to make money from Spotify, you will be sorely disappointed.

  • Bands make most of their money on tours. Unfortunately, LiveNation, TicketMaster, StubHub, and other ticket sellers act as unneeded middle men, free to skim off the top of the ticket price due to exclusivity contracts with venues.

  • Spotify has cannibalised CD sales in an unexpected way; people who pirated and bought CDs purely to support artists do not feel the moral obligation to do so if they’re using a legal method.

Albini (producer of Nirvana’s ‘In Utero” wrote a seminal article on the subject in the nineties, which is still referenced today. The capital needed, combined with payola made it difficult to break into the mainstream independently.

Another thing I found very surprising from the report was how little money Spotify was making- streaming is making record companies profitable again, at the expense of their own profitability. The record companies’ piece of the pie is large enough that I would honestly be surprised if Spotify and co didn’t follow in Netflix’s footsteps, and start signing on artists, a la Netflix Originals; owning the entire chain of production is the only way to stay competitive with similar service providers.

Look out for Spotify Unearthed Artists, or Apple Exclusive Artists (remember the Beatle’s exclusivity contract with iTunes, anyone?) in the coming years, because it’s the only way these streaming services will stand to claw back that huge piece of the pie that they’re giving away to build their userbase.

Once Drake (or substitute whichever artist you fancy) signs on to Apple Music and pulls their music from Spotify and Tidal (which attempted to do exactly this, but started with the artists and not the userbase), they’ll start jacking up prices, and lowering payouts to musicians, threatening to blacklist them if there’s any stink about their predatory business practices. Either sign on as an Exclusive artist for a $0.0008/stream payout, or get next to nothing for your music (ignoring the fact that $0.0008 is already next to nothing!)

Payola 2.0.

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