Streaming Music May Have Saved the Music Industry, But May Not Help the Artists

Streaming Music Companies Like Spotify, Pandora or Apple Music, Amazon Music, Tidal and YouTube Music have made billions of dollars in revenues. However, the average median salary of musicians has remained $20K since 1970. How can the popular streaming music providers benefit monetarily, but the artists whose music is being streamed not?

First, lets recognize who the top music streaming providers are and how many streaming subscribers they have garnered as of 2019:

Source: Statista, 2019
https://www.statista.com/statistics

The music streaming providers comprise of a huge subscriber base. Apple Music is leading the way with 49.5 million. Fortunately, having such a significant number of subscribers allows Apple Music or Spotify to make billions of dollars. With the growing numbers, this revenue model works. Even at a competitive price point revenue model.

But who are these music streaming service providers?

Music streaming services provide their subscribers with a database of songs, including playlists, videos, and albums as a monthly cost. For most companies like Spotify or Apple, the price range is typically $10 per month. For that monthly subscription rate, subscribers have access to a large library of music content. The access is made available online, via download to a device, and can be organized by how each subscriber desires.

However, while the music streaming service providers are making billions (yes, with a B), individual artists are not. Many artists are still not able to monetize on the new streaming revenue model. Unless, well, of course, you are Champagne Pappi — ubiquitously known to the rest of the world as Drake.

For instance, in 2018, the mega famous artist was Spotify’s most streamed artist. He had a whopping 8.2 billion streams. Given that the typical music royalty rate for an artist per song is 3.95%, Drake made approximately $33M just from subscribers streaming his music.

In contrast, an upcoming artist not as popular as the Champagne Pappi, earns nominally. With the 3.95% royalty rate, the upcoming artist’s song has to be streamed 253 times in order to make a whopping $1!

What about that complex music royalties distribution structure?

One argument for such a current royalty distribution in music is that the streaming companies like Apple Music have to get multiple music licenses. These music licenses include a sound recording license and a music composition license.

What are these licenses and who are they for?

The sound recording license is typically negotiated with the record label companies of the artists. In the music world, there are three (3) main record label companies — Sony Music Entertainment Group, Warner Music Group and Universal Music Group.

Then comes the composition license. As part of the composition license, music streaming companies have to secure performance rights and also in many cases, mechanical royalties. Performance rights are licensed from song publishers which are typically managed by BMI and ASCAP. The public performance license is required when the song is performed in public, including streaming on radio or television. As such, the music streaming companies likely have to pay mechanical royalties to songwriters, who write the actual lyrics of the song for many of today’s artists. In the United States, for instance, mechanical rights are governed by the Copyright Royalty Board.

CONCLUSION:

Music industry was on a decline before streaming services came along. Music piracy, change in technologies, and music preferences of new generation are some of the factors to blame. However, while the music streaming has allegedly saved the music industry by taking advantage of the revenue opportunities catered to a consumer base, the revenue distribution has not been fair to everyone involved in the music industry.

So, are there other avenues for artists to make money?

One option for artists is Sound Exchange. Once an artist registers his or her song on the platform, Sound Exchange collects and distributes royalties for the artist and the sound recording copyright owner, when content is played on a non-interactive digital source.

If you are an artist or sound recording owner, you can find more information on how you can make royalties on your music here:

https://www.soundexchange.com

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