Article: Don’t Panic – Spotify isn’t destroying the music industry, only changing it.

The more than decade-long strife between Spotify and musician’s rights groups often misses the forest for the trees. Now may, in fact, be a better time for musicians than ever before.

Since its inception in Sweden in 2006, Spotify has sent shivers down the spines of industry executives and recording artists alike. Since the inception of the recording industry at the turn of the (last) century, recording artists were paid via the sale of a unit of their work, be it a single or album. With the rise of Spotify and the music streaming model, this well-established business method was thrown off its axis, and human nature doesn’t respond well to this sort of change. Most of the criticism of this model has focused on one statistic: the royalty rate, roughly $0.004 per stream of a song,[1]Songtrust. “What Is the Pay Rate for Spotify Streams? compared to approximately 60-70 cents per download of a song.[2]Songcast. “Learn How to Get Your Music on iTunes and Collect Royalties.”[3]Both of these figures lack a lot of nuances, depending on the artist and their arrangements, these numbers would be divided by cuts from the label, songwriters, publishers, etc. The Spotify royalty … Continue reading While these numbers warrant analysis, they put the emphasis in the wrong place. Musician’s activists and the like should be more concerned with two phenomena: social stratification and the power of playlisting.

Now, if you’re a frequent reader of the site – first of all, thank you! – you might know that I work in the recording industry. This may reasonably guide you to expect a sort of Spotify-defensive stance for me. But a record label can only generate as much revenue as its artists, so smaller, independent record labels (of which I’m a part) have a similar stake in this discourse as well. It should go without saying that I want the artists to make a living off of their music and have the resources to fulfill their creative expression.

Returning to the royalty rate, this figure is somewhat misleading. A 2018 study from Citigroup found that musicians were receiving a higher share of revenue in the music industry than ever before, 12% in 2017 compared to 7% in 2006, while Bazinet found that Streaming services are now paying out more money in royalties than the album purchase model did at any point in the last three decades. In addition, music industry revenues have surpassed their 2006 peak, meaning that there is more money in the system than ever before, while Americans are also spending more on music than ever before.[4]Gierhart, Hunter. “How the Spotify Streaming Model Affects the Modern American Musician. While these gains can be attributed to the growth of the live music industry rather than Spotify, the point remains that Spotify is not the meteor that will extinguish all life on Earth as some have feared. Some artists like Vérité have even credited Spotify with augmenting the size of her live audiences.[5]Vérité. “Spotify Isn’t Killing The Music Industry; It’s A Tool For Enterprising Indie Artists.”

The real problem with the recording industry and Spotify echoes one that is pervading 21st-century society: social stratification. The rich get richer and consolidate wealth and resources while working-class musicians have to swim against this tide. Digital Media Finland found that the top 0.4% streamed songs on Spotify generated about 10% of the company’s royalty payouts.[6] Ingham, Tim. “Should Spotify Change the Way It Pays Artists? That is supported by Spotify’s cycling of a handful of artists in its top playlists, who represent safer investments than newer artists, as larger artists and labels have the resources and connections to obtain and maintain those placements. Notably, however, this is an improvement from the digital download era, when the top 0.4% of downloaded songs reflected a whopping 80% of revenues.[7]Day, Brian R. “In Defense of Copyright: Creativity, Record Labels, and the Future of Music.” SSRN Electronic Journal, 2011. doi:10.2139/ssrn.1609689.[8]Please note the comparison here: 10% of royalties compared to 80% of revenues. These two figures are certainly correlated but not necessarily commensurable.

It is also not a secret that musicians no longer need the support of record labels to make it in the industry. More people than ever before have access to uploading their music to digital distributors like Spotify and Apple and can connect directly with their audience and fans via social media. While the industry landscape is now full of opportunity, that also means more competition as almost anyone can take advantage of it, as evidenced by the emergence of entirely new genres like Bedroom Pop. To breakthrough, many need to front money to promote and market their music to achieve playlist placements and reach new audiences.

Many musicians won’t make money off their recordings in the same way that those 20-30 years ago might have. But there are still opportunities for sustainable income in the music industry, although the rise of COVID-19 has threatened traditional live music performances in a concert-dependent music industry. With fans paying more into the industry, more money going to artists, and more royalty payments being made than ever before, there is still reason for maintaining a positive outlook, but our critique of the streaming model needs more data than just one number.

References

1 Songtrust. “What Is the Pay Rate for Spotify Streams?
2 Songcast. “Learn How to Get Your Music on iTunes and Collect Royalties.”
3 Both of these figures lack a lot of nuances, depending on the artist and their arrangements, these numbers would be divided by cuts from the label, songwriters, publishers, etc. The Spotify royalty rate also shifts constantly as Spotify determines payouts by pooling all of its profits from advertising and subscriptions and awarding payments based on an a song’s proportion of the total streams Spotify accumulated. Read the Rolling Stone article mentioned later in reference 6.
4 Gierhart, Hunter. “How the Spotify Streaming Model Affects the Modern American Musician.
5 Vérité. “Spotify Isn’t Killing The Music Industry; It’s A Tool For Enterprising Indie Artists.”
6 Ingham, Tim. “Should Spotify Change the Way It Pays Artists?
7 Day, Brian R. “In Defense of Copyright: Creativity, Record Labels, and the Future of Music.” SSRN Electronic Journal, 2011. doi:10.2139/ssrn.1609689.
8 Please note the comparison here: 10% of royalties compared to 80% of revenues. These two figures are certainly correlated but not necessarily commensurable.

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