Recently Taylor Swift made news by pulling her latest album from Spotify and other streaming music services. Her statement calls these new services “a grand experiment” and said she doesn’t feel comfortable putting her music into that system as it’s currently set up.
I agree with her. Taylor is smart to negotiate with her record being a hot commodity right now. I believe this comes down to royalty rates, not a full retreat from streaming pop music.
Before streaming/mp3 – Old Way– you heard a new song/artist either from a friend, browsing, or on the radio. If you decided you must hear it on-demand, you bought a copy for yourself. You’d pay $10-20 for a hard copy complete with artwork and case and take it home.
How did this system sustain for 50+ years? Old Way
1 – Radio payed royalties for every track they played, based on their total listenership. The radio earned their money from advertisers based on listenership/ratings.
2 – The $10-20 you paid for the album/cd/cassette was split up amongst the various parties that got that music to you: about $5 to the store, $5 to the record label, $3 to the distributor/warehouse, and maybe $1 made it back to the artist. This changed based on the deal the artist had, but no artist earned below $.25 per album sale.
3 – This gave us a functioning network of music stores, music distributors, music labels, and popular recording artists that could earn a decent living from their succesful recorded work.
The streaming system works very differently: New Way
1 – Radio is still around and paying royalties, but listenership has declined steadily for 20+ years, reducing ad rates and royalty payments.
2 – If you add Taylor Swift to your streaming favorites and can hear her songs whenever you want, Spotify pays royalties at the level of $.0005 per song streamed. Let’s use this to project some earnings. Taylor Swift now needs 100,000 streamed plays to earn the same as selling 1 single CD. New Way
Out of 10k fans, if half buy the new album that earns her $5000 Old Way. To earn that from streaming she would need 10 million plays from those 10k fans, or 1ooo plays per person (20 per week) all year. 5k fans that would have bought the CD would need to stream her song 40 times a week for a year to equal the same earnings from the CD years. New Way
3 – It’s not just Miss Swift’s bank account – think of how many other jobs are removed in this model — the music store (most are long gone), the music distributor (also going extinct), the music label (down to 2 majors left), the professional music studios (paid for by the labels), all the artwork and packaging, truck drivers, etc. and on top of that artists can no longer earn the same streaming hits to people. That’s a lot of jobs wiped out by online distribution of music.
I agree that streaming won’t go away any time soon, so the major artists will continue to negotiate over rates. I don’t buy any of the crying from the streaming companies about how expensive it is to license songs. You are launching an entire business on the art/content of others and you should have to pay a rate that allows your content creators to not just survive, but thrive.
I have legally streamed my music to at least hundreds of thousands of people and I have earned < $1 in all that time. It is not a sustainable model, convenient or not.