With revenue from live performances a distant memory, artists need money from their recordings more than ever before. And there should be plenty of that around, because the recorded music industry is booming: it was estimated to be over $20 billion dollars in 20191 and growing at over 20% per year. But reports abound of artists earning a pittance for their recordings: violinist Tasmin Little2 tweeted in May last year that her earnings for 5-6 million streams amounted to just £12.34. There’s more money washing around the upper echelons of the pop world, but battles between artists and their record labels are legion – the most public of these being Taylor Swift’s.
There have been winners and losers, but who and why?
The UK Parliament is currently running an inquiry into the economics of streaming: the evidence to the inquiry reveals the recording music industry to be a jungle of entangled businesses and agencies, each struggling for its place in the sunlight. There have been winners and losers from the streaming revolution, but who and why? Are there enough losers to threaten music performance as a profession? And if so, what should be done to help them?
The answers lie in a pile of copyright legislation and treaties across the world and in an aggregation of tens (perhaps hundreds) of thousands of rights contracts signed over decades in different territories, each with their own character. These are generally kept secret, so there’s not much data for statisticians to get their teeth into. But there are enough data points and anecdotes to identify the narratives that have created the current state of affairs. I’ll be explaining these to you over the course of three articles – and then giving my own opinions as to what should happen next.
I estimate that on a broad average across the world, around 13 cents of your subscription dollar is going to the artists who recorded the track, and 7 cents to the composers/songwriters.** We’ll get on to the details of that estimate in due course, but before we do that, let’s look at the first of our narratives.
The change in the way we listen to and pay for music – from Vinyl to CD to streaming
Let’s wind the clock back forty years, looking at the USA, which accounts for around half the world market in recorded music and where the RIAA keeps excellent inflation-adjusted records3. In 1981, sales of vinyl and cassette tapes are at $11 billion - they’ve been over $10 billion for several years. The CD has yet to appear: it will show up in the shops the following year and will trigger a bonanza as music-lovers throughout the world replace their vinyl: the industry’s sales will hit its peak of $22 billion in 1999.
Now the rot sets in. Revenue from the replacement of CDs by vinyl drops at the same time as piracy grows rapidly. By 2015, total revenue has fallen to $7 billion. CD sales are at just 8% of their 1999 peak. But from there, growth returns, driven by subscriptions to Spotify and its competitors. In 2019, revenue has returned to its 1981 level. Worldwide growth in 2020 will turn out to be somewhere around 20%, helped by people consuming more streamed music during the pandemic.
Streaming to the rescue...
The big all-you-can-eat streaming platforms – Spotify, Apple, Amazon and YouTube (with a very different business model) – credit themselves with rescuing the recorded music industry from the scourge of piracy. Overall, the industry may not be at the dizzy heights it reached in the vinyl-to-CD conversion era. But it’s by no means in dire straits: $20 billion dollars worldwide should be enough to maintain a healthy output of recorded music. The annual spend on streaming subscriptions by an average music lover may not be all that different to what they used to spend in record shops.
But where is that money going? Before we go into detail about how the industry divides up its spoils, let’s think about how much music there is out there.
...but who exactly are they rescuing?
The point about an all-you-can-eat streaming service is this: any new recording is competing for a share of the revenue pie with every recording made in the last seventy years. Camille Thomas, a very fine cellist with a major recording contract, told us that the next instalment of her life’s work will be the Bach cello suites. If she releases a recording of these, she will be in direct competition with 133 other cellists, from Rostropovich to du Pré to Yo-Yo Ma.4
She will also be in competition with every recording in every genre on the planet. The number of those recordings is enormous and is increasing at a dizzying pace: here are some numbers released by Spotify at their #StreamOn event last month:
8 million “creators” on Spotify at the end of 2020 (includes podcasters, who are a minority), expected to grow to 50 million by 2025.5,6
22 million tracks uploaded to Spotify per year
$5 billion paid out to rightsholders, of which
800 artists whose catalogues generated more than $1 million per year
7,500 artists generated over $100,000.7
Considering market shares and revenue shares, we will see that the $100,000 mark is probably equivalent to 1½ times the UK median wage. In broad terms, one in a thousand of the world’s musicians is earning what would be considered “a good living” from their recordings and one in ten thousand is getting rich.
The numbers ask ever more questions. A frequently asked question is how much money gets paid out for every stream? (On its own, by the way, that’s not a particularly useful question, but people get very exercised by it. The current answer is around $0.003 for streams by subscribers, and less than a tenth of that for ad-funded).
The elephant in the room...
That last statement reveals the elephant in the room: Google. The majority of music listening in the world – an estimated 51% of all music worldwide, according to music blog the Trichordist8 – happens not on Spotify or its equivalents but on YouTube – and they don’t pay upfront money to rightsholders.
YouTube relies on legal provisions known as “Safe Harbour”, whereby an Internet platform has severely curtailed liability for user-generated content that it hosts. This creates a fallback position, roughly speaking, that any payments they make to rightsholders are out of the goodness of their hearts, and enables them to negotiate with record labels and artists from a position of extreme strength. In place of conventional licensing, they have set up a system called Content ID9, whereby if you are a big enough rightsholder, you can register your content with YouTube. If someone uploads a piece of music, YouTube’s systems scan it: if a match is found, a payment to the rightsholder is triggered.
Those payments are small. Looking at 2019 numbers from The Trichordist, Content ID payments are $0.00022 per stream, around 15 times less than the industry average. Google estimate10 that they paid out $3 billion dollars to the music industry in 2019 (for reference, that’s around one fifth of YouTube’s total ad income from music and all other types of video).11
Although YouTube dominates the numbers, there are streaming platforms that pay out even less per stream. Sony Music estimate12 that a typical artist would need over 13,000 streams to earn £1 from QQ, a joint venture in China between Spotify and TenCent – that's 2.4 times less than YouTube.
So if that’s the market size, who gets what share?
If any artist or composer, be they aspiring, established or faded, wants to understand the future income they might get from streaming, they need to ask two questions that go beyond the simple “how big is the market”. Firstly, how are we choosing what music we stream – what will make us choose their music as opposed to anyone else’s? Next, how do the platforms allocate their payouts – how is it decided what will be their share of the subscription and advertising cake?
We’ll be looking at those questions in next week’s article... [now published, here]
Sources:
1. Statista.com, global revenue of the music industry, 8 Jan 2021
https://www.statista.com/statistics/272305/global-revenue-of-the-music-industry/
2. Tweet from Tasmin Little OBE (@tasminlittle), 18 May 2020
https://twitter.com/tasminlittle/status/1262323181228036097
3. Recording Industry Association of America, U.S. Sales Database, accessed 1 March 2021
https://www.riaa.com/u-s-sales-database/
4. Figure for the Bach Cello Suite no. 1, BWV1007 on Idagio.com, 26 February 2021. Excludes transcriptions for other instruments and any recordings not available on Idagio.
https://app.idagio.com/works/1151578
5. Daniel Ek, opening remarks at Spotify #StreamOn event, 22 February 2021
https://storage.googleapis.com/pr-newsroom-wp/1/2021/02/Daniel-Ek-Opening-Remarks-Stream-On-2.22.21-2.pdf
6. Tim Ingham, Over 60,000 tracks are now uploaded to Spotify every day. That’s nearly one per second, Music Business Worldwide, 24 February 2021
https://www.musicbusinessworldwide.com/over-60000-tracks-are-now-uploaded-to-spotify-daily-thats-nearly-one-per-second/
7. It’s not immediately clear whether or not multiple members of a band count as “one artist” in Spotify’s statement. If they do, the figures are considerably worse.
8. The Trichordist, 2019-2020 Streaming Price Bible, 5 March 2020
https://thetrichordist.com/2020/03/05//2019-2020-streaming-price-bible-youtube-is-still-the-1-problem-to-solve
9. YouTube help, “How Content ID works”, downloaded 19 February 2021
https://support.google.com/youtube/answer/2797370?hl=en-GB
10. DCMS Committee on Economics of music streaming, Oral evidence, 10 February 2021
https://committees.parliament.uk/oralevidence/1689/pdf/
11. Alphabet Inc, form 10-K for fiscal year ended December 31, 2020 (shows total YouTube advertising income for 2019 as $15,149 million.)
https://abc.xyz/investor/static/pdf/20210203_alphabet_10K.pdf?cache=b44182d
12. DCMS Committee on Economics of music streaming, Written evidence from Sony Music
https://committees.parliament.uk/writtenevidence/23082/pdf/
[** Update on 6th March 2021: The original estimate of 10% has been revised to 13% in the light of new data.]
