The latest anti-Spotify editorial screeching around the internet is David Byrne’s editorial on why he’s taking as much of his music off Spotify as he can. As an artist who owns their music, he’s totally within his right to do so. His personal reasons to do so are ones I can certainly respect. However, his public forum explaining his reasoning is full of gross inaccuracies, misrepresentation and bad math. In fact, this isn’t even the first time he’s used bad math to prove a point. Believing Byrne’s anti-streaming diatribe can be harmful to a musician’s own future earning potential. Let’s look at the facts.
Most of the misinformation is found in the fifth paragraph where Byrne mentions several previous artist posts about streaming revenue. To correct each point:
• Damon Krukowski’s payouts for “Tugboat”, a 25 year old song that was not originally a hit, largely focused on minuscule songwriting revenue, while Byrne is referring to royalties from the master recording. Once again, an artist uses most people’s lack of knowledge of the different revenue streams to forward an anti-streaming agenda.
• David Lowery’s widely-distributed blog post on Pandora also referred specifically to his songwriting revenue. See: previous bullet point. Plus, I debunked this here.
• The number of streams quoted by Byrne to make minimum wage for a group of four people comes from data that is actually four years old. Based on royalties rate my own label receives, the figure in 2013 would likely be around 75,447,280 streams a year. This is 68% lower than the figure Byrne mentioned, and while still a large number, the decrease is an indication that Spotify’s royalties are improving as adoption increases.
• Similarly, based on Byrne’s presumption of a 15% royalty rate, each Daft Punk member would earn close to $42,000 each for “Get Lucky”, not the $13,000 Byrne claims. But the 15% is likely a very low figure considering that Daft Punk’s record was the subject of a major label bidding war that certainly resulted in both a high advance as well as a higher royalty rate.
The rate that I used for the above math is $.00533 per stream, which is the blended worldwide gross royalty rate for Spotify that my label personally received for all recordings in a sample month from 2013. The rates for each song vary depending on how many plays are from subscription vs. non-subscribers. The rates also vary greatly from country to country, which can be as low as $.002 in countries such as Poland and Estonia, and get as high as nearly a full penny per stream in many of the Scandinavian countries with large adoption rates.
One of the issues artists need to wrestle with in a new streaming world is their ability to attract a global audience. If our music catalog were only attracting a US audience on Spotify, our rate would actually be lower than our overall royalty average. However, we’ve been able to have music that attracts people throughout the world which raises our overall rates. This also occurs with iTunes revenue, which typically pays out at higher rates in first world countries than the US does.
Another issue is the need to have a large body of work. I have been an advocate of artists releasing more music more often. This both creates more opportunities for revenue as well as more possibilities for a song to become popular enough to sustain an artist. Complaining about Spotify’s royalty rates and focusing on individual song examples rather than whole artist catalogs is a classic misdirect. It’s similar to when news media describe a trend, yet focus on one individual’s story (as outlined in Barry Glassner’s great book ‘The Culture Of Fear’). Saying that each member of Daft Punk only got $13,000 for one hit song sounds scary. Yet add in the streams from the other tracks from the new album, and then add in the new Spotify streams for tracks from previous albums that almost always occurs with new hits (not to mention the correct math). Even with Byrne’s likely incorrect assumption of a 15% royalty rate, each member of Daft Punk is likely to be receiving over $500,000 this year. Each. Just from Spotify. Music royalties are part of the reason that Celebrity Net Worth cited the duo as the #2 richest electronic DJs in the world.
But part of Byrne’s doomsday scenario is a world envisioned by Spotify dominance. For my label, Spotify only represents 15% of all digital revenues, and gets smaller when other income streams are factored in. Logic would dictate that as Spotify’s percentage of sales increases with us, so would the amount of streaming because they also would bring along more music listeners. In the last year, this has indeed been the case.
Byrne, however, points out that he’s concerned about tomorrow’s revenues, stating that if Spotify’s growth continues, there won’t be other sources of revenue. A very similar argument made around similar technology shifts such as the advent of radio. Yet my royalty statements include revenues from brands such as EMusic, Nokia and Myspace, all brands that have been left for dead. The future will certainly see the royalty percentage mix shift, but it will likely be one where some people stream, some download, and they’ll all do it on a variety of different types of sites around the world.
The real issue is the larger question that Byrne addresses about the overall effect free and cheap streaming has. But the issue is really about supply and demand. Spotify as a whole is paying out hundreds of millions of dollars yearly, which is a net positive for recorded music. But even with the claim that 4 million songs go unplayed, there’s still tens of millions that are, which means the collective pie of revenue is spread much thinner than it ever has. The good news is the new music business allows more artists in. The bad news is that most get paid less because the pool doesn’t grow proportionally.
The fundamental issue an artist has to deal with is not one of royalty rates, but this simple concept of supply and demand. If any service, download or streaming, is going to have millions of tracks at your fingertips, than there is an overabundance of supply. The only way to make money is to increase the demand by a significantly higher factor. By this simple definition of business, music is in the volume business game. Those who are able and willing to play that game are reaping enormous benefits.
The other way to combat supply and demand is by creating diversified revenue streams. Each artist I’m currently working with has a different mix of what those streams look like. But the important thing is that while there may be one dominant player in one revenue stream, that doesn’t mean that this is all recorded music revenue streams. Our label generates revenue from download sales of singles, download sales of albums, streaming transactions on demand, streaming transactions in radio players, online licensing revenue, sync revenue, performance revenue, direct sales from band websites, road sales, advertising, and even physical product.
So, in a way, I’m thrilled when artists choose to take their music off Spotify. Because in a small way, this limits the number of songs that may take attention away from songs in my catalog. We are still in the throes of a very disruptive period that is clearly resulting in winners and losers. There are many successful artists, both commercial and creative winners, who are not complaining about royalty rates. They are focusing on making amazing music that is desired by many people the world over. Rather than Byrne’s comment on the internet sucking “all creative content out of the world”, what’s actually happening is artists are finding even more creativity to succeed. Because that’s what artists do. Those that focus on improving their craft and growing their body of work are finding varying levels of success. At that point, the math starts to take care of itself.