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.

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  1. Chuck Hughes October 18, 2013 at 3:57 pm # Reply

    I am averaging $.0072 per stream for my Hillbilly Hellcats band on Spotify. 3/4 of a penny. I think that’s great. Way better than what I got from terrestrial radio.

  2. Jaime October 25, 2013 at 1:32 pm # Reply

    No matter how the pie is sliced, whether .$0.005 or $0.007 or $0.01 per stream the fact of the matter is that for many artists the math won’t add up. As you rightly point out, the laws of supply and demand are at work here. Furthermore, competitive strategy principles apply here in terms of value,differentiation, price, substitutes – etc. making music (songs) basically an undifferentiated commodity. The music industry today must be the most fragmented industry in history. From a business (making a good living) perspective, the challenges for new artists are more than huge because of the illusion that out of hundreds of thousands (probably millions if we count all artists in the world) “he/she/they” will “make it.” It’s basically a lottery. People buy lottery tickets, because, well, someone will win the jackpot (even though we all know the odds are astronomical). In music, though, the price of the lottery ticket is very expensive and ongoing. If streaming as some are saying will dominate in the future (lately, I’ve been hooked on Songza myself), at even 1 penny per stream, it would take 300,000 spins to recoup recording hard costs for 1 song (produced with a very modest budget). If we add the costs of social media marketing and video, you might need 500,000 spins just to recover the costs (and the artist does not get a cent of this). Business wise, music is a terrible investment. But artists and many of us who support them, do it for the love of the art. Someone always wins the jackpot, right?

  3. BW October 31, 2013 at 1:54 pm # Reply

    ARG, so many things wrong in here. Let’s just start with your main thesis, which you put in bold: “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.” This, you say because Byrne forgot to “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”. Sorry dude: NOBODY is checking for any other tracks from the album, nobody can even name one. Can you, without looking it up? That’s how a HIT SINGLE works now. And as for older stuff, no, people aren’t checking for “Better, Faster, Stronger” because they bought it when it was a HIT SINGLE 10 years ago. As for the delusional second half of the article, the FACTS are the FACTS, you oblivious moron. The industry has been cut in HALF since 2000 and artists everywhere, including established acts like Bowie are STARVING. Read Lefzetz Blog, who actually knows what the f*** he’s talking about, and you’ll see that albums by Katy Perry, Paul McCartney and everybody else are dealing in 10’s of thousands of copies now – not 100,000’s, not 1,000,000’s. The way to know you’re reading the work of an idiot is the false, airy conclusions at the end: “artists are finding even more creativity to succeed”. “the math starts to take care of itself.” You should hope you never have a doctor who thinks that way: “The bleeding will take care of itself”. No, you twit. The math will get taken care of by technology, by laws, and by people who acknowledge the problem and fight against it. Unless by “take care of itself”, you mean hordes of artists will be thinned out and reduced to working at Burger King. And you, pollyanna, should work the first shift on the fryer.

    • Jay Frank October 31, 2013 at 3:23 pm # Reply

      Actually, that’s not the case. The artists that I work with have experienced lifts in all album tracks from current and previous albums with each subsequent success. Sure, a hit single leads the pack, but the numbers tell the truth that other tracks do indeed stream from that. What also happens is that streaming services allow opportunities for new royalties to be created from someone who had purchased something ten years ago. I find myself listening to albums I own on a streaming service simply because it’s more convenient than pulling it off the shelf.

      For the rest of the article, facts are indeed facts. I haven’t seen the “fact” that David Bowie is on a soup kitchen line anywhere. Can you provide that? Katy Perry and many other artists have sold volumes of singles that more than make up for a decline in album sales. But like every change, there are winners and losers. And just from the easily identified fact that more artists are trying to participate today, not less, shows that we’ll naturally have more losers. That’s just basic math. If the numbers are so bad, how come the numbers of people trying to break in keep increasing?

      I appreciate your position, and respectfully disagree. The more positive energy I put in the service of artists I work with, the more success comes their way. We use the information of this new age to figure out how to guide artists to greater success and growing income from their music.

  4. Jaime November 3, 2013 at 11:17 am # Reply

    Hey Jay, I commend you for publishing comments from some opinionated readers who think that getting personal and disrespectful makes their arguments stronger. I would delete his comment. There’s no need for name calling in adult civilized, conversations, is there? This is not the US Congress (or the Canadian Parliament for that matter.

    • Karl March 2, 2014 at 5:49 pm # Reply

      I agree with Jaime. Even though I am an artist and find it morally challenging to navigate the waters of digital streaming, and not as cut and dried as you find it here. I want to thank you for your even keel thought process even amidst bullet spray. Hey, BW, I don’t think your derogatory remarks make your credibility any greater. Keep those stabs to yourself, even on the internet, please. If you’ve got facts in your rebuttal, let those do the talking.

  5. Brent November 28, 2013 at 11:32 pm # Reply

    Great job, Jay. Keep up this wonderful blog, it’s very inspiring.

  6. Chuck Hughes December 22, 2013 at 4:05 am # Reply

    Back again. In 2013, you need to be just as good on your DAW as you are on your guitar. And you can do it for $25/month on Lynda.com and Macprovideo.com. Add a modern laptop and a $100 large diaphragm condenser mic and you have the tools. There is not financial room enough for a label on Spotify. But release it yourself and the .0072 cents/play add up. As David Paitch said at ASCAP 2009, “the future belongs to the person who can do it all.”

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