The Truth About Streaming

Fri, Feb 6, 2015

Music, Technology

So it happened this week. The truth came out. The truth as to why songwriters and publishers – especially in an industry songwriting town like Nashville get paid so little on Spotify. Even when they have a blockbuster hit.

Mike Masnick of Tech Dirt reveals data and research from France published on a web site called Music Business Worldwide that reveals where the money from a monthly subscription streaming service like Spotify ends up.

(source: TechDirt)

The final take home is that major labels pocket 73% of net revenue and re-distribute 10% to songwriters and publishers.

We represent an indie artist named Keeley Valentino. This January her music was included in a popular Spotify playlist. As of this morning, two of her songs – “Nashville” and “Honestly” have combined for more than half a million spins on Spotify.

(Keeley Valentino’s “Honestly” & “Nashville” have a combined half a million spins on Spotify as of this writing)

For a brand new indie artist who doesn’t have the inside track on terrestrial radio playlists or access to premium music placements on TV or Film, this is huge. It’s gonna be our best month financially. But from a discovery perspective we just can’t buy this kind of exposure on an indie budget. Our YouTube views have also gone up on those songs and I’m predicting that our iTunes sales will also be trending upwards. Radio has so many stakeholders and interests to please. Music supervisors have to please the director, the production company, placement agencies and other existing relationships. We’ve found these services to be agnostic and not beholden to other entities. You still have to have your shizzle and pitch together. But the only folks who have to say “Yes” are the editorial group.

This helps us build her story and take it to film & tv music supervisors and satellite radio services like XM.

But for months we’ve been unable to reconcile some of the anecdotal information that staff songwriters here in Nashville have shared in our social media circle our own experience with artists such as Keeley. Their Spotify payments have been miniscule. Even by streaming standards. Now we know why.

This reveal by Masnick & Tech Dirt is not completely shocking of course. It’s been rumored for years that the major labels have had a significant share of Spotify in exchange for granting favorable licensing arrangements for the service. In addition to a large cash advance that from what we understand is not redistributed to artists on said labels. This also explains how a service with such huge growth and a large cash influx is still in the red. But we had no proof. Until now.

All this is smart business on the part of the labels. There’s nothing wrong with that at all. But what is insidious are the non-disclosure agreements and lack of transparency that ultimately create a climate of distrust between labels, artists, songwriters and publishers. Daniel Ek alluded to as much in expressing his frustration in the Post-Swift Spotify exit period. But being held to a NDA, I’m sure he couldn’t say any more. Even Bono thinks there’s a lack of transparency in this whole morass.

Sometimes even music publishing heads don’t seem to understand that the reason they’re not compensated fairly is because the label end of their business is diverting a huge sum of that income.

Less anyone assumes this is a complete indictment of the major label system, I’d remind folks that there are good, smart, caring people who work at labels. But they don’t necessarily have an influence in policy and business decisions of their parent corporations. This speaks to culture cultivated in the era of back-room record business politics. As newer blood infuses these boardrooms, these companies will evolve. Or they’ll die.

Just as we believe the recent YouTube kerfuffle with respect to Music Key should not tarnish the reputation of excellent ground level staff at YouTube Music, suspect business practices at majors should not reflect poorly on label teams doing right by their artists.

We also heard yesterday that the US Copyright Office will begin to look into copyright reform. This is long overdue. Hopefully as part of that process there will be requirements to create transparency in music licensing deals that involve all artists, songwriters and affiliated creators. It is time to bring all these negotiations into the accessible light of day. I also hope performance rights for artists will become a serious part of the discussion.

I have data at my fingertips as to how many spins we’ve had on Spotify as of last night. Easy. Free. Try getting that info with respect to radio airplay and PRO performance surveys, as well as, what the payment schedule and rate is on those performances. You have a better chance of getting Congress to work together.

Copyright reform should hold accountable the various agencies that exploit and represent music. From radio stations to performance rights organizations, there is no more excuse to not provide almost real time data to rights holders as to where their music is been sold, heard, licensed or exploited in some form. Especially in the digital age. It just takes political will.

It’s only fair.

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This post was written by:

Charles Alexander - who has written 45 posts on Outside The Box Music.

Charles Alexander is a performing songwriter, music entrepreneur and digital media marketing strategist. He was born in Malaysia and lives in Nashville. He recently bought a shinier, new vocabulary. He can also be bribed with "gulab jamuns" and an insulin chaser.

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