Breaking into the music industry is known to be a challenge, given its lucrativeness and cutthroat competition. With such an extensive business, young creatives often struggle with the difficult task of climbing to the top. The industry is long-standing; from live piano concertos performed by Beethoven at the Burgtheater to smooth jazz via CD on a four-wheel drive, the state of music has developed tremendously. Even listening to carefully curated digital files on an iPod feels like some ancient memory. Music consumption is continually changing, and eager music careerists have to accommodate that.
It comes as no surprise that streaming is the future. Many artists can take advantage of the plethora of music streaming services at their fingertips. With digital technology revolutionizing how individuals listen to music, it is easier to upload songs that were previously lost in an mp3 file somewhere on your laptop. But there is much more involved in this process when attempting to break into the industry.
Other than composing, producing, and essentially anything else on the performance and creation side, the music business plays a massive role in the success of a project. Actually planning for the release requires a boatload of marketing, general music PR, networking, budgeting, and so on. Overall, it’s the most crucial and time-consuming part of putting out a beloved project and attempting to make a living off of its reception.
It’s worth mentioning that compensation on music streaming platforms raises a red flag for many. Though it can be significantly easier for artists to drag and drop a file or make an artist profile, most services are unforgiving to creative artists. Let’s take Spotify for instance.
A quick crunch of numbers for Spotify: 40,000 tracks are uploaded every day, one every 0.46 seconds. Between $0.003 to $0.005 are made per stream, about $3 to $5 per 1,000 streams. 52% ($1.07 billion) of the 2018 Q2 results ($2.05 billion) go to distribution and label companies, a smaller fraction (90%) to the respective 40,000 artists, $24,075 per artist per quarter.
Spotify pays artists on a pro-rata basis, meaning that royalties get pooled together and artists are paid in accordance to their share of streams. The artists who follow the numerics shown above are considered “top-tier”, but note that it accounts for 40,000 top-tier artists…and Spotify has over 3 million creators. It makes it difficult to believe in the service’s mission statement of providing “a million creative artists the opportunity to live off their art.” This poor revenue stream extends to other platforms too; as Forbes reports, “Industry estimates vary slightly, but for 1 million plays of a song, artists receive roughly the following payout from these streaming services: Amazon Music $5,000; Apple Music $5,000-$5,500; Google Play $12,000; Pandora $1,400; YouTube $1,700.”
This process is exceptionally strenuous for independent artists both in terms of self-advocacy and managing the oftentimes slow revenue stream. The general model for music streaming businesses technically benefits those who dominate in mainstream radio (rap, pop, and rock, specifically). It’s meant to build a user base and supplement the experience with advertisements and subscriptions to make an extra buck. This set-up doesn’t work as well for artists who work independently, primarily as a result of budgeting as well as lack of widespread public interest. This makes it quite unlikely to make a livable income off of music.
A few streaming platforms – namely Soundcloud and Tidal – have noticed this trend, and have been making waves for independent artistry. Soundcloud’s business model now has a “user-centric” structure; starting April 1st, artists will receive “fan-powered royalties”. This benefits independent artists since, under fan-powered royalties, payments are more representative of the actual listening habits of fans. The difference between models lies in how the royalties are dispersed. Initially, all of the royalties were pooled together across every artist a user would listen to and the artist would get a fraction of the pooled finances. The current model’s revenue stream now is distributed among the artists so that more streams mean more money.
Tidal is another music platform that may start making some progress. Square CEO Jack Dorsey bought Jay-Z’s music platform Tidal with the hopes of expanding the services reach for independent artists. As of now, Tidal is a pretty standard option to stream music, but it lacks cash flow management, making it difficult for artists without a solid financial system. The Square team is experienced in this considering their work with smaller creators and a more cohesive plan can be expected to be implemented in the near future.
With big streaming services like Soundcloud and Tidal leading the way for concrete change, there’s no doubt that the future is bright for artists eager to get their feet wet. Change is constant, and more streaming service CEOs and users alike will listen!
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