The internet revolution has made it harder for musicians to make a living from their work. But it’s not all bad news for the industry, says Simon Wilson.
Why are recording artists worried?
Because it’s harder than ever to earn a living – and many of them think new technology is a big part of the problem. The question now is whether technology can also be part of the solution. Music sold on physical discs is not dead: CDs still account for about half the global music market. But the record industry has been upended by the internet revolution perhaps more than any other.
First, it was besieged by piratical file-sharing sites, then revolutionised by YouTube. iTunes and the sale of downloads by the track cut album sales to shreds. And now it is having to come to terms with the growth of Spotify and other streaming sites, the business model famously derided by Thom Yorke of Radiohead as “the last desperate fart of a dying corpse”.
How does streaming work?
Spotify, which started up in 2008, and newer rivals such as Deezer and Apple Music, all have a similar business model. “Premium” customers pay about $10 a month (£10 in the UK, rather unfairly) for unlimited access to a library of about 30 million tracks – something in the order of 90% of all recorded music sold over the past 50 years.
Alternatively, they have the “freemium” option of paying nothing but having to listen to advertisements to get access; about three-quarters of users prefer this option. What’s striking about the model is that once customers can be inveigled to upgrade, the vast majority who try it will then stick with the paid-for option. Of the original subscribers to Spotify’s first premium offering in 2010, some 70% were still subscribers four years later.
What numbers are we talking?
More than 40 million people currently subscribe to a music streaming service, and the number is growing by 50% a year. In Sweden (the home of Spotify) streaming accounted for 79% of music sales last year.
Meanwhile, Apple has set a target of 100 million subscribers to Apple Music. If it can convert 3% of its 800 million registered iTunes accounts to paid-for streaming customers, it will overtake Spotify as the market leader.
Spotify’s goal is to top 40 million. If both those companies hit those targets, they’ll be turning over more than $16bn in revenues – about the same size ($15bn) as today’s global recording industry. For now, though, for all the fast growth, not even Spotify is making any money: it lost $200m last year.
How much do the artists get paid?
Here’s where it gets complex. Two studies (one by EY and one by the Berklee College of Music) suggest about half of streaming revenues go to the record label, about 30% goes to the streaming site and the performers/writers get between 17% and 20%.
Often, artists and writers don’t own the rights directly; they have assigned them to labels, or to companies that hold rights and manage royalties for large groups of copyright holders, adding a further layer of complexity and middlemen.
Often, it is unclear who should be paid: according to the Berklee report, up to half the money owed to artists/writers never reaches them, lost in a “dense thicket of micropayments and ‘black boxes’ where relationships among rights, royalties, processes, and participants, in the eyes of many, are deliberately obscured or, at best, have become hopelessly complex and outdated”.
What does that mean in cash terms?
It means artists earn very little indeed. “34,000,000 streams income after tax = £1700,” Geoff Barrow of Portishead tweeted earlier this year. “Thank U @apple @Youtube @Spotify especially @UMG_News [his record label] for selling our music so cheaply.”
Still, there’s an argument that he ought to be grateful even for such slim pickings, reckons Stephen Witt in the FT. His label is merely exploiting the rights that he and his bandmates have assigned to it.
And those millions of streams mean that Portishead – who have released only three albums in 21 years – are able to retain and expand the fanbase that allows them to make (presumably) good money from live concerts. Nevertheless, making just five-thousandths of a penny each time your song is played must be galling.
What’s the solution?
The blockchain, the computing technology behind bitcoin, may be a way forward, say some in the music industry. In simple terms, the blockchain is a permanent decentralised record of transactions.
In the case of the music business, the idea would be to use it to create a database of music rights ownership – who should be paid what for each usage of each song – and then build around it a cryptocurrency system that would make automatic, instant royalty payments. It is very early days – but some, at least, are optimistic (see below).
There is hope for musicians
British singer-songwriter Imogen Heap is known for her beguiling songwriting, but also has a growing reputation as a technical innovator, says Jamie Bartlett in The Observer. The British star self-released her 2005 album Speak for Yourself long before such a move became fashionable, and is the only female artist to win a Grammy for sound engineering (for 2009’s Ellipse).
Now she is working with computer scientists on a new blockchain model that she calls Mycelia, and will shortly release her next single via this route on an experimental basis. “For the first time I think the future is almost blindingly bright for our industry,” says Heap. “But we musicians have to sort this out, because no one else is going to do it for us”.