Vicious: How Streaming Services Reshaped the Music Industry and Artists' Livelihoods.
80% of UK musicians and music creators earn less than £200 a year from music streaming.
Recent official studies have concluded 80% of all UK musicians and music creators earn less than £200 a year from music streaming*. For artists and music writers’ digital music streaming is conclusively not a replacement for a previous age of healthy record sales.
Streaming arose as an antidote to mass digital music piracy. Going back two decades, recorded music industry revenues were in decline. Labels were tanking. Artist development funding was becoming extinct. The music ecosystem was contracting fast and the livelihoods of many were in a critical state.
The music industry was simply not prepared for the 21st century and its arising technology and communications innovation. It was an industry largely siloed with its traditional business methodology, and not invited to the tech revolution party. For the first time in its history, it had lost control of music formatting and the means of distribution. It’s response? Suing kids who had downloaded the new Eminem album, or single mothers who owned the computer used by such kids. Desperate times.
As people flocked to the free music on mass, the key instigators of organised piracy file sharing operations criticised the music industry and talked about internet ‘freedom’ rights as they shared copyright material for free, what they did not declare so loudly was how they were getting extremely rich on ad revenues channelled by certain advertising networks toward their operations, as labels and artists saw nothing in return. This was pure parasite economics. Some even funded far right-wing politics with some of their newfound wealth.
Disruption.
Pirate Bay, Grooveshark, Napster, MP3.com, LimeWire, and so many others, torrent, peer to peer, putting malware on your PC when you downloaded your favourite artists new album, they ruled the internet music consumption ecosystem for well over a decade.
From the late 90’s listening to highly compressed low-quality MP3 files was the new thing, in sound quality this was like regressing from the viewing experience of a large flatscreen 4K TV to your grandmothers small black and white TV she now has in storage in the loft, nevertheless free was a big draw, and more so while CD’s were a relatively expensive high margin format in a lucrative business model owned by the music industry.
This new ocean of sound online was a treat for discovery, but not so great for recorded music sales and the resulting incomes of artists – who’s key income at this time was selling music. It’s effect and the legacy of digital convenience is best described by one single statistic, like for like, 1999 remains the most successful year of all time for global recorded music revenues to this day, twenty-five years later, and that’s not even factoring inflation where the effect is worst.
Divide and conquer.
According to the Musicians Union in the UK streaming now accounts for approximately 90% of all music consumption. The BPI stated there were 179.6 billion audio streams in the UK in 2023.
Streaming would not have taken off without the buy in from music catalogue owners and front-line labels. The majors licensed their music to the concept because with a battle lost on piracy, this was their one chance of recovery with a bite of the streaming revenue cherry. The icing on the cake was the vital incentive of an open invitation for major labels to be gifted stock in a new company on a mission to become the no.1 go to music brand in the new landscape of subscription digital media. The majors now had a vested interest in the success of its platform business with their sharehold, in parallel with the opportunity for digital music revenue, some may rightfully comment this demonstrated a conflict of interest with regard to major labels most important asset, their artists, and the livelihoods of those artists via royalties - artists and their representatives were of course not at the negotiation table.
Essentially the background of the founders of Spotify was not in music, but in file sharing and ad’s. Established by a peer-to-peer file sharing entrepreneur, digital ad’s company founder and CTO of Stardoll, Daniel Ek and Martin Lorentzon, co-founder of advertising network Tradedoubler, on the 23rd April 2006 Spotify was founded in Sweden, launching in the UK in February 2010 via an invitation-only policy, finally launching in the U.S in the summer of 2011 with the buy-in of all major labels with their Spotify stock arrangement trade-offs.
The invite only go-to-market launch of Spotify added a sparkle of intrigue and demand for this exclusive member club of ‘free music’ sponsored by the occasional ad – digital music without the risk of a computer virus, malware or a legal letter from the RIAA or BPI.
A general release of Spotify followed; popularity soared. The plan was to up interruption of music with ad’s and implement listening restrictions per song in an aggressive pursuit to convert listeners to paid subscription plans to access music seamlessly, a long-term strategy on revenue creation. It worked well of course. Spotify is the number one music streaming service globally with 574 million monthly active users, 226m of these are paid subscribers paying $10.99, £10.99, €11.99. Brits paying $13.92 equivalent. Apple Music is the nearest challenger and used by 112 million people globally, all on the £10.99, $10.99, €10.99 plan, again Brits paying the most for the same service. Apple comes with premium formats and video.
To the victor the spoils.
Universal, Sony and Warners all had a stake in Spotify’s success – with Sony Music selling half its stock in the same year as Spotify’s 2018 IPO for a cash injection. While the majors did well out of this business arrangement for their extensive catalogues, the independent sector fared less well – there are few accounts of stock granted for catalogue licensing, exceptions being Beggars Group who sold its stake in 2019 for $16m, 50% honourably split between its artists including the likes of Adele, The Prodigy and Gary Numan and the remaining £8m going to Beggars founder Martin Mills. However, beyond these Spotify stock trades, and far more commonly, under these new terms of business that came with digital streaming, artists at the heart of the business seemed to come out last in the pecking order of streaming revenue derived via subscriptions and advertising.
When compared to physical sales the returns from streaming are far inferior – but at least a step up from the culture of free for both record labels and their artists. The reasoning in part for poor streaming results for artists comes from dated contract concepts and an uneven split of the revenue pie. While all agreements between recorded music labels and streaming services and indeed social media companies are treated as broad licensing agreements, unfortunately when it comes to artists contracts, many labels, especially majors, treat streaming income as sales revenue rather than a licence to use music, meaning a far lower royalty rate is due despite the label not incurring any of the costs of physical production and distribution.
An additional key factor at play is revenue splits for rights owners do differ from one streaming service to another. The landscape is very broad. Despite being the no.1 streaming service, Spotify barely makes the middle ground in ranking for pay outs to the music industry, paying less than half what its nearest rival Apple Music pays music copyright holders and in turn artists.
An undivided landscape.
To compare the two market leaders in global digital music streaming Spotify pays $4.37 to $6.40 per 1000 streams compared to $10 to $12.84 per 1000 streams on Apple Music.
Amazon Music come in at $4.02 to $4.37 per 1000 streams and Tidal $13 to $19 per 1000 streams, while Deezer $6.76 to $7.83 per 1000 streams on data available at the time of writing.
One example of a comparison benchmark:
$0.019 per stream. Tidal.
$0.01284 per stream. Apple Music.
$0.00783 per stream. Deezer.
$0.0064 per stream. Spotify.
$0.00437 per stream. Amazon.
$0.00402 per stream. Pandora.
$0.00133 per stream. YouTube.
Source. Ditto Music 2024 study.
Figures vary of course, depending on methodology, and period of study, some prior studies found £0.002 to about £0.0038 per stream on Spotify and about £0.0059 on Apple Music in 2021. General trends remain the same in all data studied for this article. Including the fact Spotify while the market leader, do not pay as much as other service providers, even their closest rival.
Revenue after streaming services take their share, is then split between music master rights holders (owners of music recording copyright) and publishing rights holders (owners of writer’s copyright) before it disseminates out to artists management, artists and the many individuals involved.
Furthermore, even with the technology available, royalty streams will not go directly to artists you play, even though each service provider records what you play for their algorithm. So, if you only listen to independent artists your streaming subscription will not go to said artists you support (you better go to Bandcamp for that), all subscription income goes into a subscription pool. After the streaming service takes their contractual share, the pool is split according to play counts from top down. Worst still, some services including Spotify have recently announced policies to exclude anyone that falls below a certain threshold of streams from any revenue earnings further harming developing artists and the independent sector.
The brutal facts.
The facts are shocking.
From a UK survey conducted by the Musicians Union and the Ivors Academy of music writers and composers in 2020, it found 80% of artists, musicians and music creators earn less than £200 a year from streaming. 92% earn less than 5% of their earnings from streaming. For artists and music writers’ digital music streaming is conclusively not a replacement for a previous age of healthy record sales.
Numerous artists have consistently raised their frustration on the topic of streaming and concern for the livelihoods. The pandemic heavily emphasised this as the live music industry collapsed and incomes fell dramatically. Broken Record was a campaign started by Tom Gray of Gomez to address the inequality, with substantial challenges for livelihoods and sustainable careers due to music streaming economics, the detrimental effects for developing artists and especially exacerbated for non-touring artists.
“Many performers currently receive no income from much of their streamed work. Music is a loss leader for tech companies like Apple and Amazon. The major rights holders were able to define the market on their terms without thought for balancing the rewards. This is market failure.”
Tom Gray.
“They’re no quick fixes, but there are some reforms such as equitable remuneration. But they don’t solve the problem entirely. Up-and-coming artists wouldn’t necessarily benefit from that and they are the ones who fall by the wayside with streaming.”
Ed O’Brien, Radiohead.
“It works for big record labels, or even medium-sized record labels that have a catalogue because for them the money from streams keeps feeding through. But if you are an artist or a songwriter where you can have one song coming out maybe once a month, if you’re lucky, then it’s just not going to work”.
Helienne Lindvall, songwriter.
Closing Thoughts
So has streaming the antidote to mass digital music piracy, the saving grace for the recorded music industry? Well, the major labels and a few notable indies did well with their Spotify stock kickbacks. With few exceptions, artists livelihoods comparative to pre digital era have fared less so, lets also not forget the entire ecosystem around the music and each artist too, all have been impacted.
The situation is explained best by the fact that recorded music is no longer a key and reliable revenue source for most artists.
Music publishing and the live music and merch sector is where the sustainable opportunities are. Which in part explains the expediential rise and rise of live music tickets tracking way ahead of inflation over the last 25 years. A reaction in part from heritage acts and their representatives, facing declining recorded music income, and who were lucky to build a profile in the former age of the CD heyday. Developing and emerging acts, or those that cannot fill an arena do not have these outlets of support so much, if at all.
Streaming has turned out not to be the silver bullet for the music industry’s woes that it promised. The big business end has seen its benefits. The livelihood end less so. Then again, I guess this was expected when the founders of the leading music streaming service are not from the music industry, have no stake or interest in it, but herald from peer to peer and advertising. Honestly, what were people expecting?
The music industry itself failed to collaborate effectively enough to pick up the mantle as new technology emerged. The disruptors did not need to answer to artists, had no commitment or obligation to invest in artist development, they were not music people. Only more ruthless business and investor interests would be served. The music industry’s golden era was sure to be over without it’s destiny in its own hands.
Closing thoughts:
Now the buck stops with labels to honourably review contract terms, respectably compensate artists under license definitions, and for the greater majority of streaming services to pay better rates. Whether either of these critical requirements are carried out remains uncertain.