

Making Cents – the meager royalties paid out to bands by streaming services - graublau
http://pitchfork.com/features/articles/8993-the-cloud/

======
notatoad
"make something, price it for more than it costs to manufacture, and sell it
if you can... Pandora and Spotify are not selling goods; they are selling
access"

except that's always what the record industry has been selling. at least
Pandora and Spotify are honest about what they are. If i bought your vinyl
record, do i actually own that or is really just a proxy for personal usage
license? Can I play that record at my wedding, or in my office, or at a party
with more than some arbitrary number of people?

Intellectual property is not a physical good. The recording industry has
coasted along for the last 50 years or so on this strange phenomenon that
allowed their IP to be sold as though it were a physical product while at the
same time getting IP protections _in addition to_ the revenue of a physical
good, and they've made a ton of money doing so - more money than they ever
should have. Now the gravy train is ending.

Getting paid per-play rather means that artists are finally seeing how people
actually value their music. You can't use law to make your music more
valuable. If you want to earn more then make more music, or go on tour, or put
some effort into selling your music for soundtracks and the like. The rates
spotify pays represent the actual value to the consumer - they aren't making a
profit, and if spotify were any more than what it currently costs, i wouldn't
pay for it. You might think your song is worth more than $10/mo in streaming
royalties, but you might also be wrong.

~~~
tptacek
So then you presumably believe that Matt Inman at The Oatmeal was wrong to be
upset at Funnyjunk for appropriating his comics; after all, he had no right to
claim them as his own property.

And, of course, what you're saying about the market valuing music is that the
market values music at zero; the price of music on streaming services is
simply the premium people pay over free pirated tracks in order to have a nice
user interface.

~~~
notatoad
please stop inventing the argument you want to argue agaist. nowhere in my
post did i say creators shouldn't own their IP, or that piracy was right.
nothing here has even the slightest relevance to matthew inman. piracy is
illegal, it's not part of "the market". theft values everything as free, it
has no relevance to this discussion. i didn't say anything about piracy.
that's not the debate here.

~~~
tptacek
_Intellectual property is not a physical good [...] You can't use law to make
your music more valuable._

~~~
nitrogen
I don't see how the OP's statement that no amount of lawmaking will make
people want to listen to more of a specific song has anything to do with
piracy.

------
dunk010
The streaming services don't make money either. In fact, Spotify makes a loss.
A substantial loss. An eye-watering loss [1]. And so does anybody else who
tries to get into this business. The trail is becoming littered with the
corpses of plucky companies who've tried to make a buck in this business. Why
is that? Quite simply, the music business is a cartel. It used to be the Big
Six; now there's just three. Three companies who own the rights to most of the
last half a century's worth of popular music. Here's the problem with
Spotify's business model: they don't own what they're selling. The labels do.
And so if Spotify makes a profit then the major labels can just renegotiate
their contracts within a year (they typically have break clauses), and gobble
up all those extra earnings.

You see the music business is a /nightmarish/ labyrinth of copyright
legislation, so to even start playing in this game you need a staff lawyer (or
three). There's recording rights, which you have to pay to one arm of the
label. Then there's publishing rights, which you have to pay to a completely
different arm of the label (or, if you're unlucky, a different label - like
with the erstwhile EMI's catalogue), and that's just to play some radio. If
you want to do on-demand streaming, of the type that Spotify provides, then
you have to pay mechanical reproduction royalties. Whaaa? I hear you say.
Well, it takes a while for the law to catch up with these things so they've
just repurposed the laws that were already there. Would you believe, you even
have a different bunch of people to pay if you want to reproduce the lyrics.
Now, take all that and multiply it by the number of countries you want to
stream in, because you're gonna need to strike deal with a different branch of
each label in each country. It's insanity.

The one beacon of light is the much maligned DMCA act, which (aside for
enabling content owners to persecute twelve year old children) allows those
wanting to stream music in a radio-like fashion to just pay a central
collections agency a fixed rate. That simplifies the business significantly -
no more negotiation and complex contracts, and no more need to have such
detailed reporting (less staff, less code). The only thing is that it's
applicable only in the US, as there's no EU equivalent (or anywhere else, for
that matter). And it doesn't cover on-demand streaming. But it's a start.

Music startups really need to push for an overhaul of the copyright laws
because the landscape has fundamentally changed and what exists currently is
both arcane and archaic. We need a complete legislative metamorphosis, lest
the major labels continue to move their contractual blessing between startups
- ideally, of course, shortly after a tasty IPO - which all resembles the
classic pump-and-dump scam.

I hope it happens.

[1] [http://techcrunch.com/2012/11/10/spotify-is-having-a-
good-20...](http://techcrunch.com/2012/11/10/spotify-is-having-a-
good-2012-revenues-could-reach-500m-as-it-expands-the-digital-music-market/)

------
tunesmith
I'm coming out with my first cd soon... a seven-song mini-album. I printed 300
copies as that was the smallest I could go without it becoming a CD-R instead
of a redbook. They'll arrive in a couple of weeks, and I'm thinking of selling
them for $10 apiece. I spent a few years writing the songs and figuring out
how to record and produce them as professionally as I'm able. I spent
countless hours on the project and somewhere between $5,000 and $10,000 on
production costs. Despite that, I know the drill - I don't really have
expectations of making a lot of money on this, or even meeting my costs. But I
do intend to try as hard as I can to maximize my revenue.

It's amazing what kind of culture has sprung up in the selling/delivery
sphere. All these companies spring up to "empower" the indie musician and they
invest in all sorts of signaling to make sure we know we had better sign up
for their services or else we're not taking our career seriously. Examples:

CDBaby: keeps $4 of every cd sale, even though you've already spent $1-$3 per
every cd you manufacture. As opposed to just setting up a paypal link or
merchant account on your website, and shipping it yourself. 2.9% + $0.30
sounds a lot better than $4. (Shipping costs are additional either way and
passed on to the user.) I have trouble imagining at what point I'd want to
spend $3.41 _per cd_ to save myself the effort of just sticking a mailing
label to a padded envelope and dropping it in my mailbox.

Bandcamp: keeps 10% (by way of keeping every 10th chunk of revenue for
itself). It's based around the belief that people will pay more if it's freely
available, or will tend to pay more than the "suggested" price. I haven't
really dived into their studies but I just cannot believe there isn't a flaw
in them. A lot of it seems based off of the logic that if it worked for
Radiohead or NIN (with their already built-in audiences) then it should also
work for small indie musicians. (And Radiohead and NIN have also since stepped
away from the free/pay-what-you-want model.) At any rate, 2.9% + $0.30 sounds
better than 10%, since I have to do fulfillment on my end either way.

iTunes/digital media: $0.99 no matter what. $6.93 for a seven-song album, and
you can't set your own price. If you have a major label you can apparently set
your album price higher but smaller indies don't seem to have access to that
privilege. Plus, if your digital album costs $6.93, then you've basically
destroyed your options of selling your hard-copy.

And everyone knows the common complaints about spotify and pandora.

At any rate, I'm considering going through a lengthy staged release process,
in an effort to measure all sorts of conversion and gather data along the way.

1) Release physical cd only, with no music previews. At this point, the few
hundred people on my mailing list are already interested in the cd anyway, so
we'll see how far that goes, along with recommendations to friends. Maintain a
list of addresses for people who indicate they won't buy until it's released
digitally.

2) Marketing music previews of each song and on an album level, through
promoted Facebook posts (friends-of-friends) and advertising. The general
principle here is to still not ever release the entire full-length tracks, and
funnel people to buying the physical cd.

3) Release digitally to services that are not on-demand and can't be
downloaded. This means Jango and Pandora. Jango also allows me to buy paid
plays and get a bunch of demographic data points to see which tracks are
popular with which groups. I can then use that to do more targeted ads over at
facebook or maybe through google.

4) When things are really dying down physically, finally release through
iTunes and bandcamp (allow full previews) and other sites where you can
actually buy the tracks digitally, and see what happens with "discovery"

5) When I'm finally ready to just trash the whole project, release it on
Spotify and forget about it to start working on the next cd.

~~~
jchrisa
If you are hoping to sell 300 copies, my guess is your best bet at building a
career would be to give everything away free, setting up a website where
anyone can download free mp3s if they give you their email address and zip
code. With this info you can book tours, tell prospective labels "I had 10k
downloads" etc.

Even if you were able to make $10 per cd, you're still in the hole. Maybe
better to chalk the whole recording thing up to marketing expense and use it
to give you better leverage in the future.

~~~
anigbrowl
_tell prospective labels "I had 10k downloads" etc._

Pfff, you can buy that for $50 and the labels know it.

 _Even if you were able to make $10 per cd, you're still in the hole. Maybe
better to chalk the whole recording thing up to marketing expense and use it
to give you better leverage in the future._

Something tells me you're not a musician,

~~~
jchrisa
I've been on tour before, gave everything away for free, slept on couches...

------
paulsutter
The biggest acts make their money touring.

Pandora should help smaller bands line up shows in towns where they are
popular, and help them promote those shows to interested fans. They have the
data and the consumer relationships to do it.

Bands would appreciate this service far more than a meager check. And it would
be much cheaper for Pandora (those song royalties eat up all their revenue). I
listen to hundreds of bands on Pandora, and I'd definitely attend more shows
if only I knew when they were playing locally.

EDIT: Even $100 is far better than a check for cents. And such a service would
increase attendance at shows. They key is that bands would _appreciate_ it,
whereas they feel angered by insulting little checks.

~~~
tptacek
Small acts make fuck-all touring. Members of bands who have put out multiple
records on well-known indie labels routinely make $50-100 for a single show.
Touring revenue is great if you're one of a few big ticket acts; it is a lie
we tell ourselves to justify not paying for albums from almost all of the rest
of them.

~~~
noonespecial
Apparently they make the same fuck-all when we buy the albums. "Paying" for
the albums is just a lie we tell ourselves to justify handing all of the money
to a middle man so we can just get our music right now without actually having
to do anything about the injustice of the big fat mess the music industry
became?

~~~
tptacek
No, that's not true, because the middle-men were actually paying the artists.
But, nice try.

~~~
noonespecial
Sometimes. But I've danced so now I'll say. The retail model was crummy to
artists even when it worked. It's ending. Streaming isn't picking up the
slack. Piracy isn't hurting as much as we're led to believe but it sure as
hell isn't helping. I'm saying that _we_ have a resposibilty to support the
artists we like (and in some cases to figure out how best to do it) or we're
all going to be listening to hobbyists. I'm arguing for a return to patronage.
Connected 21st century patronage.

~~~
tptacek
How exactly was the retail model crummy to artists? The conventional wisdom
seems to be that the model was crummy because artists barely, if ever,
recouped royalties. But that was often because their advances were calibrated
to prevent that from happening --- which is again how the publishing business
model works.

The thing the retail model seems to have done is provide predictable income
streams to artists. What seems to be looming after the retail model, between
streaming services and Kickstarter, is a model that provide patchy and
unpredictable incomes to well-known artists and a hobbyist position for
virtually everyone else.

------
shardling
I don't think the article discusses how royalties were paid for traditional
radio, does it?

Anyway, I've definitely discovered multiple bands through Pandora, and then
bought their albums/seen them in concert/etc.

~~~
adventured
Traditional radio pays a much lower % of sales to the licensing companies.

Pandora and Spotify are being fleeced by comparison.

With the shift to Internet / satellite, the licensing companies made a huge
land grab on the fees. The radio business has a few large organizations that
go to bat for the whole industry. They're old lobbying groups with quite a bit
of leverage, having been entrenched in DC for decades, and it's one of the
reasons licensing fees have remained reasonable for radio. Internet radio /
streaming has no such lobbying groups (yet).

~~~
onemorepassword
To be fair, radio doesn't completely _replace_ sales of singles and albums the
way Pandora and Spotify do.

You can't compare on-demand services to radio.

~~~
shardling
Pandora does not replace such sales. You cannot queue up an album or
particular song to listen to. It's cultural role is very analogous to
traditional radio.

Spotify is very different, of course, and that's why they have a different
royalty structure.

------
mark_h
Zoe Keating is always worth-while reading about this, including being open
about where her royalties come from. For eg (this was the post that got
represented as "pay me in data"):
[http://zoekeating.tumblr.com/post/35737991443/what-i-want-
fr...](http://zoekeating.tumblr.com/post/35737991443/what-i-want-from-
internet-radio) (there's a spreadsheet with the breakdown in there)

That one got featured in the NYT, prompting a couple of follow-ups:
[http://zoekeating.tumblr.com/post/41955905309/a-blog-
about-a...](http://zoekeating.tumblr.com/post/41955905309/a-blog-about-an-
email-about-a-blog-about-a-news-article)

[http://zoekeating.tumblr.com/post/42057406771/where-does-
the...](http://zoekeating.tumblr.com/post/42057406771/where-does-the-filthy-
lucre-come-from) (I loved the internet-expertise implied by _Several people
advised me to consider touring as a revenue stream since “that is where
artists make most of their money”._!) More pertinently though: _"Live
performance is usually my revenue stream with the highest expense ratio:
flights, hotel rooms, commissions, crew, advertising, etc…"_

------
toomuchtodo
Recorded music's value has dropped very close to zero (even 99 cents seems too
much depending on the song sometimes).

Live performances will always be the profit center. Recorded music is only
good for promoting a band's concerts; you can't copy the live concert
experience.

~~~
iknowno_one
Ask any musician during the pre-internet era and this would be their
assessment:

Recorded music will always be the profit center. Live performances are only
good for promoting a band's records; it's easier to sell 1,000,000 records
than it is to sell tickets for 1,000,000 seats.

~~~
Avshalom
no, pre internet bands still got dicked on record sales and made their bank on
live performances.

~~~
jbuzbee
From the article referenced above;

" megastars like Lyle Lovett have pointed out that he sold 4.6 million records
and never made a dime from album sales. It's why the band 30 Seconds to Mars
went platinum and sold 2 million records and never made a dime from album
sales."

Jaw-dropping...

------
balbaugh
Here is a rebuttal to this article and other streaming attacks that I linked
to a while back posted on music site hypebot. Worth giving it a look.
<https://news.ycombinator.com/item?id=4834767>

------
scottkduncan
> But I have simply stopped looking to these business models to do anything
> for me financially as a musician.

That's too bad, because there are opportunities. You could completely discount
the revenue most artists get directly get from streaming and look at the
services as the free option of the freemium model. They're getting their
product to a far larger audience than they would have if there was a cost
right out of the gate, and some of those free users will turn into paying
ones. I know I have purchased albums (from iTunes) of artists I've discovered
on Spotify. I'm positive that for Galaxie 500, some of their Spotify streams
generated additional revenue in other channels.

------
r0s
These are token royalties, I don't see the moral difference between these
services and piracy. Music discovery has always been a liability for artists,
the illusion that sharing is somehow worse than this sanctioned exploitation
is pure hypocrisy.

~~~
eurleif
>the illusion that sharing is somehow worse than this sanctioned exploitation
is pure hypocrisy.

Consent makes all the difference in the world.

~~~
r0s
Not in any measurable business sense. As a means to explain public dissonance
regarding this current market, then yes.

~~~
eurleif
You mentioned a moral difference, not a business difference.

~~~
r0s
I see no moral difference.

------
ricardobeat
> Pressing 1,000 singles in 1988 gave us the earning potential of more than 13
> million streams in 2012. (And people say the internet is a bonanza for young
> bands...)

If you had 13 million streams, you would easily sell a few thousand albums.
The internet _is_ a bonanza for artists - it gives you exposure and allows
worldwide sales at very low cost.

~~~
kenko
Saying this to Damon Krukowski is a bit like attempting to teach one's
grandmother to suck eggs, no? He presumably knows something about this topic.

~~~
adventured
There's never anything wrong with challenging a supposed authority on a
subject.

I don't care who the person in question is. Albert Einstein should still be
challenged on his calculations.

Krukowski knows what he's talking about? Good, then he has nothing to fear
from a little debate.

~~~
eropple
If you want to "debate" it might help to come with more than assertions that
don't really have much of a basis in fact.

~~~
ricardobeat
If there were no assumptions it wouldn't be a debate. It's just my opinion®

[http://www.hypebot.com/hypebot/2012/08/a-look-inside-zoe-
kea...](http://www.hypebot.com/hypebot/2012/08/a-look-inside-zoe-keatings-
earnings-as-an-indie-musician.html)

$85k in sales over 5 months, 1.5 million plays on Spotify.

Another thing that prompted my comment is an apparent disregard for scale in
the article - 7000 plays is _nothing_. Kids playing acoustic guitar get 500k
views on youtube every week (not a qualitative judgment, of course).

------
adrr
How much money would radio station pay per listener that heard the song? I
assume its far less than pandora pays and pandora is just radio on the net.

~~~
ianlevesque
FM radio stations don't pay this royalty at all.

~~~
illuminate
I can't wait for the day when Clearchannel crumbles.

------
Spendar89
I think a relevant issue that is the direct result of spotify/pandora/itunes
is that we no longer consume albums, but rather individual tracks. Artists
used to (and many still do) value producing a collection of songs that when
listened sequentially meant something much more than listening to each song
individually. Therefore, albums should theoretically be worth significantly
more than the sum of the value of each individual track, but today's services
have essentially destroyed this model. Don't get me wrong, there are obvious
benefits of being able to consume only the tracks you like most, and I
understand that we can still choose to listen to albums in their entirety, but
the vast majority of people do not. A serious consequence of this is that
consumers value music and the music industry as a whole significantly less
than they once did. I also think there is an opportunity within the music-tech
space to recreate the album-listening experience in an elegant way.

------
mscarborough
What does pay-per-play even mean? IRTFA, and then searched again to see if I
missed something for the terms 'start', 'finish', or 'duration'. I did not. I
get how crappy it is for musicians to get ahead in the world, but it would be
for everyone if we could be open about what the basic unit of currency is in
this economy.

Most of the time for my paid Rdio account, I listen to stuff I know I already
like. Sometimes I don't, and I don't listen to more than 10-30 seconds of a
song. Does that count as a play? Other times I'll go find tons of stuff within
the app, but it's still all within Rdio-land.

Also the stuff I stream on Rdio, I already paid for much of it within iTunes,
but I prefer to have everything under the same hood. First world problem, I
know. Do I get a discount for everything that I bought on vinyl, cassettes,
CDs, and mp3s on other formats?

I play thousands of songs each month, should I be paying 1 cent each?

~~~
anigbrowl
_I play thousands of songs each month, should I be paying 1 cent each?_

Assuming a song is 3 minutes long on average, and assuming you play 1000 songs
(including maybe 1000 others that you didn't like and only listened to for a
couple of seconds), that's 50 hours of musical entertainment, which at a penny
a song would be $10.

So yes, you should.

~~~
mscarborough
I pay $10 to Rdio each month, and paid a lot to iTunes before that.

I definitely don't listen to one sucky song for every one that I like.

Sitting at a desk coding and listening to music in your free time is an easy
200 hours a month.

So all your assumptions are false.

------
radley
They had < 10k plays in 3 months. That's not album sales nor requests; that's
just number of times their music played via a bot-stream. That's so low it's
practically irrelevant.

They sound like someone who started a blog a decade ago, stopped after a few
years, only updated it twice since, and are upset their AdWords income is low.

~~~
plorkyeran
The article seems to go out of its way to avoid mentioning that this is
residual income from 3 albums made over twenty years ago that weren't huge
successes in the first place. Why would anyone expect to be making any
meaningful amount of money from them at this point?

------
atechnerd
I always thought that the benefit of services like Spotify and Pandora was to
get a band's music to people that wouldn't ordinarily be exposed to it. This
in turn would prompt listeners to go buy the band's music on iTunes or Amazon.

Good music is really hard to find. I search around iTunes all the time and
come up with nothing. So ANYTIME I hear a song that I like I buy it within the
same day (usually the whole album).

For bands that aren't seeing this sort of conversion on sites like Spotify and
Pandora, this might tell you something about the demand for your brand of
music.

------
kenko
The observation that Spotify is in business solely to increase its own
capitalization and not directly for music-related reasons ties in nicely to
this post:

<https://itself.wordpress.com/2013/03/27/like-a-business/>

Spotify appears to be an organization related in some way to music, but in
fact its purpose is merely to turn money into more money. This is _not_ the
way many businesses in the real world actually operate, and a good thing, too,
because operating that way is pretty toxic.

~~~
blibble
isn't that exactly what every single company aims to do?

the music is a means to an end, the end being making money for the
shareholders...

~~~
kenko
No, as the linked post points out.

Many businesses do not have the goal of simply turning money into more money.
For a long time, the goal of GM was to make cars. It would be insane to open,
say, a used bookstore if making money were your _sole_ goal. But some people
are really into books and want to buy and sell them, not necessarily even
running their businesses in the most ruthlessly efficient way for making
money. That's not what they're into. There are businesses whose goal it is to
make, say, quality hand tools, or knives. There are businesses that
deliberately manage how many clients they take on in order to ensure that they
can turn out a quality product, _even though_ a less good product would
probably _not be detectable_ by their clientele and would increase their
profits. This is known as having pride in one's profession or in one's
craftsmanship. Of course they also have to make money to stay in business.

There's a famous example of a largely technological company rejecting the
mantra that their purpose is to turn money into more money---Craigslist.

There's also a famous if apocryphal example of an individual programmer having
the kind of pride in craft that would lead to the decision not to do something
that would increase profits, namely the Story of Mel.

The whole shareholder thing is a stupid myth that needs to die, anyway.

------
WalterBright
I was in Australia last year, and in walking around downtown Brisbane I
noticed a two person band playing on a street corner. There was quite a crowd
around them, and their music was good. They had a suitcase open in front of
them, with what looked like a couple hundred bucks in it, a stack of CDs, and
a sign that said the CDs were $15 each.

It's likely they 'salted' the suitcase with cash, but even so, it looked like
they made some decent cash for a couple hours work.

I bought one, and really enjoy it. The band is PLUDO, btw.

------
max13
The artist's share of income from record sales and radio play has been next to
nothing throughout the history of the record industry. Any experienced artist
will tell you the real money comes from live shows and merch (which can still
be pressed discs). This is why file-sharing only hurts the labels, not the
artists. The artists actually get more exposure without losing much royalty
income from the illegal downloads, which actually help promote the band and
draw bigger live crowds to gigs where they can actually make some money.

~~~
tptacek
This isn't true. Artists could make a middle-class living off record sales,
augmented somewhat by touring and merchandise, during the major-label days.
It's true that they made very little on royalties from album sales --- but
that was often because they'd been advanced more money than they could ever
expect to recoup. That's a business model common to all of publishing (music
and books and otherwise), and it offered artists a predictable income stream
in exchange for selling more of the upside to labels.

The closer you look at record labels, the more they look like venture
capitalists.

(If you wanted to make a pointed critique of venture capitalists, I suppose
you could also invoke the comparison in the other direction.)

------
therofler
What model of payment would be better than the current one?

------
ianlevesque
There's a lot wrong with the article, but the biggest problem is conflating
owning an album with listening to a radio stream on Pandora. You can't play
Pandora on demand, and the upside for the artist is primarily exposure - not
pennies for the audio bits being played. Pandora and similar services all
provide links to online sources to buy the tracks you are hearing, and people
commonly use these.

------
hobbes78
It's unfair to compare streaming one song to selling an album. A CD enables me
to hear a track an infinite number of times, with Hi-Fi quality, in my car,
living room or on the go. With a €3.49 Spotify subscription, one play is heard
on the PC, requiring an Internet connection and not in top quality (only 160
kbps). The article seems to compare the rent of an apartment to buying a two-
floor house...

~~~
anigbrowl
you're right, but...

 _Since we own our own recordings, by my calculation it would take songwriting
royalties for roughly 312,000 plays on Pandora to earn us the profit of one--
one-- LP sale._

A two-story house is not worth 300k times more than the monthly rent on a
small apartment. 300 times yes, 3000 times make. Not 300,000 times.

~~~
anigbrowl
Since then I've noticed a correction on the article which suggests the
multiple should be 3000, rather than 300,000.

