What Is The Value of Digital and Streaming Music?

For decades, recording artists have been fighting record labels and other entertainment entities for unpaid royalties and other improprieties. In recent years, the battle has also involved a number of Internet-based digital music companies and music streaming service providers. And it is not difficult to understand why. While record labels continue to generate significant, record-breaking revenue streams from streaming services such as Spotify, Apple Music, Amazon Music, YouTube, Pandora and Tidal (reportedly Universal Music Group generated approximately $4.5 million each day during 2017), artists and songwriters find themselves earning paltry sums in comparison.

A number of successful artists and songwriters have disclosed royalty statements to the press and on the Internet. For example, in 2014, Bette Midler tweeted that she earned only $114.11 in royalties from 4,174,149 streaming plays over a three-month period on Pandora. Around the same time, Grammy-nominated composer and recording artist Armen Chakmakian claimed that he earned $4.20 from over 14,227 digital spins of music he owned the copyrights to (meaning he did not have to share royalties with a record label, publisher, or co-writer) via streaming platforms. Other artists have reported streams of 1,000,000 generating around $5,000.00 of total revenue. The numbers obviously vary from case to case, but it has been firmly established that many artists and songwriters are presently earning very little through this growing medium of music distribution.

Of course, the math can be misleading, because through a streaming service, a subscriber can spin the same track over and over just like he or she could if the subscriber owned a physical version of the track via a CD or Vinyl copy. Through the streaming service, each spin is recorded by the service provider which ultimately generates a miniscule royalty figure per spin (reportedly anywhere from $0.0006 - $0.0167), while the music fan that owns physical product (such as a CD or Vinyl album), only pays for it once, generating a one-time royalty for that specific single or album, even though that fan can play the music as often as desired. Still, there are serious concerns over the meager royalty statements being generated for artists by digital music companies and music streaming service providers.

So, who is being paid? There are billions of dollars in revenue streams from recorded music. The major record labels are reportedly making huge profits from digital and streaming music, while a number of digital and streaming music providers generate significant revenues (and pay their executives lucrative compensation packages), yet search to find profits. One thing is certain, outside of a handful of present-day superstar acts such as Taylor Swift, few artists and songwriters are benefitting from digital music and streaming service revenue streams. Some observers think the Music Modernization (See Act), currently in front of the U.S. Senate, will help increase royalty payments, at least for copyright owners, but clearly an inequitable system is presently in place that grossly underpays many artists and songwriters.

The value of music is very different for different parties. The artists and songwriters who created and produced the very music that built this billion-dollar music industry continue to largely struggle to receive fair and equitable compensation from digital and streaming platforms. The major record labels and their parent corporations own highly valuable assets (recorded music and publishing) that generate lucrative revenue streams. The digital music companies and streaming service providers with their distribution platforms may not always operate in the black, but many still generate sizable revenues and pay huge licensing fees to record labels and publishing companies. And the public cannot be forgotten – younger generations may not predominately consume music the way previous generations did through terrestrial radio, MTV, physical product (Vinyl, cassettes, CDs), and record stores, but they still want music, only many do not want to pay for it, or if they do, they want to pay very little.

It is unclear if or when there will be broad changes to artist and songwriter royalties. Music is still a valuable commodity. Digital and streaming distribution models alone generate billions of dollars annually, but the allocation of those revenue streams is very lopsided and generally not in favor of the creators of the music. Additionally, there is a faction of the public that does not want to pay for it. There was a time when musicians and songwriters could make a living as working recording artists and professional writers, but with royalty checks ranging from $114.00 - $5,000.00 for several months of high volume spins, the only way many artists will be able to survive is through personal appearances and touring. One thing that is certain, this is a crisis in the industry that is not going away.

Categories: Music Business

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