I delivered this talk May 4, 2022. In the Q&A that followed, Spotify’s former Chief Economist accused me of being “uneducated” and presenting “false information,” without further explanation. I am posting the text so people can judge for themselves. Some of it is drawn from documents I have previously shared: a testimony I delivered to the FTC/DOJ Listening Forum on Firsthand Effect of Mergers and Acquisitions, Media and Entertainment, on April 27 2022; and an earlier essay here on Dada Drummer Almanach, “Where Do We Go From Here: the Case for a New Streaming Royalty.”
Thank you for inviting me. I’ve been asked to talk about music streaming: what’s wrong with the current situation, and what we might do to change that.
What’s wrong is easy to identify, from a musician’s point of view: it doesn’t pay artists enough to sustain a recording career. Ask any of us, apart from a very few at the very top. This is due to the way streaming has been set up by the platforms – monetizing market share and capital growth rather than content - and by the way it has contributed to increasing consolidation in our industry. Let me start with consolidation.
I play indie rock – the name comes from “independent.” What has changed from increased consolidation in the recorded music industry is we have lost our independent sources of income.
Like everyone else, my recorded music income is now dominated by streaming: it is 83% of all recorded music revenue in the USA, according to the RIAA.
Streaming is in turn dominated by Spotify, which has a 31% global share of the paid-subscriber market. It is also the only specifically music streaming platform that offers its services for free.
Apple is its nearest competitor, with 15%. Then Amazon, with 13%. Those three account for 59% together. Add the Chinese media giant, Tencent, which has another 13% market share, and these four companies control 72% of paid streaming.
My income – even the income of an independent artist like me – is now dependent on these companies. And we have no negotiating power over their terms.
Let’s talk about those terms.
The terms the platforms pay are punishing, and unsustainable for all but a very few artists. The “middle class” of working musicians is being eliminated by this unregulated system.
According to Spotify’s own PR – this is a number they brag about – 52,600 artist catalogues are grossing $10k or more per year from their accounts with the platform.
Daniel Ek has said the goal of the company is to enable a million artists to live from their work. That’s obviously not how it’s falling out. First of all, 52,600 is 947,400 short.
Secondly – more importantly, if we assume the million mark is hyperbole (although it remains the company’s mission statement on its website) - $10k annual gross is a sad benchmark chosen by the platform any way you take it. A large proportion of those 52,600 artists are obviously not earning even a minimum living wage from their recorded work.
Spotify pays an average of $0.0030 per stream, which means you need millions of streams per month – if not tens of millions – to generate a meaningful income.
Let me share my own experience of this. My bands see about 3/4 million streams per month on Spotify. This last month, for those 730,769 streams we grossed $2,192.31.
We are lucky and happen to own our master rights – we are our own record label. So that figure represents the total paid by Spotify for our music streams.
This might be ok as a portion of a diverse set of income sources – which is what we had before streaming took over the market. Ten years ago, we had significant income from many sources that Spotify in particular has driven out of the marketplace by offering equivalent services for free: physical media, satellite radio, licensing for commercials… All of these have been absorbed to some extent by streaming’s unchecked expansion.
I don’t need to explain what streaming has done to the physical media market. Satellite radio is another obvious place for direct competition – it was a booming source of royalties in the US before everyone started streaming in the car instead. Note that satellite radio is regulated by the US government, with guaranteed royalty payments to artists.
But even a source of income like licensing to commercials has been damaged. Formerly, a brand had to negotiate directly with an artist like me to associate themselves with our music. Now they can build a playlist on Spotify without my permission. They may even pay Spotify for the privilege – we can’t know, because Spotify would not report or share this with us as income from music.
Spotify, Apple and Amazon have also become producers of audio content, as well as distributors with outsize power – podcasting is one example of this, as are the so-called “fake” artists that journalists have discovered in some of Spotify’s branded playlists.
At least in Spotify’s case, we know that they promote their own content using privileged access to users and their data. We know this, because the platform is now asking artists to pay for similarly advantageous placement by their algorithms. “Discovery Mode” has already attracted the attention of several members of congress, who have written oversight letters to Spotify asking how this is different than payola on the radio, which is illegal.
It isn’t different. It is only unregulated.
Which brings me to what we might do to change this situation.
It doesn’t seem the streaming platforms are interested in changing their business practice of grabbing market share at all costs, or in changing their punishing structure of payment to musicians.
When the pandemic hit, and all live music stopped, a number of mostly younger independent musicians in the US formed a new advocacy group: the Union of Musicians and Allied Workers (UMAW). We started looking together at what we might do to improve our situation as working artists. Chief among the solutions: fix streaming.
We studied the situation from our own points of view, we consulted with experts in the field, and we launched a campaign directed at Spotify with three demands: Pay Us More; Be Transparent; Stop Fighting Artists (specifically songwriters) in Court.
That was October 2020. Nearly 30,000 musicians and music workers signed our demands – with many more in solidarity, but afraid to speak out for fear of retribution from the platform.
But Spotify wouldn’t talk to us. In March 2021, we delivered our demands in person to Spotify offices around the world. They still didn’t acknowledge us.
Meanwhile, it’s perhaps not irrelevant to note, Spotify’s stock began to fall. And fall. And fall. When we launched our campaign, Spotify’s capital valuation was $60 billion. The company is now worth less than $20 billion - $40 billion in paper value wiped out.
You might say our protest has nothing to do with Spotify’s stock, and you would probably be right. On the other hand, it is musicians who make the content for the platform. It is our fans who are the users of the platform. Is it really in a business’s interest to pay no mind to its content providers, or its users? Who is left?
That question is not rhetorical, because to us at UMAW, Spotify is not a music business - it is a tech platform. Spotify seems to be no more tied to music than Amazon is to books (remember “Earth’s Biggest Bookstore”?). We can see this in their behavior toward musicians, and recently in their emphasis on investment in podcasting. When Neil Young and Joni Mitchell offered Spotify a choice between their music and shock-jock podcaster Joe Rogan, it was no surprise they chose Rogan.
Because streaming platforms aren’t going to listen to the musicians who supply their content, and aren’t going to police themselves, we are turning our attention toward regulation by government.
We need help from government to restrain the practices of these massively capitalized corporations. We need protection for competition in our industry. We need support for musicians who can no longer earn a sustainable income from their recorded work.
Toward that end, I want to introduce the concept of a new streaming royalty, as proposed by the UN’s World Intellectual Property Organization.
Quoting UMAW’s summary of that proposal:
“The UN report argues that we need to create a new type of streaming royalty that is paid directly to artists, including non-featured performers. The authors note that streaming does not fall neatly into any existing royalty schemes, and so we must create an entirely new system in order to properly compensate artists and preserve cultural diversity.”
Paid directly to artists is the key concept there. As everyone in the music business knows, payments to labels don’t always reach artists, for one reason or another. This would be a new royalty that bypasses existing contracts.
Again I’ll quote from UMAW’s summary:
“This royalty would be paid in addition to all existing royalties paid to songwriters, labels, artists, etc., and would therefore not reduce anyone’s payments, and would not interfere with existing contracts… The royalties would be paid out through Copyright Management Organizations, or CMOs.”
In other words, this new royalty could be collected and administered much the way satellite radio royalties are handled in the US – which are distributed directly to artists, including non-featured performers. CMOs represent an established global network for accomplishing exactly what we are missing from streaming.
It’s a clever use of an existing system – or as the WIPO report explains in its own summary of the “pros” for this plan:
“Does not require additional transaction cost as matching and payment information already exists at CMOs; does not require renegotiation of licensing agreements or disrupt current licensing practices; platforms are already paying similar royalties in certain territories; recognizes value transfer from all performers to platforms; helps to preserve local culture by compensating both featured and non-featured performers.”
The concept of a new streaming royalty distributed direct to artists is neat, clean, and simple. All that remains is to determine how much the platforms should pay through this system. And force them to do it.
Thank you for giving me this opportunity to address you this morning. I am happy to take questions.
Excellent address in response to Spotify's chief economist whose job surely exists because of the music made by the bands on their platform.
UMAW is also providing us here in the UK with examples of how to fix streaming as we address the same question. Many thanks for setting a good example.