Updated: Feb 13, 2022
As independent musicians, I think we all welcomed the early promises of music streaming to provide an accessible distribution channel with almost unlimited global reach. But was this promise a false prophesy?
A little more than a decade after Spotify and other streaming services hit the scene, many music creators, producers and industry workers are left scratching our heads and searching for the promised pot of gold at the end of the rainbow. What we’ve seen instead is the growth of a distribution behemoth, whose shadow has highlighted some stark inequities in the music industry. With major labels taking the lion’s share of streaming revenue for their ‘famous’ artists, where does this leave independent music creators — our local, original music community?
While streaming was sold to the music industry as an accessible, instant distribution channel with almost unlimited global reach; it has become an effective distribution monopoly, with the average song play on most global streaming platforms netting an individual artist less than 0.005 cents.
To make back the cost of an average $5 coffee in Perth, a song must be streamed 1000 times.
To put this in the context of artistic earnings — one million streams on YouTube nets an artist approximately $690. One million streams on Spotify = approximately $4370. One million streams on Apple Music = approximately $7350. One million streams on Amazon Music = approximately $4020. These kinds of figures barely cover the cost of recording an album — cheaply — and certainly don’t represent a living wage.
Without costly marketing and huge effort driving discovery, achieving a million song plays is beyond the capability of most independent artists. Many won’t net this volume of listener traffic across their entire music career. At the same time, ‘free’ subscription options educate consumers not to place a value on music — to expect to consume the creative labour of our musicians at the touch of a button, but to also expect not to have to invest in it in any way.
Streaming has also made redundant the few remaining revenue streams for musicians — the sale of physical product (compact discs etc.) and digital downloads (being superseded by low cost streaming services). Live performance is now a far less viable income source for most local, original musicians, so the loss of revenue from recorded music is doubly impactful. Music streamed in our retail, commercial and hospitality spaces is predominantly international, so royalties that should be retained by our industry are instead flowing out of it.
Musicians are consequently some of the most highly trained, but poorly paid workers in Australia. Research conducted by David Throsby and Anita Zednik for the Australia Council for the Arts in 2010 showed that the mean annual income of an unsigned Australian musician was around $7200 from their arts practice.
Four years later, in 2014, the situation had not improved. Little current statistical information on the state of average artist earnings in Australia is available, however anecdotally, artist revenues are still in decline, and current music distribution monopolies play a large part in this reality.
In his 2019, posthumously published book, Rockonomics, prominent American economist and White House advisor Alan Krueger, compared the music industry to the modern, western economy. In both cases, he argued, most of the earnings were going to fewer and fewer people at the top of the pyramid. He refers to this phenomenon as the ‘tournament model’, where the winners take most, if not all, of the profits.
Krueger wrote that there are roughly 200,000 professional musicians in the United States today, accounting for 0.13% of all U.S. workers. That percentage has remained largely unchanged since 1970, which is, in and of itself, telling. But what’s even more telling is their average income of $20,000 per annum, significantly less than living wage. This bears out the Australian research, which shows the average wage of Australian musicians as even lower, comparatively, than their U.S counterparts.
The argument Daniel Ek, CEO of Spotify makes, is that digital distribution should make it easier for lesser-known artists to find listeners and get paid. He describes the Spotify mission thus:
“To inspire human creativity by enabling a million artists to be able to live off of their art.”
This was one of the great promises of the digital era — that with unlimited access to digital platforms, an artist wouldn’t have to be ‘famous’ to make a living. However current reality does not support this laudable promise. Social media and algorithm-driven recommendations instead appear to amplify the ‘bandwagon effect’, whereby popular songs become more popular by virtue of their popularity.
If music streaming is a tournament, there are some clear winners. Spotify’s CEO Daniek Ek, whose net worth is estimated at $2.2 billion, is evidently a major winner in the game of digital music industry disruption. Spotify’s major investors, who gained significant returns on their initial investments are also doing well.
Similarly, the record labels have benefitted, with Spotify doing the hard work to rescue a flailing industry, while also improving their overall valuations, and in the cases of the major players, netting them significant dividends from Spotify’s recent public offering, as shareholders. Popular musicians, represented by major labels are also well serviced, and music consumers gain access to massive catalogues of music at very low cost.
But, as Kruger wrote, the losers in the game of music streaming are the rest of the world’s music creators — the invisible, unsigned, independent and emerging original artists, of which there are multitudes. In the game of pyramid marketplaces, the fallacy of ‘trickle down economics’ systemically plays out within streaming services as it does in neo-classical economics — the 1% prosper, and the 99% survive on the crumbs.
Most astute musicians know that simply being able to upload music to a crowded global marketplace does not equal popularity — but in an industry where alternative revenue opportunities are fast diminishing, few other options are available to artists to gain any kind of exposure for their recorded music. Once music is uploaded to a streaming service, and is instantly and cheaply accessible, convincing consumers to access other routes to financially support the artists whose work they are consuming becomes a constant plea-marketing battle for musicians. It is a classic catch-22, musicians can’t survive without streaming, and can’t thrive within it.
Artist Credit: https://strugglingmuso.wordpress.com/
While independent artists can make their music available directly (to some platforms), or by using artist aggregators that have negotiated their own licencing arrangements with the streaming services, both individuals and independent record labels are often offered less favourable rates than the major record companies, who have superior bargaining power. In June 2019, after less than a year of testing, Spotify has shut down its beta program enabling independent artists upload their songs directly to the service, so once again unsigned musicians will have to pay pre-approved distributors to upload.
There is an inverse relationship between the scaling of major streaming services (Spotify in particular) and per-stream royalty rates, which presents a challenge for niche artists who are not set up for visibility in a purely consumption-driven environment. More music on a service, and more consumers accessing it for low, or no cost, does not drive up per stream fees for artists.
The growing disparity between the top 10% of artists, and the rest of the striving, but barely surviving music community is further exacerbated by the fact that Spotify (and other streaming services) afford the three major labels and Merlin, an organisation representing aggregated independent labels, certain advantages such as marketing support and advertising inventory. And as a further added ‘bonus’, the Spotify’s major playlists also reward the major labels, again reinforcing the ‘popularity begets popularity’ premise.
Music website TrackRecord notes that 87 percent of the songs added to Spotify’s popular RapCaviar playlist in 2017 came from the three major labels. Forty-three percent of the songs were added to the playlist the day they appeared on Spotify, indicating that their inclusion was not based on the influence of music consumers over time, but on the purchasing power of record companies. Not surprisingly, these major labels, and Merlin, are all Spotify shareholders. So while it may look like an equitable system from the outside, where all players are given equal access to the platform, there are clearly some invisible levers for those backed by major labels which are not available to the independent artist unless he, or she, has money to burn.
It is evident that while streaming offers some ‘dumb luck’ discovery opportunity for a lucky few; for the vast majority of music creators sitting outside of the major music label universe, diminishing revenues, invisibility on global platforms, and industry inequity represent the perfect storm.
Australian artists are creatively starving in an era of illusory musical prosperity, threatening the uniqueness and viability of Australia’s creative capital, and risking the already vulnerable health of our creative community.
At The Pack we firmly believe that there has to be a better way, and we’re making tracks towards building a platform and a pathway for our unsigned, original Australian artists to find a foothold, and a launchpad in this crowded, noisy industry.
If you’d like to know more about how we’re working towards addressing the impacts of global streaming on local music communities, download our White Paper here.