Jay Frank: It’s Not Spotify’s Fault That You Make So Little Money
Revenue figures shared by an indie band and the departure of 3 labels from Spotify sparked some strong reactions across the web. Initial results of our own poll show that, at best, the indie community is wary of Spotfiy. (Vote here.) Former Yahoo! and CMT executive and FutureHitDNA author Jay Frank (@futurehitdna) weighs in.
In the last few days, chatter has grown in the indie community about pulling releases from the new (to the U.S.) music subscription service Spotify. The complaints largely stem from minuscule royalty checks at lower rates than majors receive. Spotify has responded to the complaints but that only seems to add fuel to the fire. What is the real issue?
VOLUME
The real issue is one of volume. Nearly all indie artists don’t have it. Judging by Spotify’s 100 Most Played, most people aren’t coming to the site for indie artists as only about 10% is independent. Indies complained about unfair payments in retail in previous decades, so this issue isn’t new. The only way to increase your leverage for better rates, as it is in any other industry, is to increase your demand. The major labels do an excellent job of this, which is where their higher rates stem from.
When an artist complains that their Spotify royalty is only a couple of bucks, what is an increased rate really going to do? Double a $2.50 royalty statement to $5? Is that really making a difference in a bank account? Those that complain are obscuring the true issue about the quality of their music. The lack of repeatability and marketing to drive demand causes low usage that results in low royalties.
REPEATABILITY
Let’s take repeatability. Previously, indies did OK because they created some buzz around an artist that resulted in a CD sale. That album would then be listened to several times, but most of them really never received more than a dozen or so listens. I look around my home office and see hundreds of indie albums I own that I never listened to more than 5 or 6 times. Look at your iTunes play count and see how many indie albums you have truly listened to more than that. It’s not many. Many of these albums were good albums too, and I still think positively about them. But I have no emotional pull to listen to them again. From a consumer perspective, I used to essentially pay a high premium for that privilege by purchasing, but I really was unable to extract the true value because I never listened enough.
Now in a changed world of Spotify and other services, we no longer have to pay that premium. This means that the music has to be good enough to warrant repeat listens. Not just repeat listens while it’s new and hot, but repeat listens over time. So is Spotify to blame because the music doesn’t generate sufficient volume of listens? It’s crucial that an artist and label collaborate to make music that requires multiple listens.
Then one has to look at marketing needed to know your album even exists. Rdio has THREE THOUSAND releases in their new release section just for this week. There are only 10,080 minutes in a week. Do the math. If you didn’t sleep, you would have time to hear only one song per new release. AND listen to that song only once. This is intense competition. With that volume out there, it should almost be a point of pride if you take in five bucks. If you’re not making people aware that your music is out there, it will go unlistened to. I didn’t know the band Uniform Notion existed until they complained they weren’t getting paid well by Spotify.
LOW PAYMENTS vs. OBSCURITY
So, it’s a free country, and you could choose not to be on Spotify. The issue is that you then encounter the one thing worse than getting paid peanuts and that’s obscurity. People want to be entertained by music, not have to hunt things down. It has to be easy, which is why Spotify has gained so much traction. If you manage to get an average music fan’s attention on your band (out of the THREE THOUSAND others that released something that week) for 2 seconds and they look on Spotify and it’s not there, do you know what they do? They move on to another song. And you’ve lost your chance of gaining a fan. And the royalty. The number of people who would then spend time searching for alternative listening methods is miniscule.
When I first published Futurehit.DNA a few years ago, I detailed the techniques you needed in this song for this very reasons. Songs moving forward will make money by its repeatability, not its buyability. Believe me, if you and/or your label had songs with significant volume of activity, I’m pretty certain you could exercise that leverage for increased royalty rates. I wish I could tell you life is fair, but did you make the same money in a club as the opening act that the headliner did? Could you charge the same for a T-shirt as the headliner or did you have to cut your price to be competitive? The music business is full of these inequities. The only surefire way to justify getting the most money is to be great and have the audience to prove it.
Albums with one good song on it are no longer money makers. Songs with one good listen in them aren’t either.
IMHO, Jay’s very mixing the value of a full Album vs the value of one song shows that the basic premise of the whole post is not based upon the facts surrounding what it means to have digital distribution.
Streaming is a pretty straight forward proposition. You play it someone that owns it gets paid by the streaming company. As for the rate of payout the Indie v. Majors get is something that should not be open for discussion and Amazon, Google, Spotify and anyone else streaming needs to accept or they don’t have stream it.
I also have to LMAO if Jay’s is saying all of the releases by artists backed by those Tax Cheating Multi-National Corporations are worth the 19 bucks the major distributors are still trying to stick on the consumers with no offer of returns for the retailers!
Now! when Indie’s start using these streaming sites to match up physical sales opportunities it will be a win win win. Because we’ll be able to get the stores which are still the backbone of our industry ~no matter how much the digitards crow on about how digital rules the entertainment biz.
In the end our industry will get around to dealing with offering the consumer/fans music in every way possible and it’s going to take some real dialoge before that happens and I know some folks are trying from NARM’s digitalmusic.org to NewMusicSeminar and many others and once this progresses so will our industry.
“Now in a changed world of Spotify and other services, we no longer have to pay that premium. This means that the music has to be good enough to warrant repeat listens.”
This is a baloney statement. There is PLENTY of music that the majors are pushing out there that isn’t very good at all. The reason that it gets played MORE than indie and DIY music? Because the majors can afford to invest hundreds of thousands (if not millions) of dollars on advertising this music through billboards, internet, radio, television, and films. They go for maximum exposure and they get it and thereby see returns. It has NOTHING to do with whether the music is “better” or not.
2 + 2 = 4
The majors can afford both 2’s to reach 4, the indies usually can only afford maybe one 2.
I do agree with the fact that indies have so little listens and that’s why they have low income from streaming, but once again that has to do with exposure rather than quality. He even justifies my point by stating specifically that there is just too much music out there now. There is no possible way that the majors or even indie labels can take on all this music that is being made. Therefore, the majors have to tighten their reigns by not only keeping investing in their own products, but by doing so it limits the access to means of marketability that the indies can’t get.
Free album download at http://www.facebook.com/chancius
I never said major label releases are worth full price. However, many of those releases you are disdaining still get played more than major label releases. Also, the reality as in any business is that those with the most volume have the most leverage. Get your volume up and you’ll have leverage to get better deals.
Consumers do indeed speak with their usage patterns. They are showing they overwhelmingly listen to songs, not albums. They listen to hits over obscure. And they want to be entertained. Taking an antagonistic us vs. them approach will never solve anything. Focus on a good product that gets volume usage, just like any other business, and your music will succeed.
Good is in the ear of the listener. I’ve been part of numerous promotions regarding indie acts that rarely work. What the hardcore music fan thinks is quality is just too difficult for the overwhelming majority of people who just want music as entertainment. There are plenty of great indie success stories without big budgets. The Civil Wars have sold nearly 200k albums and many singles as a total indie DIY operation. They did not have the big budget, but they had great music. Blaming a lack of budget on an artists’ lack of talent is a common mistake.
The real issue is that much of the infrastructure in entertainment is totally owned by the Majors or the service is so beholden to them that they do the bidding of the Majors. Sure ever once in a while a story about an Indie band breaks out, however most if not all the remaining coverage is about the Majors.
Considering the recent numbers that we have been given on the Nielson/Soundscan call via NARM.com. We have been told that on store shelves Indies have as good of chance of selling, if not better, then the Major release.
#1 reason why! Fans that have been returning to stores are seeking new music.
Yes it takes loads of money to get a fan to the store and once there unless it’s release they where waiting for the consumer is apt to buy other releases and they seem to be doing just that for the last 16 weeks.
#1 reason why bands aren’t on stores shelves is that the Majors don’t want them releasing and competing for the attention.
Which leads me to think we need to start talking about the Haliburtonization of the Entertainment biz and how we’re entertaining our economy to death.
No it’s not Spotify’s fault right now, but it will be 5 years from now if it becomes the default mode of consumption.
Talented musicians haven’t been able to make money in the past because of the closed-market system. The internet has opened up the market, which is a huge inconvenience to the execs on top. Therefore, their strategy is to close the market again by devaluing music. Since they can play the numbers game, it doesn’t matter, they can still make huge profits and call the shots as it will all be centralized in the cloud. Then they’ll jack up the price a la Netflix.
The end result: unhappy consumers, poor musicians, wealthy executives, and crappy music.
I’d love to buy your conspiracy theory, but that’s not the case on something like iTunes and if indies were that desired, they’d sell a lot more there. True that there are more indie sales on iTunes than there had been at traditional retail, but it’s still not enough to suggest that a major label conspiracy is truly at work.
I’m not saying that it’s impossible for an indie or DIY bands to be somewhat successfull in this market, I’m saying that it’s very rare and the success they can reach is much smaller than a band that has millions behind them.
I’ve personally never heard of athe Civil Wars, but I can say that if they had sold 200k albums in this market I question how much of that was actual profit compared to how much it cost them to make their record and market it on their own. Also, how MUCH did they make off those “200K” sold? The are a lot of factors to consider. If they DID sell 200K albums and were able to turn a substantial profit, then the majors would already be knocking on their door.
There’s an old saying which goes something along the lines of “if you want something done properly, do it yourself.”
All too often these days, people are quick to blame someone else, if not for their outright failures, then at least for their lack of success.
Whether it’s the government,an employer, teacher, parent or, in the case of this article, the ‘majors’ and Spotify, it’s all too easy to point the finger at some greater entity than to take personal responsibility.
What I’m taking from Jay’s article is that more than anything.
The only person responsible for your success, be it in music or any other area of life, is you. Spotfy and the label don’t owe you success; contracts, royalties and legal stuff aside, they don’t owe you anything, the point here is not to think “woe is me, I’m not making enough royalties,” but rather “ok, this isn’t going as well as I’d like, what can *I* as a musician, do about it?
Nor is the argument that music released by the big labels is better than that released by the indies or vice versa; what qualifies as “good” music is a debate that could quite easily go on til the end of time without any clear verdict being reached. To quote one of Jay’s comments above: “Good is in the ear of the listener”.
The argument, simply, is that if you’re not getting results you want, look at what YOU can do about it instead of expecting somebody else to make it all better for you.
And if you don’t have the budget? Use what you do have. Use your creativity, your fanbase, whatever you have at your disposal.
Jay, you are full of shit on Civil Wars. They have a team the equivilant of a major indie label.
It ain’t no DIY.
It should be noted that the problem with Spotify is not the royalty payments, but the conditioning of society that music is free. That music has no cost, and shouldn’t have a cost, because professional musicians, ultimately, are nothing more than your slaves.
So this guy claims to have found the secret formula to make a top 10 hit, wich he will sell you for 395$
Hmmm..ok. That’s all i have to say.
( Now where did i put that snake oil bottle i just bought for making my hair longer ??)
And who influences iTunes? 🙂
It’s nice to see corporate greed sticking up for each other 🙂
Yes they have successfully limited the ability for DIY/Indie artists to monetize their content on the internet.
How? buy using piracy and laws that let it reduce any competition.
As you say it’s a “numbers game” and until now they have been better at it. 🙂
I disagree on how attached one can be to indie bands. Just found a fabulous one recently called The Blue Van. I can’t stop listening to the music. Arcade Fire is another good example – probably the most famous one. There is indie music out there from which one can get just as much value. (NIN, anybody?)
If you boil it down to statistics, then the reason why we don’t have as many indie artists that we love is because we just don’t get enough indies to listen to in the first place. It’s vicious circle and it all comes back to monopoly and promotion.
Is Spotify to blame for the indies not making enough money? No. Nobody is, directly. But as a whole we need to understand that in order to HAVE smaller, indie artists, we need to find a way to support them. And none of the mechanisms in place right now are able to do that. Pay per listen is a mechanism similar to pay per CD, only that it actually pays even less, shrinking the profit margins for everybody – but especially those who are not the Lady Gagas of our time.
Maybe we shouldn’t be looking at services like Spotify as a means to replace CD sales, but rather a promotional tool. Why wouldn’t you want your music to be listensble on services like Spotify? You go where the ears are.
If people dig your music at that point, you have an opportunity to convert them to unique subscription service you can offer, a merchandise buyer, or buying a ticket to a show.
Your band is on tour everyday now via the web.
Knowing them all personally, they reinvested every dollar and hour back into themselves. Do they have a great team working with them? Yes. But that team came from the results of their own efforts. If that’s not DIY, I don’t know what is.
You are right that some bands are repeatable and do quite well (such as Arcade Fire). But they didn’t have it any easier than other indie bands. They broke thru on their quality and they can now leverage that. There are plenty of indies to listen to. Go to the Rdio new release page and listen away. You can’t have time to listen to all of them.
The model has shifted to payment based on experience, which is a good thing for a consumer, and not good for many artists. However, patronage models like Kickstarter, Pledge Music, Topspin and others balance the scales.
Come on, albums from Majors are left unlistened the same way Indy’s are.. that’s a bad argument.. major artists have flops just like Indy ones…
Spoken like a true parasite 🙂
Forget specific music services…music is down to someones taste ie you like it or you don’t.
From previous comments …..arguments stating Indie music at a ‘disadvantage’ against Majors’ music shows 2 things to me…
1) recommendations engines within music sites are not working and
2) social media is not working (this should have spread the word of good Indie bands)
This means consumers are generally lazy / don’t have the time to discover music not covered in mainstream sources.
“Focus on a good product that gets volume usage, just like any other business, and your music will succeed” Wow. Now I know what’s wrong with my work. I haven’t been looking for the lowest common denominator that is “volume usage.” And all this time, I foolishly thought I was succeeding…… thanks for straightening me out.
I was pretty sure the low payment wasn’t about overall earnings, but per stream rates.
Napster pays something like $0.018 while Spotify pays $0.002. I’m sure Spotify loves to classify themselves as “not a streaming service” or a new way to think about music, but that doesn’t explain why a listen from one music service is worth 10x what a listen from another music service is.
If you look at who the shareholders are, you will gain some perspective into why one pays so much, while the other pays so little.
Yeah…
The major labels are laughing at everyone on this topic.
Majors are about to crush everyone and control the revenue streams.
Don’t believe me?
THANK YOU. After reading all these comments before yours, I felt like I was taking crazy pills. If there is a numbers game that you can’t win at, then create your own game. Goddamn. Take some responsibility people. How about you try the game of quality music, because that’s not the game the majors are interested in. You are capable of operating on a separate field entirely.
The problem is that musicians feel you must buy a shitty piece of plastic or a full mp3 album just to find out you can’t stand their music. Art will never be a cut and dry transaction business. It just costs too damn much. If you’re not willing to cook my food at a restaurant, and instead want to take up 3 to 45 minutes of my time to listen to you whine about your life, then I better get a preview to see if it’s worth my time. Or I suppose I should just take your word that you will change my life for a small fee of 13 dollars. Ultimately, slaves are forced into what they do. Musicians are free to try something else…like cooking. The ones who stick with it are the ones who get paid, eventually. It’s a hard life, but it’s called paying dues.
The major labels don’t know how to look up this topic on a computer.
They never lost control of the revenue streams 🙂
I agree with you. That’s why I’m a huge advocate of Bandcamp, which offers full streaming to everyone on the planet, so you won’t get tricked into buying a crappy album.
The difference between Bandcamp and Spotify though, is that the former encourages artist support. The latter is just boasting free music for everyone and implying that artists are being taken care of…
Just b/c artists complain about Spotify doesn’t mean they are spoiled and feel entitled. Any sane musician knows that the free-market should decide.
Very interesting point of view that I’ve never pondered before.
Amazingly true. But they can never ever ever get between an indie artist and the exchange that happens directly between them and fan when said fan buys an amazing piece of merch/ticket.
Ah a free market what a novel idea. 🙂
It’s a shame the one we have means free music not market 🙁
if people are making music as a hobby and they want to give their music away for free, than spotify is great – however if you want to have a professional career, spotify is bad.
let’s not forget that all four major labels have an equity stake in spotify, they make money even is the business model does not work for musicians.
ultimately this is why indie artists, labels and DIY musicians are jumping ship – there’s no money in it and there’s plenty of other ways to avoid “obscurity” anyone ever hear of this thing called “YouTube”?
if people are making music as a hobby and they want to give their music away for free, than spotify is great – however if you want to have a professional career, spotify is bad.
let’s not forget that all four major labels have an equity stake in spotify, they make money even is the business model does not work for musicians.
ultimately this is why indie artists, labels and DIY musicians are jumping ship – there’s no money in it and there’s plenty of other ways to avoid “obscurity” anyone ever hear of this thing called “YouTube”?
I love Jay and I consider him at the very least a close acquaintance if not a friend. But he very obviously comes from a non indie mindset. He’s spent his professional life in partnership with majors through his affiliation with CMT.
His book is also very informative – i think it interesting. But at least for the people I work with and represent it’s not a very applicable template.
To me Jay’s post is yet another example of how holdovers from the old model diverge from pioneers in the new model. This presumes to ignore that a lot of major label marketing is really about bank. And as someone here has already pointed out, even majors have sucky records.
This whole mindset that majors have great product and indies don’t is just indefensible. I love Spotify as a consumer. But as an artist it is definitely a loss leader to enable discovery. My fan base is going to support me by coming to my shows, purchasing my merch but most importantly by extending my community of like minded individuals.
The community aspect is less of a concern to the majors with the probable exception of something like country music’s CMAFest or even Bonnaroo. Which by the way is primarily indie driven and a great quality product.
The reason Spotify gives better rates to majors because they negotiated with the cartel that represented the largest collective of high value targets that Spotify considered critical to have in order for their platform to be successful. And let us not forget that the launch of the platform was delayed significantly in the US because most of the majors considered it a bad deal. It was only after Sony made the first deal did everybody cave.
So again the name of the game is content and more importantly in any negotiation – leverage.
There is no similar cabal in the indie world. The Civil Wars distribution deal is via a major label distribution network through a third party and you can bet that their Spotify rates are the same “low” rates that other indies have. But in the TCW plan, it just doesn’t matter. Because they know where their bread is buttered. In the fan experience.
The Civil Wars are still proudly independent. They have a bigger budget but that budget was obtained by maximizing and leveraging the limited “premium” opportunities they have worked very hard to obtain. There is no invisible pocket of money ghost driving a failing franchise. Initial funding was obtained by a very modest publishing deal and then some smartly invested licensing/placement financial income. And they tour – like crazy…
I wish all indies could hear some of their team thoughtfully speak of how they quietly and responsibly built a successful artistic and commercial enterprise. With principals who incidentally were disillusioned with the major label system. But make no mistake it was a slow burn…No major would be institutionally predisposed to building a career the way they did. The stockholders would have none of it.
But more importantly they created a movement and a community. Ideas that are pretty much foreign tongues in the “we’ll beat you to death with our financial club till you submit” push marketing mentality.
So please let’s quit all this talk that Spotify rates are somehow tied into quality. That just does a huge disservice to everyone involved. It’s better to deal with the facts up front…
Huge conversation. But in any case, I agree with you on the fact that the model is shifting to a pay per experience. In fact one of my conclusions after some heavy research in this area is that the industry is shifting from being more music focused to being more audience focused. So far, it’s only doing it timidly and not wholeheartedly, but that is the shift that needs to happen and hopefully will happen in the future.
That was a comment for Jay… I clicked the wrong thing or something…
As an independent artist and record label owner, I think this article by Jay is a breath of fresh air and well, reality. I’ve come to the point where I can’t even read the a-typical complaining and whining of the average “indy” advocate. ADAPT. Jay, loved your inclusion of “Full Notion”, as I hadn’t heard of them before and still don’t know who the hell they are, and frankly don’t care. MAKE BETTER MUSIC. Pulling your shit from Spotify because they don’t pay enough? NOBODY CARES.
Shouldn’t Indy artist’s get gratification from knowing that someone listened to their music on a service such as Spotify?
Anyhow, this is just a rant that I hope no one responds to. Simply wanted to say THANK YOU to Jay for writing a reasonable, logical article that I actually enjoyed reading.
I think it’s ultimately piracy that’s killing the industry. The streaming services, by attempting to compete with piracy with low monthly subscription fees and convenience, are more or less delaying the inevitable, rather than causing it.
Spotify has been saying the future is access, not ownership. However, one of the things I like about Spotify is that their software allows for both access and ownership, by letting you create playlists with both limited downloads from the subscription service, and permanent downloads that you get through iTunes and Amazon, and then sync both types across all your devices.
Major Labels make nearly their whole catalogs available for streaming, so someone with a subscription would have little incentive to purchase through iTunes/Amazon. The majors don’t mind, because they have the volume to see real revenue from the use, which they figure is revenue that would otherwise be lost due to piracy (and at the moment, they would be right). However, the indies wouldn’t last lo