Digital Music

Major Record Labels Are Keeping Nearly All The Money They Get From Spotify, Rather Than Giving It To Artists

Money_bagsGuest Post by  Mike Masnick on TechDirt

A small group of very vocal musicians has decided that the new target of their anger, after attacking cyberlockers, search engines and torrent sites, should be legal, authorized streaming services. They've decided that the payouts from these services are simply too low, even though almost none of these services are anywhere close to profitable, and most are handing out the vast majority of their revenue to copyright holders. The complaints are often nonsensical.

Way back in 2012, we noted that the target of these musicians' anger appeared to be misplaced, as the CEO of Merlin (which represents a ton of indie labels) admitted that the real problem was that Spotifypaid lots of money to labels and it was the labels not giving that money to the artists. Yet, rather than blaming their own labels (or their own contracts), these artists lashed out at Spotify and other streaming services. Just a few months ago, we covered this issue again, with even Bono admitting that the real problem was the lack of transparency from the labels. 

And, it appears, there's a decent reason why those labels haven't been eager to be transparent: because they're keeping most of the money. The Music Business Worldwide site has the details on a new report put together by Ernst & Young with the French record label trade group SNEP, concerning where the money from streaming services Deezer and Spotify ends up. Spoiler alert: it's not with the artists. Here's the overall share of the 9.99 Euros that people pay for a premium account on these services:

As you can see, the labels get the lion's share, with songwriters/publishers splitting 10% and the performers getting less than 7%. And, if you look at the specifics of the actual post-tax payout, you can see the contrast more starkly:

The labels end up with nearly 75% of the total payout, with actual artists and songwriters left with the scraps. 

Of course, since this project was paid for by SNEP, which represents the major labels, it then tries to spin this as being not only perfectly fair, but a good thing for the artists themselves. What, you say? How can that be? The report claims that 95% of that money that goes to the labels goes to cover all of the "expenses" those poor poor labels have to endure to record and… um… upload(?) the actual music. Sure, in the past, it may have been reasonable for the labels to take on large fees for distribution — but that's when it meant manufacturing tons of plastic and vinyl and then shipping it to thousands of record stores around the globe. In this case, there's no manufacturing, and distribution is an "upload" button. Sure, there are some marketing costs, but the numbers ring pretty hollow (especially for many of the artists for whom the labels do little to no marketing). 

So, again, rather than blaming these streaming services, it appears that perhaps they should be discussing things with the labels.

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  1. Look at this, 20 f*n’ paints in a row. Hit me again! You should pay as fast as you collect, you know. – Nicky Santoro

  2. This is an excuse to not have streaming services pay more. $0.004 per play is NOT acceptable – whether or no the big labels are sharing is another story, but the root is still price per play being something that artists can exist from in respect to the % of where their fans are listening from

  3. Not an excuse for piracy apologists either. Artists can discuss things with both their labels and the streaming services thank you TechDirt.

  4. C A, $0.004 is better than $0, which is what artists get from torrenting and illegal downloads. What people need to understand is that music-streaming is never going to be a musician’s bread-and-butter…nor should it. Music-streaming services like Spotify offer artists the ability to get their music heard to a growing audience of ~60 million people AND get paid for it. This story hits the nail on the head: labels are the problem. In the digital age, they are no longer necessary and there’s absolutely no reason why they should be eating up 75% of revenue to artists.

  5. A couple of weeks ago i was at a Music Conference and someone from Sony who managed one of their catalogs was on the panel. I asked if he could explain how the payouts for streaming revenues were divided up, and he responded by saying that it was a little “murky” and that all of the money was basically in some kind of separate account and that nothing was really happening with it, and then he excused himself and stood up and left. “Wow!,” I thought. “Something really weird’ is going on here.”

  6. But it’s not simply the withholding of royalties. It’s the acceptance of low per stream rates for stock in the streaming startup. And it’s certainly not limited to Spotify. In the Music Key case there may well have been big cash behind NDAs. The artists get stuck with rate. Indies get that same low rate plus nothing. Slimy.

  7. Saying paying out most of the revenue and yet still garenering complaints is nonsensical is itself nonsensical. We’re talking about businesses building themselves on the backs of copyrights. Of course they should be paying an extreme majority of any money that comes to the copyright holders. These company’s Business model is making money by exploiting someone else’s property.

  8. the major labels holding onto the revenues is a separate issue, not the main problem. the main problem in a nutshell is this…if you pay $15 for a CD you’ll probably listen to it 50 times max if you really really like it. but if you stream that same album 50 times the payout is only a few cents. meanwhile, in 2014 music sales dropped 11% while streaming grew 54%. therefore, when streaming under its current conditions usurps music sales there is a large drop in revenue going to labels, artists, everyone. it doesn’t add up.

  9. Hey everyone, I’m building a startup for the music industry and I am looking for artist and fan feedback and thoughts on the idea.
    The idea is.. a site that acts like iTunes where artists upload music and fans purchase music, but instead of purchasing a download, the fans will be purchasing a share in the publishing rights to your music.
    This means every time the song is played on radio, tv, spotify, or whatever, the writer will earn 50% of the royalties and the fans will receive 50% of the royalties, divided amongst them, depending on how much money they each payed for the music.
    This means the fans have a vested interest in the music they purchase from you, and the fans will actually earn money, depending on how well the artist does.
    The artist is basically getting a publishing deal from their fans.
    This site will basically create a type of stock market for songs where people can buy, sell, and trade the royalties they have bought. Each song will have a one month IPO for people to purchase the royalties, and after the one month, the auction closes.
    Please tell me your thoughts on this idea!
    Would you be willing to sell publishing rights to your fans to make lots of cash now?
    Do you think your fans would be willing to purchase music this way?
    Do you currently have a publishing deal and are you seeking one?
    Would you be willing to exclusively release your music on this site for a month so that your uber fans could pay you and get a first listen?
    Would this encourage you to create more music/write more songs?
    Thanks for the input!

  10. Ross… No.
    For your safety it might be a good idea for you never to bring this idea up again within earshot of professional musicians or managers.

  11. I recently instructed that my catalogue of published CDs be removed from Spotify, having been informed that there is virtually no income from playing copyright music on the site.
    Is there a suggestion that such free downloading of copyright music is a service? Surely not.

  12. “Sure, there are some marketing costs”… Which is by far the biggest cost! Why put that as a sidenote? There clearly lack some transparency in this field and properly also some shady business that needs to be taken care of, but its sooo last decade to talk about costs and distribution. Its about marketing and it costs a crazy amount of money wether its ads or peoples time to break a band. THATs the big expense and it wouldnt change anything if the artists went DIY, cos the ocean of music would be just as big.

  13. I always knew that major record labels were the primary beneficiaries in the music industry, but I never knew exactly how significant these numbers were. Very interesting post. Thanks for sharing.

  14. It’s always been this way. It’s been the same debate over radio, over Mtv, YouTube, and now streaming.
    The biggest thieves always have been and always will be the labels.
    I launched myself two years ago and already make more money from spotify than many major label artists… with 5% of their streaming numbers.

  15. Just like all other businesses, music industry seem the same. The marketer gets the more than the real talent. This is a marketing world. So it is not just enough to have skill to make something, we also need to know how to sell.

  16. Maybe its time for the Artists to leave the labels for companies designed to work within the streaming structure, until the labels begin to give a fair deal.

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