Songwriters, publishers, performers, and a myriad of others that create the music that defines moments in our lives, serves as the background for dinner dates, house parties, and corporate conventions are earning less money than ever before. While there are many factors to consider one of the most notable issues is the lack of compensation from streaming services. Sure, radio has been notorious for their lobbying group that has kept them exempt from paying their fair share of royalties to recording artists, but streaming media has taken it to a whole new level.
While the streaming music industry continually battles for lower royalty rates – here’s looking at you Pandora – claiming exorbitant fees keep them unprofitable, the real truth is that MANY streaming companies NEVER PAY royalties. Those that do will point to the big fat checks they wrote last year (looking at you Spotify) but what they leave out is how many streams were played without compensating the artists. Or how many free users got to listen to free music which, by their private agreements created in back rooms with no input from the creatives that made the songs int he first place, happens to have an agreed upon royalty rate of NOTHING.
The ugly truth is that streaming music companies CANNOT BE PROFITABLE and PAY FAIR ROYALTIES and give away their services for free. In fact it is difficult, if not outright impossible, to charge anything less than $9/month per listener and pay fair royalties while covering the technical infrastructure needed to provide the service. That very fact is one of several pieces that have created the perfect storm to suck the money out of the pockets of the musicians and songwriters. It seems that EVERYONE in the music industry that is supposedly “artist friendly” wants to pay themselves first; including the newest kid on the block – the streaming music service.
In the streaming world, nobody wants to ‘go first’ and eliminate the free part of their service. Users are fickle. They will immediately jump to the next free service. Sign up for Spotify for 30 days. Then Pandora. Then Slacker. Then grab stuff on YouTube. Then repeat the cycle. Thus every big name streaming music company MUST HAVE FREE offers; or so they think. But who gets screwed in that scenario? The artists.
What happens under this type of business model? More than 70% of your users NEVER PAY A DIME to consume your main product. You remain a non-profitable entity. Even the artist-friendly service, Tidal, has been accused of not paying their royalties and assumptions are that the lack of profitability is playing a role. Even the largest player in the game right now, Spotify, is not profitable and has been accused many times of not paying their artists.
Some people are under the impression that , “hey, they are playing ads on the free station and making money so it should be free”. Sorry folks, but that is a fallacy. The ad rates for streaming radio stations is orders of magnitude LESS than your local radio station. That means 10 to 100 times lower per minute of advertising. IN 2014 the average streaming audio ad rate would have required a user listen to MORE THAN HALF of their stream as ads to cover the cost of streaming music. Here is your 3 minutes of music followed by 3 minutes of ads.
Just ask Radionomy whose main method of paying for those 50,000+ free radio stations they offer is ads; Radionomy lets you stream any music from their catalog and pay ALL the license fees in return for placing ads on stations you create. How well does the model work? By some recent accounts, they’ve not paid Sound Exchange a royalty check since 2014. This is a service backed by a billion-dollar company know as Vivendi.
The streaming companies look at their bills and decide “the biggest chunk is royalties” and then go and argue to the royalty board that rates are too high. Ummm, no. The rates are not too high, you just gave away far too much of your product for free. It would be like your local bar giving away 5 beers for free for every 1 paying customer then complaining to the distributor that the price they pay for beer is too high because they can’t pay the rent.
I recently came across a royalties report that included top-rated content. Of the 30+ streaming music companies playing music today less than a dozen were shown as paying their performance royalties. There are far more than a dozen companies playing the songs. The bottom line is that the creatives behind the music are not making money because more-and-more of people listening are doing so over their phones and digital devices. The companies they are using to connect to the music are not paying their bills, plain and simple.
What needs to happen to fix the situation? Streaming companies need to pay their suppliers. That means paying ALL royalties for ALL streams they serve. Free or paid. In turn they need to charge more for paid services and be better at limiting free trials and stopping repeat (just got another free gmail account) offenders.
Let’s not leave out the USERS, that means YOU. You need to start paying for your music. If you want to listen for free, turn on the radio. You know the old-fashioned static-laden FM radio – if you still have one. Otherwise get on a reputable streaming service, if there is one that really does pay all their bills, and pony up the $10 for a paid account.