"Neil Young Demands Spotify Remove His Music Over ‘False Information About Vaccines" (Greene) is the title of a Rolling Stone Magazine article shared last month on the social commenting website Reddit. One of the top comments with over 1700 upvotes reads:
“He’s also not going to miss the $4.73 annual checks. Spotify sucks.” (Thetimmybaby).
There’s so much to unpack here. Why does Spotify suck? What does a music streaming service have to do with public health? Five bucks a year, is this what an established artist earns on a music streaming service?
More than ever in human history, music is all around us. You may sit down and experience a Beethoven symphony with undivided attention. Or you may play background music to relax and put a baby (or yourself) to sleep. You use music to concentrate, to exercise, to dance, to heal an emotional wound. The average person listens to over 2.5 hours of music every day of which about 2 hours is streaming music in one form or another (Engaging 6). Streaming music is on the rise, with services such as Spotify and Apple Music growing exponentially. The share of streaming is increasing year over year compared to other forms of distributing music (Vinyl, CDs, downloads) and is now the number one revenue source for the music industry (Engaging 6). I’m a music fan and I want to support my favorite artists and see them release new music while paying rent and feeding a family. I’m also an aspiring musician and would love to make a living from music one day. As a fan and an artist I’m fascinated by the streaming industry and its effects on music makers and listeners.
Today we have access, right at our earbuds, to more music than we can listen to in several lifetimes. You’d need about 400 years of 24/7 listening to go through Spotify’s catalogue. At the same time, the average person spends about $15/year on streaming (Nelson) of which mere $1.8 makes it to the artists (Masnick), mainly to the most popular ones, signed to the labels with the most klout.
Researcher Francis Lewis points out that
"...streaming, like many facets of digital and internet music distribution, is failing to substantially pay artists. A growing number of artists have boycotted digital streaming services, as they are increasingly worried about their income, or the lack thereof.” (Lewis 13).
Currently “the big 3” (so called major) labels own the rights to about 70% of all music and have much to say as to how music is monetized. And how music is monetized is not how most people imagine it to be. A User-Centric Payment System (UCPS), meaning your money goes to the artists you listen to, is merely a pilot program in one country, France, by one streaming service, Deezer. All other streaming services send the money to the major labels based on their relative share, and what happens next is anybody’s guess (Seabrook). This is not sustainable for the artists, who need to rely on touring for the bulk of their income (Masnick). This proves impossible in times of a global pandemic. Additionally, it’s not sustainable for the streaming services either. Spotify is yet to have a profitable year in its history (Iqbal) and relies on investments to keep the lights on.
The main problem lies with the major labels who are absorbing an unjustified share of profits thanks to their monopoly (or 3-opoly). The solution is simple: first, increase the payments distributed to artists and the streaming services and second, fix the accounting of streams by switching to UCPS. Then we have a shot at the dream of the “long tail” where artists don't need to be superstars with million dollar marketing budgets but can make a living by finding a niche that appeals to just a big enough number of enthusiastic fans.
Let’s look at what happens when you pay the usual $9.99 fee to a streaming service? According to Mike Masnick’s research 21% goes to the platform, in other words the streaming service for their work of making the music available, for server and Internet bandwidth costs, technology, employee salaries and the like. 16.7% goes to taxes, inevitable (like death) as we all know. The rest should go to the people making the art but actually 73% goes to the label and 27% to the artist (Masnick), provided that the artist wrote, produced and published the songs too, which happens but is not always the case. These numbers are a generalization, the reality is more complicated: "The amount that an individual artist will get per stream depends on their contracts in the industry." (Silberling). This ¾ label to ¼ artist distribution needs to change in favor of the artist and we only need to look at recent history to see that it’s not fair. In the age of CDs (approx. 1990-2001) the distributor took 22% (compared to 21% for today’s online distributor, e.g. Spotify), the label took 30%, manufacturing 5%, retailers 30% and the remaining 13% went to artists, songwriters, publishers and producers (Vinson). The labels’ big trick was to absorb the share of the now obsolete manufacturers and retailers. While music makers and distributors have the same share as in the height of the CD era, the labels’ share has doubled.
A side note: Vinson’s stats provide data about the split of the 13% but for the purposes of this discussion let’s treat it as one number and use the term music makers to refer to artists who are performing, writing, producing, recording, and publishing their music. If they want to hire others to offload some of the music making activities, that’s certainly their choice. Also, publishing refers to registering with certain companies to keep track of how music is used in radio, ads, movies and so on. The music business is indeed complicated.
In the light of the statistics above the first step to a solution is fairly obvious: redistribute the share of manufacturing and retail to artists and streaming services instead of to labels. In fact, here’s a simple formula: after taxes, 30% should go to the streaming service, 30% to the label and the rest 40% to the music makers.
This may look like a big blow to the labels but is completely justified. Opposing views may claim that there’s no artist without the label’s marketing muscle. Obviously labels must be doing something. That is an understandable point, however the truth is that labels did a lot more in the days before streaming. They had A&R people (Artists and Repertoire) on payroll to discover and develop artists. They had musicians on payroll to compose and record music for their artists, not anymore (Götting). They had to maintain relationships with hundreds of radio stations where they promoted the artists (payola anyone?). They had other coordination headaches: manufacturing, physically moving LPs and CDs to retailers and convincing (read paying) the retailers to display their artists more prominently. With streaming most of this is obsolete. Labels go to clubs to evaluate potential hit-makers, they look at the number of Instagram followers and YouTube subscribers before they offer a deal. These days the artist needs to already have a following to be “discovered” by a major label. With no physical products to manufacture and no radio DJs to bribe, the role of a label is diminishing. And yet, thanks to their monopoly and influence, they not only maintained their share in the age of streaming but increased it. The proposed 30% for labels is on the generous side: they get the same share for doing considerably less.
Increasing the share of the streaming services from 21% to 30% is also justified if we look at how we got here. Not too long ago “the majors” were on their deathbed. The golden age of CD sales peaked around 2001 (Global 6). This was the time where labels were “printing” money with no effort. All they had to do was re-release beloved LPs when the buying public was replacing their collections with the newer format. When that was over the labels cried wolf and blamed piracy for the diminished sales despite the fact that piracy was never proven to have a significant effect on sales (Oberholzer-Gee and Strumpf 38). Another blow to labels was the “unbundling” of music pioneered by iTunes where you could buy only the songs you liked for 99 cents instead of paying for a full CD (Byungwan et al). In 2013, Radiohead’s Thom Yorke called Spotify “the last desperate fart of a dying corpse” (Seabrook). Taylor Swift was (and is) an outspoken anti-label voice. Even back in 2013, "For Swift, streaming is not much different from piracy" (Seabrook). And yet labels managed to not only not die, but get their profit levels back to the golden age (Global 6). Their trick was familiar: use their back catalogue to negotiate their way to profits. No need for A&R or even any new artists. Labels continue to use their catalogues to make Spotify dance to their tune. Spotify had to give away shares of the company to the big 3 in order to please them and negotiate for the music (Ingham et al). Soon after Spotify went public, 2 of the big 3 promptly sold their shares (yey for free money!), which only shows how invested they were in the success of streaming. With its back against the wall Spotify has to not only give away shares of the company but also try to find income elsewhere.
“Content is king” is an adage that proves to be true once again (as much as it saddens me to refer to art of music as “content”). Netflix proved this by repositioning themselves from a streaming provider to a content provider. One that wins film festival awards and forces Hollywood to collaborate. Now Spotify is attempting the same because it " …remains heavily dependent on the three major label groups. While Netflix is often cited as a model for Spotify to follow, the recorded music industry is much more consolidated than the television industry. If the largest major – Universal Music Group – decided to remove its content from Spotify, or to refuse to grant it a license to use its content in new markets, the platform would be in serious trouble." (Prey 13). You certainly won’t be happy to pay the same fee for a service that is suddenly missing ¼ of its music, just because one of the “big 3” one day decided to assert its influence.
Spotify’s two desperate content efforts are both questionable when it comes to the art of music. The first one was to produce their own music independent of labels, this way keeping 100% minus expenses to hired musicians. They looked at the most popular playlists of background music and contracted artists to produce similar music which then they placed at the top of their own playlists (Ingham). Since early on, Spotify heavily promotes their own playlists in an attempt to fight labels for influence (Pray 11) and suddenly unknown “artists” became the proverbial overnight success. People noticed, complained, Spotify denied, but also removed this content. The other content effort, still ongoing, is their foray into podcasting – an area where labels are not involved. Podcasts are not music and so are unrelated to Spotify’s core business or to this discussion, they are just another example that Spotify’s efforts to be profitable and to combat labels’ influence leads them to new problems. Now they need to police the content to avoid misinformation spread on their platform which is a whole other beast from merely distributing music (Greene). A better balance of influence between streaming services and labels is likely to be restored in the proposed 30/30/40 split. And better for the art and artists too. No more fake artists or content attempts. Instead, streaming companies can focus on their core competence: deliver music in the best and most efficient way possible.
Now, to the second item of this proposal. The new share split will be great for the music makers signed to major labels. But what about the others who use independent labels or are completely do-it-yourself? That’s where switching to a User-Centric Payment System comes in. The idea of UCPS is simple: you listen to two artists this whole month and listen to them equally. At the end of the month each one gets exactly 50% of your monthly contribution. Clear and fair. In fact, any other system is suspect, including the current system. In the current system, let’s say artists signed to Sony Music were responsible for 35% percent of the streams this month. Sony gets 35% of the pie and, as mentioned before, what happens next depends on the artist’s agreement with Sony. But still 35% of your monthly fee goes to Sony even though you listened to 2 independent artists the whole month. After the three majors eat most of your pie, your favorite 2 indie bands get next to nothing. Even Spotify agrees with UCPS: “We are willing to make the switch to a user-centric model […] However, Spotify cannot make this decision on its own – it requires broad industry alignment to implement this change.” (Silberling). I personally read this as evidence of pressure by the majors which prevents the streaming services from implementing a system that makes sense in favor of a more complicated one that benefits the labels.
A common counterpoint to UCPS is a single study (CNM 2) which claims that not much will change for the artists outside the top 10000. Even if that’s true (the data is in French) it’s still not a reason not to switch to a simpler system. And how many of the top 10000 are outside the majors and will benefit greatly? Another study commissioned by the Finnish Musicians’ Union found that “as the overall stream count decreases, the revenue difference between the user centric and the pro rata models increases.” (Muikku 11). In other words smaller artists get a fairer share. After all, no one claims that any artist is entitled to be paid a living wage just because they released a song. The goal is to pay fairly the artists who do have streams and likely a following of passionate listeners.
Streaming as we know it needs to change if we’re to keep new music and artists in our lives. A step in the right direction is restoring major labels’ share of streaming to its rightful place as it was during the peak of the CD era, namely 30%, and splitting the rest 30/40 between streaming services and music makers. At the same time switch to UCPS for counting streams so indie artists have a fair share. Today’s artists are like early-stage investors (in themselves) more than ever before. It makes sense that they benefit accordingly in case of a success. Let’s make this happen!
Works Cited
“The CNM (French public organization for the music industry) publishes a study on the impact of a possible change in the way arti.” Centre national de la musique, 27 January 2021, https://cnm.fr/wp-content/uploads/2021/01/20210121_UCPS_
CNM_Pressrelease.pdf. Accessed 6 February 2022.
“Engaging with Music.” The International Federation of the Phonographic Industry, 11 October 2021, https://www.ifpi.org/wp-content/uploads/2021/10/IFPI-Engaging-
with-Music-report.pdf. Accessed 6 February 2022.
“Global Music Report.” The International Federation of the Phonographic Industry, https://gmr2021.ifpi.org/assets/GMR2021_State%20of%20the%20Industry.pdf. Accessed 6 February 2022.
Götting, Marie Charlotte. “Number of full time musicians in the US by employment type 2019.” Statista, 23 November 2021, https://www.statista.com/statistics/317681/number-full-time-musicians-label-independent-type/. Accessed 6 February 2022.
Greene, Andy. “Neil Young Asks Spotify to Remove Music Over Vaccine Disinformation.” Rolling Stone, 24 January 2022, https://www.rollingstone.com/music/music-news/neil-young-demands-spotify-remove-music-vaccine-disinformation-1290020/. Accessed 30 January 2022.
Ingham, Tim at al. “If Universal Music Sells Its Spotify Stock Right Now, Artists Get $500 Million.” Rolling Stone, 11 February 2021, https://www.rollingstone.com/pro/features/universal-music-spotify-ownership-artists-1126893/. Accessed 6 February 2022.
Ingham, Tim. “Spotify is making its own records… and putting them on playlists.” Music Business Worldwide, 31 August 2016, https://www.musicbusinessworldwide.com/spotify-is-creating-its-own-recordings-and-putting-them-on-playlists/. Accessed 6 February 2022.
Iqbal, Mansoor. “Spotify Revenue and Usage Statistics (2022).” Business of Apps, https://www.businessofapps.com/data/spotify-statistics/. Accessed 6 February 2022.
Koh, Byungwan, et al. “Digitization of Music: Consumer Adoption Amidst Piracy, Unbundling, and Rebundling.” MIS Quarterly, vol. 43, no. 1, University of Minnesota, MIS Research Center, 2019, pp. 25–45, https://doi.org/10.25300/MISQ/2019/14812.
Lewis, Frances. “Slipping through the cracks: how digital music streaming cuts corners on artists’ royalty revenues globally.” Brooklyn Journal of International Law, vol. 43, no. 1, Brooklyn Law School, 2017, p. 297–.
Masnick, Mike. “Only 12% Of Music Revenue Goes To Actual Artists.” Techdirt., 21 August 2018, https://www.techdirt.com/articles/20180819/00051140461/only-12-music-revenue-goes-to-actual-artists.shtml. Accessed 30 January 2022.
Muikku, Jari. “Pro Rata and User Centric Distribution Models: A Comparative Study.” Digital Media Finland, 30 November 2017, https://www.muusikkojenliitto.fi/wp-content/uploads/2018/02/UC_report_FINAL-2018.pdf. Accessed 6 February 2022.
Nelson, Keith. “The Average Person Spends Less Than $15 Per Year on Streaming Music.” Digital Trends, 15 November 2017, https://www.digitaltrends.com/music/nielsen-streaming-music-spending-news/. Accessed 30 January 2022.
Oberholzer-Gee, Felix, and Koleman Strumpf. “The Effect of File Sharing on Record Sales: An Empirical Analysis.” The Journal of Political Economy, vol. 115, no. 1, The University of Chicago Press, 2007, pp. 1–42, https://doi.org/10.1086/511995.
Prey, Robert at al. "Platform pop: disentangling Spotify’s intermediary role in the music industry." Information, Communication & Society, vol. 25, no. 1, 2022: p. 74-92.
Seabrook, John. “Spotify: Friend or Foe?” The New Yorker, 24 November 2014, https://www.newyorker.com/magazine/2014/11/24/revenue-streams. Accessed 30 January 2022.
Silberling, Amanda. “Tidal is investing in direct artist payments, a step toward fair streaming payouts.” TechCrunch, 23 November 2021, https://techcrunch.com/2021/11/23/tidal-is-investing-direct-artist-payments-a-step-toward-fair-streaming-payouts/. Accessed 6 February 2022.
Thetimmybaby. Comment on u/kurtios’s post of Neil Young Demands Spotify Remove His Music Over 'False Information About Vaccines', by Andy Greene. Reddit, 24 Jan. 2022, https://www.reddit.com/r/music/https://www.reddit.com/r/Music/
comments/sc0b2a/neil_young_demands_spotify_remove_his_music_over/
Vinson, Chris. “Record sales: Where does the money go?” Bandzoogle, 9 June 2006, https://bandzoogle.com/blog/record-sales-where-does-the-money-go. Accessed 30 January 2022.
