Tuesday, August 16, 2011

Land of the Free?

I was working on another post when two music news items caught my eye. Both about the same thing. Labels who are removing themselves from the streaming service Spotify because the streaming payments are so small it makes it not worthwhile having their catalog available.

One of the reasons that streaming services, and new music gurus, give to justify low payments, are that the labels and artists, due to piracy, now have to complete with free. And we are talking payments below 1/3 of a penny or lower with streaming services.

It is interesting to note that the labels in question couldn’t be farther apart in musical style.

The first one to to pull out was a collection of labels owned by Century Media, a “heavy metal and hardcore” group that includes at least six labels. The company issued a statement saying, "Spotify in its present shape and form isn't the way forward"... "Physical sales are dropping drastically in all countries where Spotify is active."

They went on to say, "The income streams to the artists are affected massively and therefore that accelerates the downward spiral, which eventually will lead to artists not being able to record music the way it should be recorded..." and “Ultimately, in some cases, it will completely kill a lot of smaller bands that are already struggling to make ends meet.”

Echoing what this blog has been saying all along, “This is about survival, nothing less and it is time that fans and consumers realize that for artists it is essential to sell music to keep their heads above water." Similar to our last post, "There needs to be awareness...that how you will consume your music has direct consequences for the artists, who we are all trying to support." 1

The other label was an Indie classical and jazz label. Yeah, they still exist! Who knew?

The label is called Mode Records and their owner and operator, Brian Brandt issued a statement saying, "New streaming services like Spotify… have the promise to squeeze smaller labels out of the picture.” Brandt cited “low payments again as an issue.”

He goes on to state, "On a typical CD sold through a distributor (yes, still the bulk of our sales are wholesale), we may make a profit of $3-4 a unit. Already that is not much considering the total sales of a typical niche CD. Sales through iTunes or similar service can yield a similar profit. But this all gets turned on its head with the Spotify model. For example, in June 2011, Mode had a total of 11,335 streams through Spotify; our income was a whopping $36.98! A big individual seller that month, by composer Luciano Berio, was streamed 1,326 times through Spotify; our income $4.18. So, we earn about 1/3 of a penny per stream. And these meager amounts should be split with the artists and composers." 2

As long as we are talking about Spotify we should include Rhapsody, Last.fm, Napster and all the other streaming services in this discussion. All their payments to artists directly, or through an artist’s label, are all so small as to be ludicrous and downright insulting. As always, they justify these low rates as the music industry needs to compete with piracy, e.g. free.

Let’s take a moment here to talk about the drum beat in the music world today, by everyone except the artists who are trying to make a living off their music, which is that we need to compete with free.

This is just crazy. What other industry is being told to complete with free? Auto manufacturers? Food companies? Big oil? Big pharmaceutical companies? Taxi companies? Airline companies? Shipping companies? Computer and other electronic companies?

Just because something can be stolen it should priced to compete with free? Cars are stolen everyday, so I should get a new car for next to nothing? I’m sure there is a large black market for drugs, so Walgreens, CVS and the others should practically give away my medicine? While we are at it, we can get medical advice from Webmd.com, so shouldn’t visits to the doctor be just a few dollars? And of course siphoning gas is as old as the oil business itself, so Exxon, Shell and Chevron and all the other oil companies siphoning us at the pump everyday should sell a gallon of gas for less than a penny? Or books by a certain NY Times tech columnist who is hip to streaming? I’m sure his books get shoplifted. So said columnist will just need to start competing with all those free books.

During the recent riots in London, looters carried off all sorts of stuff, so all of the people and companies that make, distribute and sell all that stuff better wake up and realize that they are competing with free from now on. Clothing, Plasma TVs and other electronics, food, toiletries, basically everything that is sold can be stolen, so that’s now the new competition for everything made in the world, free.

Crazy, right? But that’s what the music industry, and its artists, are being told. This is a load of crap and if you don’t understand that you don’t understand how society works.

When someone steals something, say a car, or robs a store, or breaks into a house, or smashes a window during a looting spree we expect the police and other law enforcement agencies to catch, prosecute and, if convicted, throw them in jail. If the police don’t do their job and protect people’s and companies property, as in the case of the recent London riots, people get, understandably, upset. 3

So who does a musician or label call when their product, the music they have worked so hard to make, is stolen? The police? The FBI? The DOJ? Not so much.

When someone posts my music illegally on a website somewhere, when I call my congress person, all I hear crickets from their end of the phone call. The silence is deafening.

Congress has enacted laws to deal with piracy. One of them, the DMCA, forces right holders to be our own police surveillance team. Other laws allow for the prosecution of the pirates, but when someone, e.g. the RIAA, actually brings lawsuits against these thieves, the RIAA becomes the bad guy. They didn’t write The Copyright Act (which allows for penalties ranging from $750 to $150,000 per infringement, all at the jury’s discretion), which are crazy IMHO, but those are the laws on the books. 4

So I guess in London the shopkeepers and other retailers who lost merchandise will be the heavies if they prosecute the punks that robbed them?

But I’ve gone off track here. The point is having to price your goods and services against free, illegal copies. How would that all look in a free country.

  • For one thing that $40,000 Lexus you want, now that it’s priced like a streaming payment, will finally be affordable for a mere $126.00.
  • And the $4.00 gallon of gas? That will be very user friendly at $0.0126 per gallon.
  • And you’ll want a new iPod, those are now only $ 0.789
  • While driving that nice new car, why pay $0.0031185 for a drive-thru fast food burger when you can get a lobster dinner for $0.19?
  • And that new plasma TV, that will only set you back $2.20185.
  • Don’t forget to buy a Kindle, and why not spring for the 3G version, it is only $0.50. Then you can download that Missing Manual you need for only $0.0787185
  • And $ 2.20185 for a top of the line iPad? What a steal! (Pun intended...)
  • Dairy farmers will be fine when their milk is competing with the price shoplifters pay, or $0.011025 for a half gallon. I’m sure they’ll be able to feed their cows and their families. (As long as someone starts stealing dairy feed.)
  • Do you have homeless and squatters in your city? Most urban areas do. So now your $300,000 home is only worth $945.00. Hmmm, that’s not good is it?

Oh, that reminds me.

  • We keep hearing about how other countries are stealing US jobs. The median income for a single US household is about $50,221.00,5 but since jobs are stolen, your $50K a year job, when priced like a streaming payment to compete with free, is now only paying $158.19615.

Maybe you cannot afford to buy that Lexus after all...

1. http://www.hypebot.com/hypebot/2011/08/century-media-pulls-all-labels-from-spotify-to-protect-artists.html

2. http://www.billboard.biz/bbbiz/industry/digital-and-mobile/another-indie-slams-spotify-1005312482.story

3. http://www.latimes.com/news/nationworld/world/la-fg-britain-riots-20110813,0,3919647.story


5. http://quickfacts.census.gov/qfd/states/00000.html


  1. You don't keep streaming songs like you keep a CD you bought. A proper analogy would be renting a Lexus, which does cost about $126.

    Would you pay $10 every time you listened to your Berio CD?

    11,335 streams does NOT equate to 11,335 record sales. It's closer to 11,335 listeners on a radio station.

    I agree that the situation is bleak for musicians, but this sort of nonsensical mathematical hyperbole does nothing but confuse the issue.

    Additionally, piracy and theft are different issues with different repercussions, and equating them through metaphor makes them no less different.
    Steal someone's television, and you have a television and they do not. Pirate someone's record, and they still have full access to that record.

    I'm not trying to justify piracy, just pointing out that the issues should be treated for what they are. It's a different paradigm from make-a-physical-product-and-sell-it-to-someone, and it requires different business models. Business models that may indeed be quite profitable to artists, but that have not yet been adequately explored in our haste to cling to old ways.

    If I could use a gallon of gas, and the gas station would still have that gallon of gas to sell to someone else, and the gas station could send it to me wirelessly through my iPhone without even going to a station, 1.26 cents wouldn't be all that unreasonable.

  2. The point of the post was that these payments are based on supposedly having to compete with "free", illegal copies. That free has become the common denominator. You seemed to have missed that.

    Of course the numbers aren't real. The whole idea behind the post was to get the reader to take a moment to think, and imagine, how the world would look and, most importantly, how they would be paid for their hard work, time, and sweat equity, if the economy of streaming was applied to the the economy at large.

    Your comment about stealing someone's TV and they don't have a TV, but steal from a right holder and they still have their copy is absurd on its face. It is the music, the content, that is valuable, not the physical item.

    Do you seriously think that if you posted the plans for an iPhone on a web page Apple would think, "That's cool, we still have our copies."?

    Like many people you are confusing that what is being stolen is not the medium on which it is delivered, but the content itself. You are not stealing a polycarbonate plastic disc, or even a digital file, you are stealing the hard work and intellectual property of someone.

    You say that the Lexus example based on streaming is more like renting. If so then we should take the real cost of renting a car and reconfigure those numbers based on streaming payments In that case a rental would really work out to be $0.3969, if the rental company had to compete with free.

    Regarding the Berio CD, of course you don’t pay every time you listen. You buy a CD and get to listen to it however many times you like. Forever...

    And BTW, royalties on real radio are higher than streaming royalties, and you don't get to listen to a song on the radio on demand. You have to wait, and hope, that a station might play the song you want to hear. A completely different paradigm.

    Musicians do indeed get the payments mentioned in the post. Those numbers are real.

  3. I didn't miss that at all. I realize that it's a completely different economy when you have to compete with free. However, the solution is not to throw around a bunch of bogus numbers and vilify listeners (who want more than anything to hear your music) as thieves.

    "Streaming sites pay crap royalties" is a valid complaint, a complaint that should be directed toward the streaming sites.

    Looking at it from a purely logistical standpoint:

    The entire recording-sales paradigm originated from a situation where distribution of music was a costly affair, with scarcity of supply. This worked well for several decades. However, that condition is now gone.

    There is nothing short of a technological apocalypse that will cause music to be expensive to make copies of or distribute. Screaming at people will not do it. Suing people will not do it. Both of those just make angrier people who are LESS inclined to give you money.

    The long-term solution is to look at the present situation and find out how to make it profitable. Look at it without the historical model, as a situation with opportunities:

    You, a musician, have the ability to distribute your music to anyone in the world who wants it, for free, and they'll even take care of distributing it to each other if they like it. What are ways you can make money off this situation?

    A couple come to mind immediately:
    1) Concert ticket sales, merchandise (including "physical records"), advertising, guest appearances, street cred that leads to other gigs, etc.
    2) Monetized premium music services that offer search recommendations (an experience superior to free), curated (i.e. DJed) programs, etc., and charge a fee or make money through advertising.

    Copying someone's music and giving it to someone else for free is not an intrinsically ethically wrong act. People do this all the time for promotional purposes. It is only because we ascribe value to such transactions that it becomes "piracy." We need to look at whether or not it is in our best interest as musicians to continue to ascribe such value.

    Music isn't the only sector feeling significant upheaval due to technological changes. While the situation has obliterated the feasibility of old models, it also presents enormous opportunities. It may be that the entire paradigm of being a musician will change in the coming years. People still love music, and leveraging that enthusiasm should be our #1 priority.

  4. Wow, I never knew how low streaming payments were-- or even thought about it. This post really puts into perspective!

  5. @ Alex

    First let's be clear about a few things: No one here has called anyone "thieves". No one here has sued anyone. No one here is screaming at people.

    Once again, the numbers are just illustrations. Just because you do not like the way I make the point that streaming payments are, as you say, "crap royalties" doesn't negate the point. So low that in order to make the U.S. monthly minimum wage of $1,160 an artist would have to receive in excess of 140,000 streams each month. For a low or mid level artist that is just not going to happen. Most people when they learn how low streaming payments are, are shocked. They have no clue. They assume that payments are much larger.

    However, the main point of the post was not just that streaming rates are low, but that the rates are justified because they have to to compete with free. Even Spotify can not seem to hold on to free users. In the time period from May through June of this year, even though they gained 520,000 paying subscribers they lost 1.6 million users due to restrictions on free access. That makes for 956,000 free only users who left the streaming service and have gone...where? To another paid streaming site? I'm guessing not so much.

    Regarding your solutions as to how to earn an income as a recording artist, I would say, with no snark, sarcasm or disrespect intended, why don't you try your method for twenty five years, see how that works, and then get back to me.

    My income is derived from many different sources: CD sales, Digital Sales, Radio play, Satellite Radio play, Television royalties, Airline on-board play, Concerts, Workshops, Lessons, Books... I have income data for 10 years of making and marketing my own music, and another 15 from composing music for TV commercials and corporate films. Any income that earned me a "living" wage has always come from selling my music. Everything else is either too low to really count, or promotional in nature.

    Your music is not, as you are suggesting, your promotional material, or your loss leader, it is your product.

    This is why the Coca Cola Company does not give away Coke for free in the hopes that people will buy their Tee Shirts, stickers and cup holders. Those items are not their product. As a musician you are not in the business of competing with Old Navy to sell Tee Shirts. If so, you would not be learning, practicing and polishing your music making craft just to sell Tee Shirts. You'd be studying fashion design. (This is assuming you are a musician.)

    As for concert ticket sales, try to separate what a low or mid level artist makes from what a super star makes. Advertising? Have you actually tried that? I have. It does not even approach streaming revenue. Guest appearances? Not in my genre. Street" cred"? Seriously? If by that you mean that your "reputation" will lead to other gigs, that has been true for as long as society has existed.

    Perhaps if I was U2, Beyoncé, Lady Gaga, or any other superstar act, more income could be derived from concert tickets, merch, promotional endorsements, etc. However, most musicians are not at that level. And never will be. Nevertheless, they can, or could, still make a living through their original material.

    One could also say that people are already "enthusiastic about music. Otherwise they would not want it, whether it is free or not.

    Last, but not least, as to whether copying someone else's music is an "intrinsically, ethically, wrong act". U.S. copyright law states that it is illegal. I live in the U.S., so, "Redde Caesari quae sunt Caesariss..." In fact, when I contract a disc manufacturing plant to make copies of my music on CDs for me to sell, I have to sign a contract giving them the limited right to do that. They will not do the job with out it, even though I am requesting and paying them to do just that. Something you would know, if you had ever made a CD.

  6. Questions of morality and legality notwithstanding, the genie just isn't going back in the bottle ever. Observe that recording hasn't been merely a passive medium for transmitting music - rather it changed the nature of music itself, with commodification pushing the 2.5 minute song to the center of our collective consciousness. Before that transformation, the best music was paid for at the time of creation (not consumption) via commissions and patronage. For music to continue to exist as a profession, society must revamp that practice for a new century. Better minds than mine will discover the ultimate model, but certainly possibilities exist. And I do believe that listeners will learn to finance the creation of the music they most love if musicians demand it by refusing to create music on spec. Indeed I foresee a new world where a given music lover directs money in comparatively large amounts to a very small number of artists (as opposed to the old way of sending small amounts of money to many artists by collecting records and/or downloading songs). Artists in turn would then lose interest in mass appeal and concentrate rather on satisfying their small but zealous base, much as visual artists do now. While I admit that I do happen to believe that our collective musical life will ultimately benefit from this (r)evolution, my point here is not advocacy but prediction. The current paradigm has collapsed and something must eventually arise to replace it, and paying for music at the point of creation seems to me an inevitable feature of any new paradigm.

  7. @ Anonymous

    Any time I see the term "new paradigm" I know we are headed for the Kool-Aid stand of the so called New Digital Music gurus, who have never earned a "digm" from creating anything in the art-form they are so quick to tell others how to earn a living. Quite frankly, if I earned a pair of dimes every time I heard someone talk about the so-called "new paradigm" (pun intended) I would be able to nicely supplement my income.

    Nothing in your comment addresses the main point of the post "Land of the Free", which is that low streaming payments are, in large part, justified in order to compete with free.

    But that said, let's look at your comment point by point.

    Genie out of the bottle? Just like the genie of accepting of slavery, gunfights, smoking on airplanes, and drunk driving? As with the early stages of those problems, society has not caught up to dealing with the damage of digital age.

    Technology has always changed the way anything is done. The printing press brought the written word to the masses, the telegraph enabled news to cross the U.S. in minutes instead of weeks. Beethoven wrote more forceful piano sonatas, (and longer than 2.5 minutes) as the instruments became stronger, the electric guitar brought about a revolution, magnetic tape made recording easier, the multitrack radically changed the way music then was recorded, amplification brought folk music to mass audiences. Nothing is passive.

    As for music being paid for at the time of creation, and not creating on "spec" I assume you are just choosing to bypass the millions of copies of sheet music that were sold during the 19th century? The works of Chaucer, Shakespeare, Austin. Thoreau, Melville, Faulkner, Steinbeck, the paintings of Rothko, Van Gogh, Matisse, Warhol, The Brandenburg concertos, piano Rags by Scott Joplin, the recordings of Billlie Holiday, Frank Sinatra, Miles Davis, John Coltrane, Pink Floyd, the Rolling Stones, Lady Gaga, The Beatles...?

    In your so called "evolution" of not creating on “spec” we would instead move backwards to a patronage system, similar to the 17th & 18th century, where the aristocracy funded musicians for their own pleasure That music would return to being something only the super rich can afford and musicians would be at the mercy of the few, who, to paraphrase a line from Amadeus, could blithely say "...too many notes" I assume that you and your Wall Street banker friends are wealthy enough to support your favorite musician(s) while they work on music that, in the end, will need to pass your approval since you paid for it? This sounds extremely undemocratic, but I’ll let you know where to send my check.

    Finally, if you want to hear music that was not created on “spec, but instead funded by someone with money, you can always listen to the works of The Bay City Rollers, The Spice Girls, In Sync, New Kids On The Block and The Partridge Family.