Who makes money from streaming music and how much money are they making?
Two things should be kept in mind when you think about trying to answer these questions. First, the money flow in the music industry in general and the streaming end of the industry in particular is complex, convoluted and often opaque. It would take a lot more than an article or two on a blog to disentangle the whole thing and by the time you had it all worked out the situation would have changed because the money flow from streaming is a work in progress. No one knows how or when music streaming is going to settle down into a stable configuration of music providers, distributors, and payment models.
The second thing to remember is that no matter how convoluted the streaming situation is (and it’s very convoluted) the record labels always get paid and they always get paid more than anyone else. The recording industry is now and always has been vicious and ugly. The label owners make money while the people who actually compose and perform the music (with the exception of the 1% who achieve superstar status) usually get screwed. Streaming by independent creators threatens the label’s hegemony but, at least at this point, the threat is small. The story today is the same as it ever was. The record labels always get paid and they always get paid more than anyone else.
The completely independent creator provides the simplest case if you want to try to follow the money from digital sales and streaming. The main reason for this is that the independent music creator has no ties to a record label. Things get very complicated very quickly as soon as a record label gets involved.
Streaming has given independent creators access to a worldwide audience of music listeners and consumers. This is why the labels are threatened. Before streaming the record labels were the undisputed gatekeepers separating musicians from a wider audience. If you wanted your music to be heard outside of the venues where you performed, you either had to try to convince individual radio DJs to play your song or you had to sign a contract with a record label. That isn’t true anymore. The gatekeepers have lost control of the gate.
Does this mean that independent creators can make a living streaming their music? Not likely. Here is a brilliant infographic from Information is Beautiful that very clearly illustrates how much money musicians can make from streaming, how many streams it takes from different streaming services to make $1,260 per month which is minimum wage in the United States, the number of streams it takes from different streaming services to reach minimum wage for independent musicians and musicians who are signed to a label, and the proportions of streaming income paid to the distributors, the labels and the artists. It is an outstanding example of information visualization the way it ought to be – rich in information, easy to understand, and nice to look at. Check it out and then come back.
From the infographic it’s easy to see that independent creators take in a larger percentage of the revenue from both streaming and digital sales than musicians who have signed with a label. For example, the sale of a $0.99 single from iTunes pays $0.69 to independent creators and $0.23 to musicians signed with a label. Independent creators also have an advantage when a track is streamed rather than purchased. The magnitude of the advantage differs with different streaming services. For example, signed musicians have to stream 2.45 times as many tracks as independents in order to make minimum wage on Google Play and 13 times as many tracks as independents to make minimum wage on Deezer. Tidal, Beats Rhapsody, Spotify and YouTube require signed musicians to stream between 6 and 6.37 times as many tracks as independents to make the same amount of money.
Independent creators may make more money per stream than musicians signed with a label but it is still nearly impossible for the independent musician to make even minimum wage streaming music. For the independent musician Tidal is the best of the streaming platforms shown in the infographic although at the time of this writing it is unclear whether Tidal has any hope of succeeding. Tidal may be the best, but it isn’t very good; independents have to stream 29,302 tracks per month from Tidal to make minimum wage. Without label support this is extremely difficult to do. Still, it’s more than an order of magnitude better than YouTube where the independent has to stream a ridiculous 700,00 tracks per month to make minimum wage.
If independent creators make more money per stream or digital sale, why do musicians sign contracts with record labels? That’s an easy question to answer – marketing and support. Musicians signed with a label may get a smaller proportion of the revenue from digital transactions but they have the potential for many, many more streams and sales with the record label’s marketing and promotional power behind them. The label will also support the musician by sending them out on tour and by taking care of all of the business parts of the music business which many musicians either don’t understand or don’t want to deal with. All of this support comes at a high price, a price that is so high that record labels make a lot more money from the music than the musicians who create and perform it.
We’ll take a closer look at where the streaming money goes for musicians who are signed to a label in the next article in this series.
(Full disclosure: I am an independent musician that makes, sells, and streams music under the name Parametric Monkey on Spotify, Google Play, iTunes, Deezer, Tidal, YouTube and many other streaming services such as Soundcloud that are not shown on the infographic.)