One part of the great Grateful Dead song Touch of Grey (written by Robert Hunter and Jerry Garcia on the album “In The Dark”) goes like this:
I know the rent is in arrears
The dog has not been fed in years
It’s even worse than it appears
But it’s alright
I will get by
I will get by
I will get by
I will survive
There’s been plenty of ranting in the last year about the low payouts from the streaming platforms and the financial pain and unfairness inflicted on most musicians. That ranting includes my own piece on Medium and plenty of newsletters I’ve put out at Indy Music Sales. How about we put all of that in a real financial context? Namely, how much it costs to live in modern America? Or even better put because it illustrates the pain threshold, can you earn a minimum wage on the streaming platforms and can you even live on that?
America’s Federal minimum wage is $7.25! Taking one week’s vacation per year and assuming no sick days that works out to $1,472 per month or approximately $17,600 per year gross. To provide a little context, it’s worth noting that in 1968 the federal minimum wage was $1.25 per hour. Had it kept up with inflation, it would now be $21 per hour!
Hopefully musicians reading this aren’t having to live on that income level, but if they do, it’s also worth recognizing how that translates into day-to-day life. Laurie Blank did us all a real service in an article on Well Kept Wallet called How to Survive on Minimum Wage this past December. In it she goes so far as compiling a suggested budget for minimum wage earners:
For the sake of this exercise, just pause for a few minutes and compare these suggested monthly expenses with what you spend in those categories. Phone and utilities for $60 each? Yeah, right! Rent for $500? In which rural town with a population under 5,000 is that? This, however, is how an awful lot of people in the so-called service industry have to live. Laurie goes on to list suggestions to get by: keeping housing expenses at bay, keep a lid on grocery costs, keep health care costs low, get a side hustle! You get my point, don’t you?
For the record over half a million American ADULTS only earn this federal minimum wage, and then there’s all those that aren’t adults, living at home or whatever. It is a painful reality to contemplate. Now, set that aside for a few minutes and look at the latest info we have on the financial aspects of music streaming.
The Arrival of the Telecoms
Two months ago we pointed out that the arrival of the big wireless telecom companies in the music streaming market promised not just to change the game again, but in the face of the commodification of music to virtually assure that music is permanently relegated to be thought of as “essentially free” in the minds of end user customer. By the way, musicians tend to think of those end user customers, as “fans,” but big conglomerates just see then as “EUC’s” and all they care about is how many they’ve got and what revenue stream they can generate off them.
If you think this is sounding a little apocalyptic, you’re right. And here’s living proof from Verizon who recently rolled out their new phone plans to include FEEE Apple Music.
Start with the monthly cost per plan which is fairly competitive — even though someone earning the minimum wage probably couldn’t afford it. Then ask yourself how much Verizon has to rebate Apple Music per subscriber or phone? It’s unlikely to be the full $10 monthly Apple Music subscription charge, but even if you assume it is, we all know the payouts are infinitesimally low for most musicians. What this does however, is solidify the concept that music is just another one of those freebies that come along with your phone plan. You know, like maps and Google and weather, etc.
What’s not evident is that the telecom companies will make their money on their data plans, because as those EUC’s listen to more and more music, they use more and more of their data plan and they start paying more and more on the data plan side!
So, Apple Music, like the other streaming platforms makes their money on the front end by underpaying musicians, the majority of music creators make almost nothing in the middle, and the telecom companies make their money on the back end. Predatory capitalism at work!
Are subscriptions the death knell of indie music
Until you stop and think about the business model upon which the streaming platforms are based you don’t realize that there are two key components: 1) free (or next to free) goods and 2) subscription revenue. In that sense the streaming platforms aren’t much different than the social media platforms. Facebook has now been revealed for what it is: a giant platform that provides all its tools and services to EUCs for the specific purpose of harvesting all the free data from and about you that it can (i.e. free goods). The only difference between them and the streaming platforms is that they re-package your data and sell ads to business based on it, while the streaming platforms do battle based on number of subscribers and try to get more and more to pay monthly fees.
The current big challenge for the streaming platforms is converting subscribers from a free tier to a pay tier so they can monetize them. Recently Louis Morales Chanard published an intriguing piece on Medium titled Have We Already Reached “peak subscription?” He basically points out that the growing number of offerings that are all looking to sign up end user customers to monthly paying subscriptions will hit an end point soon: there are only so many potential subscribers and most don’t want (or can’t afford) many multiple subscriptions.
He points out that the churn rate for major video services (with the exception of Netflix and Amazon Prime) is over 50% and that all of this is starting to drive bundling. And, what comes along with bundling is acquisitions. Think about last year and AT&T’s acquisition of DirecTV (now bundled on one monthly service billing) or the more recent pending acquisition of Pandora by SiriusXM to see where it’s going.
Morales Charard’s other point is that we’ll end up with different subscription models: free subscriptions with ads, ad-free subscriptions with a monthly fee and bundled offers. His conclusion should be chilling for musicians. He observes, “This model represents the best of both worlds. For users, it means lower prices and greater simplicity. For companies, it means super-loyal consumers locked up in all-inclusive ecosystems…” Sadly, what he’s leaving out of the formula is that in the case of music, any of these subscription models locks in the current business model which is based on a near-free cost of goods for music.
The streaming platforms are striving to become profitable as they battle for more and more subscribers, and the telecom companies (the likely acquiring companies in the next round of this drama) make their money selling their data plans. So it should come as no surprise that Spotify recently announced they are providing musicians with a new opportunity! For a fee they’ll let you advertise on their platform. That is, you can pay to advertise your music on the very the platform that is already grossly underpaying you for your creative content. Welcome to the apocalypse!
Is It Really Possible For Most Musicians To Make A Living With Streaming?
The low streaming payouts make us suspiciously likely to be able to answer this question for 95% of musicians, but some recently published data confirms all the wailing and gnashing of teeth that became a chorus of anguish in 2018. What we knew through late 2018 was the “published” payout rates from the various streaming platforms, which is generally available. Statista published a comprehensive graph of rates from the major streaming platforms last year showing a range of $0.00074 to $0.01682 per stream.
What’s new is recently published data from The Trichordist and an analysis article by Daniel Sanchez on Digital Music News (Jan. 30, 2019) titled “Streaming Music Royalties are Even Worse Than We Thought — At Least According to This Indie Label.” This is data from the other side of the equation, tied to what is actually paid instead of standard published rates.
The results are mind blowing by themselves, but what Sanchez did that is most helpful is calculate out, using the actual paid rates, how many streams have to be generated at those rates in order to earn a minimum wage.
Now we’re back to earning a living, which (if you’re still with me on this exercise) we painfully looked at when we began. We’re usually talking a full-time job in the service industries to earn the minimum wage of $1,472 per month or a yearly gross of $17,664.
The first point is that most of us can’t live the lifestyle we currently have on minimum wage, and the majority of musicians aren’t living lavish life styles! So now, with what you’ve seen in your streaming reports for the last year, consider the number of streams per month per platform required to make the minimum wage:
This way of looking at the financials of the streaming platforms moves from the theoretical to the practical. You might more accurately say from the theoretical to the existential!
None of us who stream are guilt free
I listen to a lot of music at home, in my office while working, in the car, etc. I’d guess that 90% of what I listen to is split between CDs and MP3 downloads, and no more than 10% is streaming. The streaming that I do listen to I specifically chose to do so from Amazon Prime Music because at least with Amazon streaming is part of a larger offering that includes the option to buy albums as CDs, vinyl or MP3s. That’s not an option with the big streaming platforms. (Full disclosure: I still purchase music!)
But I have to admit to feeling guilty when I stream, even on Amazon. Why is that? Maybe because I’m a guilt freak, but its also because I’ve looked at the underlying financials. For the sake of the exercise, I’ll say I stream two albums per day. Let’s call that 20 tracks per day, which is 600 tracks per month. Amazon Prime Music has a subscription fee of $11 per month. That means my 600 tracks translates into $0.01833 per track paid to Amazon. (For those not good at numbers, that means I’m paying Amazon less than two pennies per track/song!) How much of that gets paid to the artist? If its sixty percent, then the artist payment per stream is $0.01099 per stream — just over a penny. As the table above shows, the volume of streams for that to turn into any meaningful payment is astronomical.
Unless you’re among the 5% of big name musicians signed with the majors and have their marketing and promo budget behind your music, and through them or other ways you are able to influence the curators of the playlists, you can’t generate enough streams per month to make a minimum wage living!
This is the sad fact of life for most musicians. They have to play live performances, they have to sell music and merchandise and most also have full time jobs of one sort of another. So, that’s how musicians get by. But the larger question is if anything can be done about it. Unfortunately the digital revolution in entertainment started with music (Napster and pirating, etc.) and while the video and film segment pretty well learned the lesson and vowed it wouldn’t happen to them, it’s probably too late to turn the tide for music. At least what can and should be done is making sure everyone is aware how the financials work in today’s music industry and who benefits and who pays. in the meantime the reality is that we the music consumers are aiding and abetting the destruction of a creative art form, and as Hunter and Garcia said: It’s even worse than it appears.