Royalty Payments or Artist Pennies? Why Streaming Companies Laugh at Indie Artists

The music world has changed a lot with the rise of Spotify and other streaming sites. Indie artists get upset about the low¹ royalty payments from these platforms. DSPs give 50-70% of their money to the royalty pool, which is more than radio pays¹.

Even though some songs make a lot of money from streams, the real problem is the 4 or 5:1 ratio of master vs. publishing value¹. Artists get about 54% from the master side and 14% from publishing¹.

The main issue is that rights holders want more than 70% of the money or for DSPs to charge more¹. The music world has moved from just making money to also building a fan base¹. Artists used to make extra money from sync placements and brand deals, but these have been cut¹.

Now, streaming is more like an ad for artists’ work than a main way to make money¹. The focus is on what listeners want, not just streaming numbers¹.

It’s said that making a living from music is not guaranteed, but finding an audience is key¹. Minor success is valued, and streaming may not always mean a lot of money. Live shows are still a big way for artists to make money¹.

The material shows how hard it is for artists to make money from streaming¹.

Key Takeaways

• Streaming platforms pay significantly lower royalties to artists compared to traditional radio play.
• The imbalance between master and publishing rights creates an injustice in the distribution of streaming revenue.
• Successful artists still struggle to generate substantial income from streaming, leading to a shift towards live performances and fan engagement.
• Indie artists face even greater challenges in receiving fair compensation from major labels in the streaming era.
• The music industry’s shift towards streaming has complicated the path to sustainable income for many artists.

The Myth of Streaming Riches

Many think the streaming era has brought huge wealth to musicians. But, the truth is more complex. Platforms like Spotify pay very little per stream. Even big hits barely make enough to live on, while most artists struggle².

Spotify’s Royalty Rate Deception

Spotify’s practices make it seem like artists are making a lot from streams. But, some artists use tricks to get more money. This has led to checks on these practices by companies like DistroKid².

Streaming services are now fighting fake streams. But, the main issue is still there. The system favors big artists and labels, leaving indie artists behind².

Independent artists are now focusing on live shows and other ways to make money. They’re not just relying on streams anymore². This shows we need a fairer music streaming model that helps all artists, not just the famous ones.

“The streaming economy is designed to reward the biggest stars, while the vast majority of artists are left to fight for scraps.”

A study from the early 2000s shows most millionaires have only a few income sources. This contradicts the idea that most have many streams of income³. It’s clear that having different ways to make money is key, especially with today’s economic challenges.

Side hustles are becoming more common, but they often require a lot of time. They’re meant to add to your income but can be risky and pay poorly³.

In the music world, the myth of streaming riches shows the need for artists to find other ways to make money. By doing live shows, selling merchandise, and getting licensing deals, artists can secure their financial future²³.

The Streaming Revenue Model

The current streaming model is facing criticism⁴. It divides royalties based on overall stream percentages, not individual listening habits⁴. This unfair distribution hurts independent and new artists.

User-Centric Streaming: A Potential Solution

User-centric streaming could solve these problems. It pays royalties based on who listens to what, not just overall stream numbers⁵. This way, artists get paid for each listener, not just the most popular ones.

Supporters say this model helps all artists, not just the famous ones⁵. It also encourages artists to make more unique music. This is because they can earn more from their dedicated fans.

Starting user-centric streaming is hard, but some platforms are trying⁵. As the music world changes, this idea could make streaming fairer for artists.

“The current streaming revenue model has created a winner-take-all dynamic that often leaves independent and emerging artists struggling to earn a livable income from their work. User-centric streaming offers a potential solution to this issue, providing a more equitable path for artists to monetize their art.”

royalty payments

Royalty payments are key in the music world. They help artists and songwriters get paid for their work⁶. But, with streaming, things have gotten more complicated. Many artists feel they’re not getting their fair share.

The big issue is the difference between master recordings and publishing rights⁶. Master recordings are owned by labels, while publishing rights are with songwriters. Songwriting royalties are set by law, but master recording royalties are negotiated. This often means artists get less money.

Streaming sites like Spotify take a big cut of the money, leaving artists with even less⁶. This makes it hard for independent artists to survive. Their music is popular, but they don’t get paid enough.

Some think changing to a user-centric model could help⁷. This means royalties are based on what each listener likes, not just the platform’s total earnings. It could make things fairer for artists.

The music industry needs to find a way to balance everyone’s needs⁸. By fixing royalty payments and finding new ways to pay artists, the industry can value creativity more.

Diversifying Income Streams

Many artists face challenges in the streaming era. They have turned to diversifying their income streams to keep their music careers alive⁹. There are eight types of income streams, including earned, investment, and rental property income⁹. By spreading income across different assets, artists can increase their overall wealth⁹.

Companies like Apple and Amazon have grown by offering more than their initial products⁹. Financial products like dividend stocks and bonds provide stable income and help manage risks⁹. Artists need to balance active and passive income and look for new opportunities⁹.

Industries with only one income stream are at risk when demand changes¹⁰. Business income can come from sales, services, and investments¹⁰. Active income is earned through direct sales, while passive income comes in later with less effort¹⁰.

Creating digital courses or books is a way to earn passive income¹⁰. Royalties can also provide ongoing income for creators¹⁰. Diversifying income can include digital courses, sponsorships, and real estate¹⁰. Having multiple income streams can protect against financial loss¹⁰.

Passive income is valuable, especially in tough economic times¹¹. The IRS says passive income can come from rental properties or businesses with little involvement¹¹. Affiliate marketing offers commissions of 3 to 7 percent for site owners¹¹.

To earn passive income from rental properties, consider the return on investment and total costs¹¹. Successful passive income streams need initial effort and ongoing maintenance¹¹. Building wealth through passive income can secure your financial future¹¹.

Investing in rental properties requires understanding the market and management¹¹. Creating passive income streams like courses or e-books needs effort in creation and marketing¹¹. Diversifying income through various sources can lead to financial stability¹¹.

The Future of Music Monetization

The music industry is changing fast, but the future of making money from music is still unclear. Over the last 20 years, profits have dropped because of the shift from physical to digital music¹². The rise of Napster and streaming sites like YouTube has made people think music should be free¹².

But the industry is adjusting. Streaming is becoming a big source of money for artists¹². Groups like the Open Music Initiative are fighting against piracy and unfair streaming practices¹². They want to make sure artists get paid fairly and that the market for music is open and clear¹².

The future will likely mix different ways to make money from music. With over 120,000 new songs uploaded daily, finding new music is hard¹³. Companies like Mubert and Boomy have created millions of AI songs, adding to the problem¹³.

To solve these issues, the industry might pickier about what music they accept. Spotify is thinking about requiring a certain number of plays before artists get paid¹³. Services like Deezer and SoundCloud might also start paying artists based on how much fans like their music¹³.

The future of making money from music will involve fighting piracy and finding new ways to pay artists. As the industry keeps changing, everyone involved needs to adapt to make sure music stays a fair and thriving business.

Conclusion

The music industry has changed a lot, moving towards streaming. This change brings both good and bad for artists, especially those who are new or work alone. Even though the industry makes more money, artists often don’t get paid as much as they should¹⁴.

To solve these problems, new ideas like user-centric streaming and finding different ways to make money are being tried. Artists need to understand the streaming world better and find new ways to make money fairly¹⁵.

As the music world keeps changing, it’s important for everyone to work together. Artists, music experts, and leaders need to find ways to make sure musicians get paid right. This way, the music industry can grow in a way that helps artists and makes the future brighter¹⁴¹⁵.

Source Links

1. Re-Damon Krukowski On Streaming
2. Streaming Farms: How Big Artists and Labels Fake Their Streaming Numbers | Qoncert App
3. The myth of multiple income streams (or how side-hustle culture is killing us)
4. Understanding the Business Models of Royalty and Streaming Companies – Publish What You Pay
5. Modernizing Our Royalty System to Drive an Additional $1 Billion toward Emerging and Professional Artists – Spotify for Artists
6. What Is a Royalty?
7. Royalty payment
8. Royalty Payments: A Comprehensive Guide
9. Mastering Income Diversification: A Guide to Building Multiple Streams of Revenue
10. How to Diversify the Streams of Income in Your Business – She Means Profit
11. 25 Passive Income Ideas To Help You Make Money In 2024 | Bankrate
12. This Will Make the Music Industry (and Royalties) Far More Profitable – Royalty Exchange
13. Spotify’s New Royalty Model Confronts The Overabundance Of Music
14. What are Royalties & How do Royalty Payments Work? | Tipalti
15. Royalties Explained: A Comprehensive Guide to Their Impact