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Industry News Courtesy Of Hypbot
Streaming services, most notably Spotify (by far the largest) use what could be called a parimutuel royalty system: all the money collected goes into a big pool, Spotify takes their 30% off the top, and whatever is left is distributed to artists based on their share of overall plays. Spotify explains how it all works right here. It sounds perfectly fair and reasonable: if an artist wants to make more money all they need to do is get more plays. But there’s a major disconnect in this economic model that has not been discussed widely: Spotify doesn’t make money from plays. They make money froms subscriptions.
So how is that a disconnect?
Let’s say I am a huge fan of death metal. And nothing pumps me up more than listening to my favorite death metal band Butchers Of The Final Frontier. So I sign up for Spotify in order to listen to their track “Mung Party.” I listen to the track once, and then I decide Spotify isn’t for me.
OK, So who got the benefit of the $10 I paid in subscription fees?
$3 goes to Spotify. Sure, that seems fair enough.
Roughly $0.007 will go to Butchers Of The Final Frontier. Hrmm, if only I had played the track one more time Butchers would have earned a penny.
But… hey, wait a second… I paid $10. Where’d that other $7 go?
Spotify: “What $7?”
That other $7. Where’d it go?
Spotify: “We paid it out in royalties. For plays. Your boys got paid for their plays”
Don’t be cute with me. Who got the $7?
Spotify: “Look! A puppy!”
Since Spotify is so reticient on this topic, allow me to explain what will happen to 99.9% of the payable royalties generated by Butchers Of The Final Frontier: that money will largely wind up in the pockets of major pop artists like Calvin Harris, Meghan Trainor, Maroon 5 and Avicii. That’s right: essentially all of the revenue that was solely generated by a small death metal band will be divvied up among a bunch of major dance-pop artists. The horror.
Share of royalties from subscription revenue generated soley by Butchers Of The New Frontier
How could this be?
It sounds inconceivably wrong, but the current streaming royalty system payouts are heavily tilted towards artists that get massive numbers of plays. And once a pop artist crosses a certain threshold it is a mathematical certainty that their royalties will actually exceed what their fans paid in subscription fees. Sadly this royalty bias towards popular artists comes at the expense of small independent artists. You could call this a case of the long tail wagging the dog.
Imagine if physical records or downloads were sold in this manner: instead of an artist getting money directly from the sale of their CD or Mp3, it went into a giant pool, and the artist only got a percentage of the pool based on how often their music was actually played. It’s conceivable an artist could sell thousands of records generating hundreds of thousands of dollars of revenue, and still get a check for less than $10, with the majority of the money going to more popular artists.
In the past some have argued that forcing consumers to buy the whole album when they just want a single song is a “ripoff”, but I don’t think anyone believes the solution to this perceived problem is to have unrelated artists benefit from the sale of music they had no hand in creating. Yet that is exactly what streaming services are currently doing.
The irony is that each additional play actually costs Spotify money (servers/bandwidth/engineers aren’t free). So artists with fans who exhibit behavior that is less profitable for Spotify are actually getting a larger share of the revenue. That’s kind of fucked up, don’t you think?
OK, so what’s the solution?
Here’s what I think a fair(er) streaming royalty distribution might look like:
In a nutshell, royalties should be paid based on subscriber share, not overall play share.
If I pay $10 and during that month I listen exclusively to Butchers Of The Final Frontier, then that band should get 100% of the royalties. I didn’t listen to anyone else, so no one else should get a share of the $7 that will be paid out as royalties from my subscription fee.
Share of royalties from subscription revenue generated soley by Butchers Of The New Frontier
Now let’s say I listen to Butchers, but 25% of the time I’m listening to Madonna. My $7 of payable royalties would then be divided this way: Butchers gets $5.25 and Madonna gets $1.75. Again my subscription fee is divided up based on who I actually listened to:
Share of royalties from subscription revenue when Butchers Of The New Frontier is responsible for 75% of the subscription revenue.
Now let’s say I just like to listen to death metal in the background while I work (my co-workers find this habit simply adorable). So I listen to Butchers once, but I also listen to 100 other artists once. In that case Butchers get 7 cents, and so does each of the other 100 artists:
Share of royalties from subscription revenue when Butchers Of The New Frontier is responsible for 1% of the subscription revenue.
And, accordingly, if Butchers was just one of 1,000 artists who each got played once, then Butchers, along with each of the other artists, would get $0.007 each. Which, ironically, is pretty close to what they stand to get under the current system.
In this far more equitable system the subscriber is paying to listen to certain artists, so those artists, and those artists alone, are the only ones splitting the royalties payable from that subscriber’s subscription fee. The economic model that drives Spotify is now connected to the economic model that drives artists: get more listeners, not more plays.
What if a listener doesn’t listen to anyone at all? They forgot they had a subscription, or maybe they just weren’t in the mood to listen to music that month. In that case the money should be divided among all artists proportionate to their cumulative subscriber share, not their share of overall plays. In other words, let’s reward artists who actually bring in and sustain revenue, not artists who simply have listeners more likely to listen to the same tracks repeatedly.
Were Spotify to adopt this approach some wonderful things would happen. Suddenly it would be possible for small artists with modest fanbases to generate meaningful royalties. If Butchers Of The New Frontier could convince just 5,000 people to listen to nothing but their music for one month, they would earn $35,000. Not a bad haul for one month! Countless independent artists would suddenly have a stake in the system. Music genres that have dedicated but small fanbases (jazz, classical, and yes… death metal) would reap the benefits of their listener’s dedication. And perhaps most meaningfully, the fan would suddenly be empowered with the ability to directly support the specific artists and genres they actually enjoy, instead of seeing substantial portions of their subscription fees being used to prop up a culture of disposable singles.
This could also have a dramatic impact on the perception of the streaming music industry. What is the public hearing from artists right now? Many artists they love are passionate that streaming services represent a bad deal for artists. This has forced Spotify to increasingly take a defensive tone, with CEO Daniel Ek pleading for feedback from the industry on how to serve artists better. This can change. If artists directly and visibly benefit from every subscriber they bring in that could be very exciting and empowering, particularly for new artists. Every band on every corner would become a walking billboard for streaming services, and it’s easy to imagine a future where iPads would be present at every merch booth to sign even more listeners up.
But if indie artists do better will that come at the expense of popular artists like Taylor Swift? I don’t think so. Real data is hard to come by, but I suspect artists like Taylor Swift would continue to do very well. Perhaps even better. Taylor Swift has popular full length albums, a large catalog, and very passionate fans. The most likely losers would be artists who do not have passionate fans, have only released a single or two, or who mainly get played in passive listening environments in combination with large numbers of other artists.
This could renew the faded glory of the full-length album: if an artist makes a track that finds its way on to numerous playlists they will do alright but not as well as an artist that can persuade people to listen to entire albums. In this model the real benefit comes when you get people to listen to your music for sustained periods, as having lots of tracks played one after another is the most efficient way to get subscriber share.
To get a sense of how this might work out, take a look at this breakdown:
Update Nov. 19th: I forgot to include an assumption in the orange area (avg # stream a sub plays of fav artist) and that caused some confusion. For those of you that like to dive into the numbers you can find the original spreadsheet here. You can download a copy, check my math, argue with my assumptions, and play with the model to your hearts delight. Even better: make your own!
The section to pay attention to is the blue section, where the ratio of dedicated subscribers to streams is labeled the “Dedicated Subscriber Ratio,” and the total number of dedicated subscribers is reflected in the “Total Subscribers” column. The idea here is that if one subscriber listens to an artist 70% of the time, and another subscriber listens to the same artist 30% of the time, that’s equivalent to one “Dedicated Subscriber” listening to the artist 100% of the time.
I’m not aware of any publicly available data on how many artists individual subscribers listen to when streaming, so for illustrative purposes I’m going to hypothetically assume that as an artist increases in popularity the proportion of casual listeners to uber-fans will increase as well.
As you can see, while the net royalty payout is essentially the same from Spotify’s perspective, nearly all categories of artists fare as well as they did before or better, with the sole exception being artists who either have no other tracks for listeners to play (a problem that can be remedied by releasing more quality tracks), or simply cannot command an active fanbase of their own. Meanwhile small indie artists see as much as a 300% boost to their revenue. These breakdowns are hypothetical, and this doesn’t remotely solve other artist concerns about streaming royalty rates, but it’s easy to see how this could be a step in the right direction.
Assuming that you could even get the streaming services to sign on to this plan—and why wouldn’t they? It doesn’t cost them a cent, and everything about this is great for listener engagement—the elephant in the room is…
What will the major record labels think about all this?
It’s fairly obvious that without the support of the labels this plan is dead on arrival. So, will they approve?
They should. This system would move revenue away from one-hit-wonders and towards artists that build and sustain lasting relationships with their fans. Given the expense, risk and effort in making a hit song, this could work out wonderfully for the major labels over the long haul. As a side benefit it does an awful lot for small independent artists and labels in the meantime as well.
A fair(er) royalty system, a boost for independents, improving listener engagement, a renewal of value for the full length album… what’s not to love? In theory artists, labels, and streaming services should be able to unite around these common goals. But history has shown getting the music industry to do the right thing, even when its in it’s own best interest, can be very challenging.
Music industry analytics firm Next Big Sound and FRUKT, a marketing company dedicated to the creating and delivering of smart ideas for brands through strategic partnerships with entertainment influencers, just concluded an in depth study of the relationship between brands and bands. Their research illustrates a progressive shift among artists and brands alike, illuminating the path of possibility for exponential growth and gain if the partnership is properly aligned and executed correctly.
If bands and brands can set their sights further down the road of a lasting partnership instead of a one-off collaboration, possibilities abound - and FRUKT has the stats to prove it.
"First and foremost, we have to state quite categorically that we firmly believe in artists getting paid. Period. Music has an inherent value, and talent all along the music industry chain – from songwriters to performers – have the fundamental right to earn a living from their creative endeavours. What they do is based on years of work, talent, creativity and focus – and it should be respected. Just the same way that a logo, a product, a service or a brand should be." - Giles Fitzgerald, Trends and Insights Director, FRUKT
There is no question that working with brands comes with significant financial gain for artists. Depending on the level of the brand/artist agreement, that financial gain could boost revenue in a way that downloads, streaming, and ticket sales combined wouldn't be able to match. Seeing the opportunity through to its full potential starts with artists shifting their expectations of brands by beginning to view them as a partner - not just a paycheck. FRUKT illustrates that point perfectly by referencing Bruno Mars and his agreement to perform at the 2014 Super Bowl for the shockingly low amount of absolutely nothing. That's right, $0. The upside? $96 million in advertising dedicated to his 12 minutes on stage - a brilliant success for any artist combating increasingly decreased label marketing budgets.
Bruno Mars and his value exchange is obviously a top shelf example, but there is no reason to believe it the same success isn't possible for artists on a smaller scale. FRUKT's research shows the value to artists beyond direct payment manifests itself in reaching fans, content creation, reputation enhancement, and incremental revenue boosts. For brands, the value added lies in the reaching of new and unique audiences, credibility among consumers, the creation of original and own-able content, and their reputation as a supporter of artists.
The industry has been slowly divorcing the sales-based revenue model for quite some time now. The collaboration between brands and bands provides a bit of a financial stop gap alternative for artists on the rise and allows brands to take part in the building of their career in a way that brings value back to the brands.
FRUKT shares, "When Samsung announced their collaboration with rap mogul Jay-Z last year through a string of videos, the official YouTube channel for Samsung Mobile USA racked up more than 50 million views in a month. While the results are generally positive for artists, the impact for brands is even greater. Comparing the week prior to an announcement, to the week following, brands included the study typically see a 16% increase in new Twitter followers, a 40% increase in YouTube video views, and a 36% lift in new subscribers. Twitter mentions typically jump by about 80%, and Retweets close to 100%." With both brands and bands seeing significant upticks in social media traffic by working together, there's no good reason not to be actively working toward connecting those dots.
With 80% of artist managers expressing interest in exploring the possibility of equity in a brand campaign, the active pursuit of collaborative opportunities suggests brand partnerships are becoming a permanent facet of artists career paths. Joe Dimuro, President of FRUKT North America said, "We now know the power of the right brand artist partnership to build tremendous value for both sides over the course of a long and successful relationship. But tactically how do brands and artists execute these complicated relationships to give both sides the best chance at success?"
FRUKT has partnered with Next Big Sound to offer the best chance of a successful pairing between artists and brands. Together, they've established three key stages all deals must go through. The first is the artist selection where they assess the compatibility of a band with a particular brand and calculate an Artist Brand Affinity (ABA) score. The second step is in-campaign optimisation where tracking of the campaigns progress can take place through the FRUKT dashboard. The third step is the assessment of value exchange. "By tracking the online activity of every artist in the world on a daily basis, we can finally quantify the impact a brand partnership has on social, streaming and sales numbers, and isolate this impact based on how activity differs from a previous baseline period."
Next Big Sound and FRUKT are currently offering campaign based subscription pricing upon request. Inquiries can be sent to firstname.lastname@example.org or email@example.com.
To access the full report, visit WeAreFRUKT.com
Just days after taking Taylor Swift to task for removing her music from Spotify, musician and activist Billy Bragg has apologized and offered her his "full support." More than about free streaming music, Bragg's criticism had been more about why he believed to Swift's decision to 'secretly' side with Google and YouTube over Spotify. "Google are going after Spotify and Taylor Swift has just chosen sides," wrote Bragg. But after learning that most of Swift's music had also been kept off YouTube's new Music Key, he quickly changed his tune.
"I want to apologise to Taylor Swift for accusing her of selling her soul to Google," wrote Bragg on Facebook. "I have learned that her music will not now be available on the new YouTube Music Key service, which launched this week."
Then in terms that a friend of labor like Bragg can relate to, he expressed his solidarity:
Millenials know only a world where free music is everywhere, but one group is still willing to pay and has the disposable income to do it - adults 50+. Chasing that market, Sony Music Entertainment and its catalog division, Legacy Recordings, have formed a new relationship with the American Association Of Retired Persons to offer its 37 million members special music packages, deals and discounts.
In addition to receiving savings on new Sony Music releases, AARP members will also be offered discounts from new and catalog titles from Legacy Recordings.
"Helping people save money has been a priority for AARP for more than 50 years," said Angela Jones, Senior Vice President, Business Development and Lifestyle, AARP Services, Inc. "We're pleased to enter into a relationship with Sony Music that will help our members' dollars stretch further while enjoying the music they love – from contemporary or legacy artists."
Sony Music Entertainment will provide AARP members special access to an unparalleled library of music, including many meticulously restored and remastered archival titles, from virtually every musical genre including popular, rock, jazz, blues, R&B, folk, country, gospel, rap, hip-hop, Broadway musicals, movie soundtracks, world music, classical, comedy and more.
In addition, each month Sony Music will bring AARP members exclusive savings on select box sets, classic catalog titles and new releases -- such as Willie Nelson's forthcoming December Days and Leonard Cohen's Live In Dublin -- from the label's current roster.
As a limited time bonus, www.musicdeals.com is offering AARP members free shipping on all orders from now through December 31, 2014. "Music has and will always be an important part of the lives and identity of the Boomer generation," said Adam Block, President of Sony Music's Legacy Recordings. "AARP is connecting with many millions of us daily and we're pleased to be partnering with this renowned organization to make it easier and more affordable than ever for their members to access their favorite artists and albums." - via Celebrity Access
The Financial Times yesterday reported that Apple is planning on integrating Beats Music into an iOS update as early as the first quarter of 2015. Which means the entire base of Apple’s 500 odd million iOS devices suddenly become Apple’s acquisition funnel. As I wrote back in May, this was always the strategy Apple was most likely to pursue. Of course being available to 500 iTunes customers is not anything like converting them all. Just ask U2. But it does give Beats Music – if Apple keep the name – a reach like no other subscriptions service on the planet. Especially if Apple is willing to roll out free trials to them all. Currently just 8% of consumers in the US and UK have experienced a subscription trial, which translates into approximately 30 million people. Even if Apple does not quickly succeed in taking subscriptions to the mainstream it is about to take subscription trials to the mainstream, which is the crucial first step.
Add this to YouTube’s recently announced Music Key subscription service, which should be aspiring to get 5 million or so subscribers in its first year to be considered a success, and a picture emerges of Spotify squeezed in the middle of a streaming pincer movement (see figure). In the near term Apple will be hoping to win back a lot of its lost high spending iTunes customers from Spotify. Longer term it will be looking to grow the market.
None of this means anything like the end for Spotify. Instead it will force Spotify to up its already high quality game. Competitive markets thrive far more than ones in which one or two key players dominate. It could mean that Spotify’s potential flotation or sale value is tempered for a while, which could push out Spotify’s exit timelines until it has proven its worth in a more competitive marketplace. But Spotify has the distinct advantage of being a) the incumbent and b) a pure play. Spotify, Deezer and Rhapsody are all in this game simply for music. That means each and every one of them has a laser focus on making the best possible music service proposition they can. The same is quite simply not the case for either Apple or YouTube. They will need to leverage that asset in their conversations with rights holders to ensure they are given more flexibility in terms to drive true marketplace innovation and experimentation.
But Spotify et al would be foolish to underestimate the scale of the challenge they will face. Apple has the largest installed base of digital music buyers on the planet (see figure). As creditable as Spotify’s 12.5 million paying subscribers is, it pales compared to Apple’s 200 million iTunes music buyers. Also Apple has many additional assets at its disposal. Integrating into iOS is just one tactic it can employ. Spotify et al depend on Apple’s platform for much of their survival. But there is no reason Apple has to play truly fair.Amazon set a platform precedent with its treatment of Hachette that Apple will have been watching closely. Don’t expect anything too obvious, but little tricks like tilting app store optimizing in favour of Beats over Spotify can go a long way.
Things are hotting up, no doubt. But Apple’s arrival in the subscription market will take the sector to a whole new level, and a high tide should rise all boats.
As my recent "Ask a Publicist" article explained, having a publicist is an essential tool for your band's growth and success. But not every band can afford the spend, depending on where they are in their development. So if you're not signed to a label with in-house PR, relax. You are not S.O.L. There are ways to do your own PR and get some placements on a limited level so you can lay the foundation and make inroads in the media before a trained PR pro, with limitless contacts, steps in and takes over.
1. Make friends with local press, radio, and promoters– BFF-style
If you make your local media (such as print press, web press, and radio) a priority and align yourself with them from the get-go, they'll assume ownership and stick with you. If and when you blow up, they'll be there for life, proud to have boarded the train at the first stop.That support and love must be reciprocated on your end; don't forget where you came from and always foster and nurture that relationship. Plus, you never know where your fellow locals may end up. If they get an upgrade, you'll have a friend in a new, high place.
2. Be persistent, not annoying
This is an art. Use common sense. Don't be a pusher, which will make press and radio not want to take your calls and delete your emails without even opening them. Learn how to toe the line between passionate and pushy. A good template to use: don't call or write someone daily. Once a week should suffice, unless there is some level of time sensitivity, like an immediate show or gig happening.
3. Do something gratis for your local market
Help yourself and your local market thrive by doing something for free, which will pay dividends later. It can be something like playing a show or writing a column. The relationship remains symbiotic that way. They get something out of it, as do you.
4. Attempt a small, national campaign
Know your genre, know who writes about it outside of your regional cocoon, and cast the net accordingly. Send a song or video link digitally when you send a query. Make it original, get to the point fast, and don't ever say, "We play what we feel. We love what we do. What we do comes from the heart." Every band says that, so don't – since it's the equivalent of PR pitch Ambien. Say something new, fresh, and exciting. Give the media member a reason to open your email or package, and spend his or her precious time listening to you and your music.
5. Don't call something "requested material"
This is a personal pet peeve. Don't reach out to a writer or editor and ask to send a package, then when he or she agrees to accept it, write "requested material" on the envelope. That person really didn't request it; he or she responded to your request to send it, so don't be sneaky!
6. Be professional
Yes, this is rock 'n' roll and it's meant to be good times, but don't check yourprofessionalism at the door.
7. Don't rely on your friend or your girlfriend to do the job
If there's a local PR person, partner up in a way that's mutually beneficial. Trade goods and services. If someone in your band does IT, help the PR person with his or her website in exchange for blasting a press release or making some pitches.
These are a handful of things you can do give your PR profile an initial liftoff without getting in over your head. You don't have a full list of media contacts, but you can zero in on the ones within arm's reach.
Warner Music Group and Tencent Holdings Limited announced a landmark agreement that includes the industry's first-ever master distribution partnership between a major music company and a leading Internet provider in Mainland China. Under the terms of the deal, Tencent will distribute WMG's repertoire and manage new releases to all legitimate local Chinese audio services, with the exception of Mainland China mobile carriers with which Warner Music China will continue to develop partnerships. WMG will oversee relationships with all global service providers, as well as drive all marketing and promotional activities across the region.
The partnership also covers the extension of commercial opportunities for WMG's music across Tencent platforms, including the country's flagship QQ Music streaming service. Further, Tencent will provide unique promotional opportunities to WMG's artists through Tencent's video and music streaming services, mobile and PC games, and social media capabilities, including its leading messaging platform QQ which currently has 820 million active users in China.
This partnership unites Tencent's technological infrastructure and massive user-base with WMG's marketing expertise and roster of global and local artists to accelerate the evolution of mainstream licensed music models in China. By providing wider access to high-quality, licensed music on authorized services, the deal will create greater choice for consumers, greater value for artists and a more sustainable business for music companies and service providers. - via CelebrityAccess