Another artist has come out against the royalties paid out to artists by the top two music streaming services of our times (Pandora and Spotify). In a widely-circulated Pitchfork article called “Making Cents,” Damon Krukowski of Galaxie 500 and Damon & Naomi reveals some truly startling figures:
- “Galaxie 500′s ‘Tugboat’ was played 7,800 times on Pandora in the first quarter of 2012, for which its three songwriters were paid a collective total of 21 cents, or seven cents each.”
- “For the 5,960 times “Tugboat” was played [on Spotify], Galaxie 500′s songwriters went collectively into triple digits: $1.05 (35 cents each).”
- “It would take songwriting royalties for roughly 312,000 plays on Pandora to earn us the profit of one – one – LP sale. On Spotify, one LP [sale] is equivalent to 47,680 plays.”
- Selling 1,000 copies of the 7″ vinyl version of “Tugboat” earned the band as much as they would get from 13 million streams from Spotify, given the 2012 rate for indie bands.
- Spotify pays indie bands/labels $0.004611 per stream per user, and its actual payouts are lower, at least in the case of Galaxie 500.
Yikes. Considering that Galaxie 500 was my favorite band at one point in college (in fact they played their final show there), this made for a heartbreaking read.
Krukowski’s conclusion: that just as Galaxie 500′s first single was sold only on vinyl, the next album from his current band, Damon & Naomi, will also be “likely” be only pressed on vinyl again, and that both bands will continue to stream all of their music for free via BandCamp as a “punk rock” protest against the pittances paid out by Pandora and Spotify, which he accuses of being “divorced from music” and in the music game only so that their founders can cash in when big new investors get on board and increase their valuations.
Despite his well-founded protestations, Krukowski admittedly subscribes to Spotify Premium for $10/month. Clearly, he sees the value proposition of such services from the music fan’s perspective. I think he missed a few things, though I sympathize with his points:
Traditional radio doesn’t pay a sound recording royalty at all, and nobody knows exactly how many people hear it.
Like North Korea, Iran, China, Rwanda, and no other country that we know of, the United States does not require traditional “terrestrial” radio stations to pay any performance royalty for sound recording (it does pay songwriters). So to complain about the performing royalty paid by Pandora and satellite radio services via SoundExchange doesn’t totally make sense. Also, while Pandora and other online radio streamers pay for each stream to each listener, terrestrial radio works with vague estimates. Wouldn’t it help to know how many people terrestrial radio reaches, in order to compare its payouts to that of online radio?
General listeners don’t go to BandCamp, and those streams generate no revenue.
If putting music on Pandora and Spotify, where thousands of people are streaming it even if they aren’t generating much money at this point is such a bad idea, why is it a good idea to make the same music available on-demand on BandCamp, where potential fans who haven’t heard of these bands will never come across it? Not only do those streams generate zero dollars, but they fail to attract new fans who might come see Damon & Naomi play live, and are arguably even more substitutional for selling downloads on iTunes or Amazon to pre-existing fans than Spotify is.
Nobody’s going to buy a record player to hear the next Damon & Naomi record.
If the next Damon & Naomi record is available only on vinyl, as Krukowski says it might be, nobody who is currently using Spotify to listen to music is going to say to themselves, “Well, that settles it, I guess now I have to go buy a record player.” As much as Krukowski and others might wish we were still living in the ’80s and ’90s, those times are gone.
If Spotify grows, Daniel Ek is not the only person who will make more money.
Damon claims that Spotify co-founder and CEO Daniel Ek mainly wants it to grow because that way, he can sell his shares — in other words, that Spotify is more of a finance play than a music play. But as the head of indie label consortium Merlin told Evolver.fm in an exclusive interview, he thinks it’s worthwhile for indie bands and labels to put their music on Spotify in part because it’s growing — as is the number of users who choose to pay for it, which is ultimately the number that determines how much musicians, labels, songwriters, and publishers are paid for the music streamed there.
If all of the music fans who listen to free online radio and buy five or so downloads per year were to suddenly start paying $120 per year for Spotify, Rdio, or any other streaming service, that would not only grow those services; it would also represent a significant uptick in money spent on recorded music in general. It’s not happening suddenly, but many argue that it is happening.
If these services can’t make free music pay, people will have to pay for it.
Unfortunately for Pandora, and fortunately for Krukowski, not many industry experts seem to think that Pandora’s bid to convince Congress to lower streaming radio royalties is going to work (increasing satellite and/or terrestrial radio rates could be a different story). That means that if Pandora can’t make free music pay its stockholders, it will have to force users who listen to more than 30 hours per month (or whatever) to pony up $3 per month (the current rate for premium Pandora) to keep using it. If people love Pandora enough to listen for more than an hour per day, every single day, they might simply have to be willing to commit a few bucks in order to keep the wheels in motion.
Music is still too free to be expensive and too expensive to be free. How can Damon not mention piracy?
Spotify’s Daniel Ek has said on many occasions that his company’s main goal is to get the people who pirate music — a group that includes many of the most dedicated music fans in the world — to pay for it, or at least to generate a tiny rivulet of revenue by making them sit through ads, then divvying that money up among rightsholders. Piracy is without a doubt the force that is driving the price of online music down, which is why these royalties are so small, even though both Pandora and Spotify are losing money. How can Krukowski make all of the points he makes without mentioning it — or all the free music on YouTube, for that matter, which is how the kids are listening to music?
For the first time in recording history, music that people listen to for long periods of time after they first pay for it will earn more money than the disposable, one-hit wonders they listen to only a handful of times. That has to be a good thing, especially for bands like Galaxie 500 and Damon & Naomi, to which fans tend to return years later, even as yet another replaceable teen idol has captured the popular imagination.
It’s early days on a number of fronts.
Granted, people like me have been saying this for well-nigh 15 years now, but… it’s still early days. Pandora, Spotify, and other services with a mobile component have yet to crack the much-vaunted nut about how to advertise to people based on their location and where they are going. Remember the infamous example from the early mobile ad days about pop-up ads alerting people to a deal on coffee at the shop three blocks away? That has yet to happen, and it could mean lots more money coming in. The online ad ecosystem still needs to get more robust, and all of these services need higher conversion rates from free to paid, before we can really know whether online music is a sum-total rip-off for musicians.
Those arguments might make more sense to a forward-looking label executive than they do to a musician with a mortgage that needs to get paid right now, which is one reason I understand where Damon Krukowski is coming from, and I don’t want to pick a fight here (especially with a guy who went to Harvard). He can do whatever he wants, obviously. But to chuck everything in favor of vinyl-only releases and free streams doesn’t seem like a strategy that’s built to last.