From The Plastic Hallway

“The music business is a cruel and shallow money trench, a long plastic hallway where thieves and pimps run free, and good men die like dogs. There's also a negative side.” -Hunter S. Thompson

Playing The Game

August 16, 2015

 

 

"Money was never a big motivation for me, except as a way to keep score. The real excitement is playing the game.” ~ Donald Trump

 

That’s great, potential-president-elect Trump, but back here on earth people need to make a living.  Recorded music used to be a nice way to do that, and streaming music has made that notion damn-near impossible.

 

Recorded music is currently a $7 billion dollar industry, so it’s hard to plead poverty when you just assess the number at face value.  However, one major problem is that marketing and promotion costs have stayed the same, while the amount of revenue generated by music has decreased significantly.  Another major problem is that major labels are making 50% of their revenue on catalog titles, and likely another 20% of their revenue on adrev – advertising served on controlled video content that the labels own outright.  

 

The major labels don’t give a shit, though.  They’re going to, once again, get paid handsomely on the backs of the artists who’s music has buoyed them for years.  More on that in a minute. 

 

It’s expensive as hell to market and promote music properly.  Let’s say you spend $20K to market and promote a new release.

 

In order to recoup that $20,000, an artist would have to sell:

2,000 copies of their CD at $10 each.  Or.

2,850 copies of their digital album at $7 each (net from iTunes).  Or.

28,500 copies of one song at 70 cents each (net from iTunes).  Or.

 

Wait for it.

 

3,320,000 streams of one song at $.006 per stream on Spotify or another comparable streaming service.  If you want to dig in further on the unfriendly streaming math, here you go: http://thetrichordist.com/2014/11/12/the-streaming-price-bible-spotify-youtube-and-what-1-million-plays-means-to-you/ 

 

Three million?  Holy shit.  My alma mater Penn State had 50,000 students… maybe each student will listen to a new song 60 times?  Most of the tracks on streaming services have less than a thousand plays.  So if you take the potential audience for a song and multiply by zero it all adds up to "no fucks given". 

 

Only a third of one percent (0.33%) of the content on streaming services has over a million views/streams, and so the odds of an artist recouping their investment in marketing and promotion dollars are quite long based on streaming alone.  As experienced label head, manager and songwriter Jack Ponti says “you can't replace lost dollars with pennies”.  And that is what’s happening in recorded music.

 

But, how did we get here?  Why did the majors labels acquiesce to the demands of companies like Spotify when the payouts were so obviously bad for artists?

 

Because the majors are in on the action.  The three major record labels (Warner, Sony, Universal) own approximately 18% of Spotify.  And if and when Spotify goes public, those three companies are going to see quite a windfall: http://www.digitalmusicnews.com/2014/06/11/major-labels-trying-sell-spotify-10-billion-sources-say/

 

The situation is being addressed in part by a lawsuit, but it’s highly unlikely that artists will be compensated in the event of a public or private sale of Spotify: http://www.billboard.com/articles/business/6605841/sonys-spotify-equity-artist-royalties-lawsuit-breakage

 

Yet, aside from this suit and Taylor Swift standing on the conference room table for artist rights, no one seems to give a shit that the labels are going to rob their artists blind.

 

What’s going to happen when the big labels are flushed with cash again?  My best guess is that the cost of marketing new music is going to go through the roof, as the majors double down on their inherent advantage.  The majors are already crushing indies with their relationships, clout and catalog… expect a bad situation to get worse for the indie sector.

 

One glimmer of hope is that Apple Music seems to be gaining some traction.  11 million registered users are on board to carry forward after the 3 month trail period.  That’s already twice the size of Spotify.   I personally think Apple Music is inferior to Spotify – it’s not as easy to use, and I find that the curated content is dominated by the majors and indie releases through major distributors.  Meet the new boss, same as the old boss. 

 

The biggest losers are the artists in this new paradigm.  How is an artist supposed to market themselves competitively?  How does that artist make up for this financial shortfall?  Is it licensing? Touring?  Publishing?  Cover songs on YouTube?  Medicinal gardening?  Busking? 

 

There are some artists who say they love streaming because the revenue they’ve been able to generate pays their bills.  I think that’s great.  I also think you’d be sticking your head in an oven if you knew how much more money you’d be making if it were “the good old days” and the sale of music carried a $6 per unit margin.  But hey, we can’t live in the past, can we?

 

More from Jack Ponti: http://superiorshit.blogspot.com/2014/07/music-industry-veteran-jack-ponti-to.html

 

Math makes counting pennies cool: http://www.al6400.com/blog/a-penny-doubled-everyday

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