Why the launch of a new streaming platform by a Berlin-based company called Soundcloud on April 1st might shake up the music business and ultimately benefit millions of artists around the world -- if Spotify were to follow their lead.
In the world of independent musicians around the planet who are still in the game and paying attention to these things, the music press is buzzing with news about the launch of a new music streaming platform on April 1st. A recent article in Rolling Stone mentions this, quotes a bunch of record company executives, and kind of just leaves it there. As I seem to clearly be one of those musicians that get increasingly referred to as members of the musical "middle class" -- in fact, according to the stats, I pretty much embody the term, as it is used -- I thought I'd chime in on this discussion, and provide some background for those who don't follow these sorts of developments closely and could use some context.
But first, in terms of the present context, the reason Soundcloud's new platform especially matters is because it's one more reason Spotify might potentially decide to change their payout structure. The music industry today is largely about music streaming platforms, and Spotify is the dominant music streaming platform globally.
More about the present in a bit. First, background.
In the 1980's and well into the 1990's, music streaming didn't exist, for all practical purposes. Other technologies, such as cassettes and then CDs, had made it affordable for independent musicians to produce our own physical recordings, and sell them to recoup recording costs and to pay the rent, too. Those of us who toured and did at least a hundred gigs in a given year might sell a few thousand CDs at our shows. For a lot of artists, like this one, this amounted to tens of thousands of dollars of income each year, and made up around half of our earnings. In most cities across the US, the UK, Germany, and many other cities, artists could live cheaply in warehouses, lofts, collectives, and even in more typical nuclear family type of arrangements in houses and apartments. At least if they didn't mind spending half the year on the road, to pay all the bills, after paying for all the overhead involved with touring in the first place.
In the late 1990's and especially in the Naughties, downloading and streaming audio for free was becoming increasingly popular, but it was largely either illegal, or if not, it involved independent artists who were more or less strategically giving away our music, often on platforms we had control over, where we had various opportunities to stay personally connected with people who downloaded our tracks. The music industry globally contracted in size dramatically during this period, a real industrial collapse, which continued into the 2010's.
During the Naughties, however, many independent artists I've talked to say they still sold plenty of merch on their tours, as did I. The damage to the music industry seemed to be focused at the top. The more popular an artist was, the more likely you could easily find all of their recordings online for free on some pirated music site. The less popular an artist was, by contrast, the less likely it was that you'd find all, or even any, of their music on some site like that. And due to the illegality of the pirated music sites, many people stayed away from them anyway.
In the 2010's, this all changed, and then in 2013, with Spotify launching their free tier, it was like a 9.0 on the Richter scale kind of change. Everything basically fell apart for so many independent artists.
Now, all of us independent artists who had innocently been doing what everybody did, and registering our new albums for digital distribution on all platforms that paid, or some other such box we clicked on wherever we registered our songs for people to download on iTunes for 99 cents each (which was the norm as far as these things went at the time that many of us clicked that box), suddenly found that we had already agreed to make all of our music available for free streaming on Spotify, for anyone, anywhere in the world, who was willing to sit through one advertisement every 30 minutes.
Many of us didn't discover we had done this until after we went on a tour where we sold half as much merch as we expected to. The next year, we sold 20% as much as the one before it. With some exceptions, like with some older independent artists who either purposefully or accidentally never signed up for digital distribution, and you can't get their stuff any other way, they didn't suffer as badly. But even for many artists in such a position, with so much free music on Spotify, their CD sales suffered as well. Music had become really cheap for the consumer -- free -- but for those of us producing music, it was a crisis of the sort akin to that facing the modern taxi driver. (No, I don't mean Uber or Lyft.) What was once a decent living was suddenly no living at all.
The way Spotify pulled off the industry-shattering move it did was made possible by massive investments from the Big Tech venture capitalists, willing to pour massive amounts into a money-losing company, in order to give it a chance to take advantage of the crisis the major labels were in, and get them to agree to Big Tech's terms of surrender. They did this by offering them an arrangement that was preferable to them, at least in comparison with the crumbs allotted to independent artists. It was still an arrangement altogether representing a shell of what the big three labels had once been, but they had been sufficiently humbled by years of piracy that they were ready to settle.
With this textbook "disaster capitalist" move that could easily have been a chapter in Naomi Klein's classic book on the subject (The Shock Doctrine: The Rise of Disaster Capitalism), Spotify simultaneously brought the major record labels into the fold of the world of free music streaming platforms, and devastated independent artists around the world at the same time -- while bragging the whole time that their company was altogether the best thing to happen to music and musicians since the advent of the phonograph.
In the same period as the Spotify-inspired industrial collapse for independent artists, beginning in earnest in 2013, the financialization of the rental market meant musicians were constantly leaving all the towns they had made their homes for decades, places that had been centers of the independent music scenes, such as New York, Boston, Austin, San Francisco, LA, Seattle, and Portland. In response, as with any collapsed industry, formerly professional artists sought work in other, more lucrative industries, such as flipping burgers. As indicated by tax filings, the ranks of people who claimed they were artists, from a financial standpoint, fell precipitously during this period.
Those who stayed in the game generally either had very low overhead because they owned their home or lived somewhere really inexpensive, or they lived in a country with big subsidies for the arts, or they were living at least partially on inherited wealth, or they never quit their day job in the first place -- or they became really good at the form of online begging that we have learned to call crowdfunding. Or some combination thereof.
The ranks of professional artists over all of this period became increasingly white, as the ranks of those who owned houses, had inherited wealth, or well-off friends from whom to crowdfund were disproportionately white, as illustrated eloquently and in great detail by Bill Deresiewicz in his 2020 book, Death of the Artist. Platforms like Patreon and Kickstarter exploded in popularity during the 2010's, as artists who were still trying to record albums with bands in studios every year and tour while making hardly any money on these activities tried to figure out how to make up for the loss of half of their income.
That brings us up to the beginning of 2020, more or less.
During 2020, the vast majority of formerly working artists became fully unemployed. We lost all our gigs, and those many artists subsidizing their income with jobs in the service sector lost those jobs as well. To be perfectly honest, it was only with the onset of the pandemic and the closing of all the restaurants and bars that I fully realized that so many of the bands that are hard-working bands with a decent following still consist of band members who mostly have to go back to waiting tables somewhere when they get home from a tour.
It was also during 2020 that many of these musicians who used to largely rely on their day jobs to pay the rent looked with ever more alarm at the monthly receipts from the streaming platforms, showing that they might have hit triple digits in their earnings again this month from that source of revenue, if they were all added up, after 100,000 more streams on Spotify that month. Even artists too young to have ever known what it was like to record an album in a real studio or sell a CD after a show could feel the injustice of the situation, now that they'd been laid off at Shoney's. We "creatives" may be adaptable and resilient, but there are limits, and they were reached long ago.
Not only did crowdfunding once again mushroom in popularity during the pandemic, along with many other forms of mutual aid, but music streaming platforms began trying to get into the act, with donation buttons on artists' pages and loads of fundraisers to keep shuttered venues in business and so on. But the donation buttons prompted a new round of the broader public wondering, why do they need donation buttons when they have so many fans? Don't they make lots of money from these platforms that in many cases we're paying monthly for, on the assumption that it's benefitting our favorite artists when we do so? (Answer: nope.)
Enter March, 2021.
At the beginning of the month, Soundcloud announced that although after many years of trying, they had failed to come to an agreement with the big three record labels, they were going ahead with a music streaming platform that allowed their one hundred thousand members to earn streaming income based on a simple formula rooted in how much time people spend listening to a given artist, rather than the more typical, opaque and apparently complex formula employed by companies like Spotify, distributing royalties based on an artist's percentage of total songs streamed on the platform, which will always tend to skew in favor of the artists that get played all the time on commercial radio anyway -- which of course is the skew demanded by the big labels.
Soundcloud very publicly explained the results of their number-crunching, when they announced the coming launch of their streaming platform. Under their simple system, independent artists with a loyal following that acted like loyal followings of independent artists generally do (for example, indy artist fans are more likely to listen to an album than to a single in a playlist, relative to other music fans) will stand to make as much as five times as much income from streaming than they would under Spotify's system, without really changing the size of the overall pie being sliced.
Then on March 15th, a new, global, ad hoc musician's union organized a well-publicized series of protests outside of Spotify offices around the world, to highlight the unfairness of the platform's practices, and the predatory nature of the company's modus operandi.
And then a few days later on March 20th, Spotify launched a new website called Loud & Clear, where they make some fairly inadequate efforts at being a little more transparent in terms of how streaming royalties are distributed. Although it seems evidently to be an effort to show that, look, most artists just don't make much money, even though some of you may get a lot of streams, and here are the various reasons why, such as labels, lawyers, and other middlemen. At the same time, they show how they have distributed many billions of dollars in royalties, and they show how there are thousands of very popular songs that result in millions of dollars being paid out annually, to some.
What they also inadvertently reveal is Spotify's relationship with what is often called the "middle class" of independent music. There on the website they explain that there are 3 million "creators" on the platform, which hosts tens of millions of songs altogether. While they explain that they distribute royalties differently depending on the artist and their agreement with a given label and so on, they give us a few interesting numerical tidbits to digest.
There are, they tell us, just over 200,000 songs on the platform that are streamed more than a million times every year. The way they introduce this bit of information seems meant to encourage us uppity musicians to calm down -- look, bro, there are loads of other people who get a million streams a year, you're nothing special.
Then they have a calculator widget built into the website, where you can enter your number of monthly listeners, and it'll tell you how many other of Spotify's three million "creators" have that many monthly listeners. I type in my number -- 11,000. The number that comes up is 176,000. Meaning there are 176,000 other artists getting as many streams as I get on the platform, which is around a million streams a year. Which more or less matches up with their claim about how many songs get streamed at least a million times in a year (just over 200,000 songs). And there on the site they also tell us that there are just under 200,000 artists who make more than $1,000 a year from Spotify streaming royalties (including among that number those who make much more than that).
So, taking Spotify's numbers and then applying Soundcloud's royalties distribution formula to them, assuming they are as accurate as all the number-crunching types who are smarter than me seem to think they are, we come up with the following conclusions:
- If it is more or less the same 200,000 or so artists who are making more than $1,000 per year from Spotify as those artists who have more than a million streams per year, then Spotify is paying independent artists like me somewhere between 1/10th of a cent and 1/5th of a cent per song streamed, with the payout varying fairly wildly depending on the month.
- Many artists currently making $1,000 a year on Spotify royalties would stand to quintuple their income, to $5,000 a year, under Soundcloud's distribution model. Every working class person on the planet, musician or not, understands how much difference an extra $4,000 a year could make for any worker, gig worker or otherwise.
- Untold numbers of the over 90% of Spotify artists currently making less than $1,000 per year would be making more than $1,000 a year under Soundcloud's model. Someone else can figure out exactly how many, but it's undoubtedly a hell of a lot of people -- loads of whom are living in countries where a hundred dollars goes a long way.
- If racial justice matters (and it sure does), then implementing Soundcloud's model is the way to go. Unless it's only the pop stars that matter, rather than the independent artists, the ranks of whom will become more diverse as there is more money in the pot, due to the aforementioned factors involving wealth vs. income and our history of racial inequality. Gig workers being paid matters, if anyone's life matters at all.
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