1. What Is This FAQ For?
This is the FAQ for the article “Streaming Music Is Ripping You Off”.
2. Dude, That Article Is Way Too Long For My Limited-Attention Span. Can You Break It Down For Me?
The current model with Spotify, Apple Music, etc. rips you off by sending your money to artists you don’t listen to and probably don’t even like. There’s a hack you can do that could fix things: stream your favorite indie playlist 24/7 all through September. Turn down the volume when you aren’t actually listening, but leave it playing! This will help support indie artists and could even shake up the music industry’s archaic payment model.
3. How Do I Spread The Word?
- Direct your friends and frenemies to the article by clicking on the “share” button at the bottom (the box with an arrow pointing up on it)
- You can also tweet this little phrase:
Make streaming royalties fair(er): this September please join me in playing an indie band at low volume non-stop. #SilentSeptember
- Join our Thunderclap: https://www.thunderclap.it/projects/30798-make-streaming-music-fair
- Here’s a logo for you to use in whatever way you like (t-shirts, bumper stickers, profile pics, sponges, laser pointers…):
4. Am I going to get in trouble if I do this?
We’re just using the repeat button, which the services provide to us specifically so we can repeat music. If they didn’t want us to use it, then why did they put it there?
5. How do I know which artists are independent?
Good question. The majors sometimes try to trick people into thinking a major-label artist is actually an indie artist (I was one of those artists once). But thankfully people are putting together playlists of confirmed indie artists which you can play.
HERE’S OUR FIRST ONE:
6. Why September?
You can start anytime you like. But to really be effective it helps if we all do it at the same time. I thought September would be a good choice because college will be back in session, and it’s right before the major label contracts with Spotify expire in October 2015. A big jump in September would speak volumes (pun!).
7. Streaming Music has like 20 million subscribers. Won’t it take a gazillion people doing this for it to even make a dent? Is this impossible?
Streaming royalties are calculated by region. So while it’s a big giant pool, it is not a global pool. There’s a pool for the United States, a pool for UK, a pool for Spain, etc.
Different regions pay different subscription rates. For example the Phillipines only pays $2.93 a month: http://mts.io/projects/spotify-pricing/
Because of the vast disparity in usage between the typical subscriber and the heavy user it doesn’t take as many people as you might think to have a measurable impact within a region. So if a typical subscriber does 200 streams a month, and then switches to 24/7 they will do 14,400 streams if they are playing songs that average 3 minutes in length. That’s a 72x difference!
Let’s look at the numbers for one month: At last count there was just under 4.7 million paying subscribers in the US generating (in the last month we have records) $37M in revenue. They streamed 3.4B songs paying out $25.7M in royalties. This works out to a per-stream rate of $0.0075. Major labels are 64% of the market, so they are getting roughly $16.4M of that revenue.
If a typical subscriber who streams 200 streams per month switches to streaming 24/7 then they could wind up streaming as much as 14,400 streams in a month, which is a 14,200 stream increase. Assuming all the numbers above are accurate and the revenue stayed roughly the same then just 70k subscribers doing the hack would add another billion streams to the total lowering the per-stream rate to $0.0058. 1B streams would obviously go the indies so thats $5.8M for just indies. The remaining 3.4B streams would then be paid out at the normal 64/36 split, which means the labels would get $12.6M.
So just 1.4% of the subscribers employing the hack could potentially pull off a 23% decrease in major label revenue in one month.
I am quite certain that even a 5% reduction in royalties would raise alarm flags at the major labels — so even 17,000 people participating could make a difference. The article has been read by well over 100k people at this point — so it’s not *impossible*, or at least not as impossible as you might think. I’m not saying it will work, but it’s a lot better than sitting around whining about it, don’t you think? :-)
Want to see for yourself/check my math? All the calculations right here:
8. What are the criticisms of Subscriber Share?
- Different streams now have different values.
Response: is having different subscribers worth different values somehow better for some mysterious reason? What is so valuable about heavy-usage subscribers anyways? Do they pay any more money than other subscribers? So wouldn’t the music industry be far better off encouraging and incentivizing the acquisition of more paying subscribers — and stop obsessing over how many times they click?
- Subscriber-Share “rewards” artists for getting less streams.
Hogwash: it’s simply removing the artifical reward currently in place benefitting heavy-usage subscribers. It’s like suggesting that outlawing bribes “rewards” people who don’t take bribes!
- Harvard researched Anita Elberse revealed that heavy-users are more diverse in their listening habits, so switching to Subscriber-Share will hurt “indie” artists.
These studies examined the listening habits of individuals only. When people get in groups (offices, gyms, hair salons, and even the family car) music diversity drops, as anyone who ever tried to play My Bloody Valentine in the family car, or George Winston at the local gym, or Lil Wayne in the office can attest.
Furthermore Elberse’s study was conducted in 2007, long before streaming had any sort of any critical mass, and at a time when unlimited streaming was not widely available, and most subscribers were still quite new to the service. Even so, she concluded unlimited subscription streaming plans are “closely associated with higher levels of consumption of the more obscure products”.
It may be that heavy-users listen to more obscure artists on average than light-users do, but that does not mean that light-users do not listen to any obscure artists at all. And importantly, Elberse found that heavy-users also listen to the most popular artists most of all, diversity be damned. So if the heavy-users get all the “votes” and they are mostly listening to only the most popular artists, then new and emerging artists are clearly unfairly disadvantaged.
- What about the study in Denmark by Rex Rasmus (expanding on an earlier study by Arnt Maaso). These studies compared the Big-Pool method with Subscriber-Share and found blockbuster artists did better in aggregate when switching to Subscriber Share, and that this gain came at the expense of what might be called “slightly less blockbuster” artists (they were still in the top 5,000 artists)?
There are some important caveats with this research: the study had a comparatively tiny pool of subscribers to work with (users of the WiMP service in Denmark, which ran a distant second to the dominant Spotify), was looking at just one month of data (August, 2013), only looked at the top 5000 artists (and it found a gain in income for all of them!), and it also included free trial-period subscribers which brought the average usage down a lot (ranging between 200–350 streams per month. Compare with the 800–1200 that Spotify is currently reporting!).
Neither study looked at how artists fared over time, or how widely the money was spread among all musicians. And they both explicitly acknowledged that the results are deeply heterogeneous: there are winners and losers in every segment and category. Saying indies do better under the big-pool method *in aggregate* is like saying a neighborhood does better *in aggregate* because one person in the neighborhood won the lottery. You need to look at how the typical artist fares, not just the averages. Remember “average is not typical”.
- These same studies by Rasmus and Maaso seem to show very little change, in fact it looks like a wash. So why should we care?
I can illustrate the problem in this thinking with an analogy: let’s imagine a box with two mice in it. We have our choice of two poision gases which we can pump into the box. As it turns out either gas will kill one of the mice. If all we care about is which gas will promote overall survivability, then the gases are interchangeable. “It’s a wash”
But what if I told you that one of those mice had a rare gene that will lead to a drug that can cure small cell carnicomas?
Well shit, now we care a lot about which mouse will live. And now we have to carefully decide which gas will not kill our precious cancer-curing mouse.
This is what’s happening in music: there are rare beautiful mice (musicians who can actually attract fans and persuade them to seek out and listen to the music), and if we allow them to live, they will be the musical equivalent of the cure for cancer. And then there are mice who are not the cure for cancer. The goal here is to save the beautiful mice. These mice tend to collect “fans”. The other mice tend to collect “clicks”. If you reward the mice that collect fans, your odds of curing cancer increase significantly, benefiting the entire cultural ecosystem, even though the overall survival rate has remained unchanged.
- Streaming is like cable TV, or a gym: you aren’t paying for what you use, you are paying for access to use whatever you want. In other words, it’s an access fee.
If it’s an access fee, then why does it get smaller the more I access? And (assuming the variable-per-stream rate is $0.007) if I listen to more than 1,000 tracks in a month, why does it become a negative number? In other words, I’m not only NOT paying to access tracks I’m not listening to, I’m actually taking other people’s payments, and directing them towards the artists I listen to.
But the comparison breaks down even before we even get out the door, because content providers in cable are paid on a per subscriber basis.
I’m not intimately familiar with the business but I’m willing to bet that negotiations for per-subscriber rates probably look a lot like subscriber-share on steroids. For example ESPN will probably say to the cable networks “x number of your subscribers are watching ESPN x% of the time” (basically a “mindshare” argument, the same argument which is at the heart of subscriber share) but they will also layer in all kinds of metrics (demographics, engagement, survey scores showing how ESPN affects user acquisition, etc)
Cable networks can spend a lot of time and energy analyzing each deal because there’s limited real estate (# of channels) and the revenue per channel ranges from massive to Godzilla.
Music has limitless channels, and millions of independent rightsholders. You can’t go on distrokid and get yourself a cable channel, but you can get your music on spotify. Most of these rightsholders will not get a single listen, but one in a million will be huge. So it makes sense to have a one-size-fits all revenue sharing deal for the indies, and negotiate with the largest aggregators (Warner, Universal, Sony, Orchard and larger indies) separately.
The truth is you are paying to listen to artists. You pay 30% for the infrastructure (you can call this the access fee if you like). And the other 70% goes to artists. The question is should 70% of your money go to the artists you listen to, or should it go to artists that other people listen to?
- Streaming is like a library/subway/lunch buffet/Netflix
Libraries: Employees get paid by the hour, or by salary. Authors are paid per book sold. Neither are paid “per book read”, or “per book checked out”.
Subway passes: Subways are owned by a single entity (typically the local goverment). They get 100% of the subscription revenue. Employees are paid by the hour or by salary. No one is paid “per ride taken”.
Lunch buffets: buffets are owned by a single entity (the restaraunt). The restaraunt gets 100% of the subscription revenue. Food vendors are paid outright for the food. Employees are paid by the hour or by salary. The restaraunt keeps whatever is leftover after expenses. No one is paid “per meal eaten”.
Netflix: Netflix licenses content for finite periods of time. The content is owned by a single entity (typically a TV or Film studio). The owners of the content get an up-front license fee which they negotiate with Netflix. No one is paid per-stream.
Now let’s look at music:
Music is owned by a single entity (either the label, or the artist, or a combination of both). Spotify does not own or manufacture music. They are just the platform. In exchange for Spotify being the platform they get 30%.
If streaming was like libraries then music would be purchased outright for use on the streaming platform. I would have no problem with this.
If streaming was like Netflix then spotify would license music for a fixed fee for a finite time period. I would have no problem with this.
Streaming cannot be like subways or lunch buffets because there is more than one piece of music on the network, so there is more than one owner. In fact there’s millions of owners. However, to the extent that streaming can be like subway passes or lunch buffets, Subscriber Share does a better job than the Big Pool because it’s giving each owner it’s proportionate share of each subscriber’s plays.
9. What Is Your Beef With Major Labels?
This is not about indie vs. major label, although I understand why it appears to look that way. I have *nothing* against major labels at all. I was once a major label artist myself. The truth is I want the major labels to do better, I want the indie labels to do better, and I want the services to do better. Indeed I want the entire music industry to do better. This is a labor of love that I am doing out of a love for music and the music business which I have spent my entire life in. I am not getting paid anything to do this, and I am not angling for a job (in fact I’ve turned down job offers).
This is tough love. Just trying to help. :-)
10. I Don’t Like Indie Music, So Why Should I Play Indie Artists?
When I talk about “indie”, I’m talking about the business distinction (i.e. not on one of the 3 major labels). Every genere of music has indie artists: jazz, blues, hiphop, country, reggae, EDM, etc.
I am NOT talking about the genre of music known as “indie rock”.
The reason this particular protest is asking people to heavily stream indie artists is for the following reasons:
- It raises awareness of the problem
- The major labels control what the market does, so by targeting them specifically for the kinds of manipulation that smaller artists have to deal with constantly, they are forced to make a decision about which plan they would rather have. If we do nothing, then nothing will change. This is something we can do.
- If the plan fails, then the worst that will happen is some indie artists will get a slightly bigger check. That’s not so bad, is it?
11. Subscription services might be ripping the artists off. They’re definitely not ripping -me- off, as you suggest in the title.
Why is Spotify (and Apple Music, Deezer, Rdio, Rhapsody, etc) giving your money to artists you don’t even listen to? Don’t you want to support the artists you listen to (particularly the small indie artists who desperately need it), so you’ll hear even more music from them? Don’t you think it’s weird that you are personally providing financial support to artists you don’t listen to, probably don’t like (and maybe have never even heard of?)
Has any of the streaming services ever told you that they are going to give your money to artists you don’t listen to? Do you see any mention of that on their websites?
Isn’t doing something with people’s money, against their wishes, without telling them about it beforehand, the definition of fraud/exploitation?
Look up the dictionary definition of ripoff: “To exploit, swindle, cheat, or defraud: a false advertising campaign that ripped off consumers.”
I’m not suggesting you didn’t get what you paid for, I’m saying your money isn’t going where you thought it was going. If a food bank raised money from you for a new building, and then used the money for something else, wouldn’t you be bummed?
If you are totally cool with services taking your money and giving it to artists you do not listen to (or may even actively despise), without telling you or making you aware of this beforehand, then I feel sorry for you: you are getting ripped off (the music you like, and the culture you enjoy, is not supported by your money. Instead you are supporting someone else’s music and culture) and you don’t even care.
12. I don’t care. If artists feel it’s not worth putting their music on those services, they can simply quit.
If you don’t care about the artists you listen to, then you don’t care. No one can make you care. If you want to listen to a local band that moved you to tears with a beautiful song last week and are perfectly comfortable with Calvin Harris getting the money instead even though you don’t listen to Calvin Harris at all, then this protest isn’t for you. This doesn’t affect you, or at least not in any way you care about, and you can ignore it.
But a lot of people do care. This article is for those people. It’s right there in the third paragraph: “If you love music and want your money to go to the artists that you listen to, consider this simple hack.”
Most artists cannot simply “quit” (they are under a recording or publishing contract that prevents them from doing so), and when they do it rarely has any impact. Go ask Prince. Did you see anybody change how they did business because Prince quit? Nope. The biggest music star in the world right now, Taylor Swift, was able to get Apple to change a little bit, but she was unable to change Spotify at all.
The only source of leverage musicians have right now are music fans.
13. Aren’t you asking people to do the same thing that you say is wrong?
Yes. I want people to manipulate the system en masse in protest, so that smaller groups of people can’t manipulate the system for personal gain and profit. The idea here is to make the problem so visible that the major labels feel it would be better to switch to a different system where this kind of manipulation isn’t possible.
The concept of using the thing that is bad to stop more of the bad thing from happening can be found in everything from allergy treatments to firefighting.
14. If you truly care about artists, don’t use subscription services. Buy their music. That’s a way better solution.
First let’s get this out of the way: making streaming music royalties fairer is not mutually exclusive with encouraging download, CD, and vinyl sales. You can do both at the same time.
But with that being said, we should also face reality: Streaming music is the future of the music industry. In the USA it’s already more popular than radio and generates more revenue than CD sales. But in countries where streaming music has a longer history, it has for all intents and purposes completely taken over: in Sweden streaming music now brings in 80% of all recorded music revenue, and in Norway it’s up to 81%.
So lecturing consumers on how they should spend their money and telling them they should “buy music if they care about artists” is akin to begging for spare change on the street: it’s asking for charity, as opposed to offering consumers something they are happy and willing to pay for. And even as charity, you will be facing a declining audience: many consumers no longer own CD players, turntables, or have enough space on their phone to store all the music they like (all those selfies take up a lot of space!).
Because streaming music is quickly approaching worldwide dominance in the music industry it is important to get the royalty model correct before any lasting damage is done. Even if you disagree that subscription streaming will be how most people consume music in the future, there is nothing wrong with making the royalty system for streaming music fairer for all.
15. Artists should make their money from touring/shows.
Until you reach a certain level touring is a money losing proposition. As the CEO of the largest provider of touring vehicles to the music industry I know something about this. Revenue from live music is highly concentrated in the top 1%. The overwhelming majority of artists are either losing money, or barely scraping by. In fact new bands on labels often cannot tour without financial support from the label. Meanwhile billions of dollars are being generated by streaming music. Making sure that emerging and niche artists get their fair share of streaming music revenue helps avoid situations where established artists have to continue touring while in renal failure, missing parts of their stomach and intestines, and dealing with recurrent rectal cancer.
16. Aren’t businesses required by law to get licenses to play music?
Yes they are, but like speeding and jaywalking, public performance laws are commonly broken with little consequence. Particularly in offices: performing rights organizations will occasionally (roughly 20–30 times a year out of 25M businesses in the United States) file lawsuits against bars, clubs and restaurants, but I’ve never heard of an office being sued, have you?
So regardless of the fact that it’s illegal, the usage still has an impact on royalties, and we need to consider this when contemplating the best royalty distribution method.
16. Additional Reading
- Comparing Subscriber Share to the Big Pool by the numbers:
- What happens if the heaviest users increase their usage by 10%? Everyone else loses.
- Comparing Subscriber Share to Big Pool with a real users data:
- Actual Revenue Data From Spotify:
- Analysis of Spotify 2014 Revenue: https://docs.google.com/spreadsheets/d/1tQFoh6vOcWwMZoudquW-cEJI5eWE-EBI3jJLRJa1ixc/edit?usp=sharing
- Academic Paper by Rex Rasmus Pedersen comparing Big Pool with Subscriber Share: http://www.koda.dk/fileadmin/user_upload/docs/Analysis_Music-Streaming-In-Denmark_2014.pdf
- Academic Paper by Arnt Maaso comparing Big Pool with Subscriber Share: http://www.hf.uio.no/imv/forskning/prosjekter/skyogscene/publikasjoner/usercentric-cloudsandconcerts-report.pdf