How musicians make money from streaming - What in the World podcast, BBC World Service

Key Concepts

• Music publishing and royalties
• Performance, mechanical, and sync royalties
• Streaming revenue and payouts
• Rights holders (labels, publishers, etc.)
• Independent artists vs. signed artists
• Diversification of income streams (touring, merch, brand deals, social media)
• AI and fraudulent streaming
• Alternative streaming platforms
• Challenges for rising musicians (touring costs, sustainability)

1. How Musicians Make Money: Publishing and Royalties

• Musicians earn money each time their song is played on the radio, streamed, or purchased physically.
• Income also comes from live performances and licensing songs for use in advertisements or films.
• However, artists often don't fully own the rights to their songs; publishers (record labels) take a cut.
• Royalties are payments for the use of copyrighted works and are split into three categories:
  • Performance Royalties: Paid when a song is played on the radio or in public spaces (e.g., shopping centers).
  • Mechanical Royalties: Cover streaming and physical sales.
  • Licensing and Sync Royalties: Paid when music is used in films, TV shows, games, or advertisements.
• Sync royalties are particularly opaque, with no clear benchmarks for artists to estimate potential earnings.
• Example: The band Heaven 17 criticized GTA 6 for offering $22,500 to use one of their songs, highlighting the disparity in sync royalty offers.

2. Streaming Revenue: A Breakdown

• Artists signed to major labels may earn less than 20% of their income from streaming apps.
• Spotify's annual economics report will provide a breakdown of revenue distribution.
• Spotify paid £10 billion to the music industry, but this figure doesn't specify how much goes directly to artists.
• An artist may need around 1,000 streams to earn approximately $0.25.
• Small-scale artists with fewer than 1,000 streams may not receive any payment.
• Even if an artist earns $100,000 from streaming, the amount is split among labels, collaborators, and other rights holders.
• The lead artist might only receive about 16% of the overall streaming revenue.

3. Independent Artists and Alternative Income Streams

• Singer-songwriter Mary Spender shared her experience as an independent artist.
• She rejected a 360 management deal, where the business takes a cut of all earnings, even those unrelated to music.
• Spender funded her album by using videos to promote her music on YouTube, where she has 750,000 subscribers.
• Her YouTube channel provides multiple, relatively equal income streams.
• Touring is often a significant expense rather than a major income source.
• Spender sold 1,000 copies of an acoustic album ("Songbook") through her Shopify store to fund a full studio production.
• Streaming pays about a third of a penny per stream.
• One CD sale from her website is equivalent to over 8,000 Spotify streams.
• Her album "Super Sexy Heartbreak" earned about £800 from 375,000 Spotify streams but cost £25,000 to produce.
• To break even, she would need over nine million streams, or 18 million streams to earn minimum wage.
• Alternatively, selling 2,000 CDs would recoup the costs and provide a living.

4. AI, Fraudulent Streaming, and Alternative Platforms

• AI has been used to create songs and generate fraudulent streams.
• In the US, a man was accused of using AI to write songs and bots to stream them, potentially earning over $10 million in royalties.
• A similar case occurred in Denmark, where the perpetrator was jailed.
• There is increasing awareness and a crackdown on fraudulent streaming.
• Alternative streaming platforms claim to pay artists more, but the increase is often just fractions of a cent per stream.
• Tidal and Deezer pay about double what Spotify pays per stream, but thousands of streams are still needed to see a significant impact.
• Ken Rel Bis in Kenya launched Interfine Music, a free music distribution platform that takes a 20% service fee from royalties, with the artist receiving 80%.
• Spotify and Apple Music did not comment on artist payouts, but Spotify previously stated they pay rights holders directly, who are then responsible for paying artists.

5. Diversification and Challenges for Rising Musicians

• Artists need to diversify their income streams through touring, merchandise, brand deals, and social media.
• Social media platforms like TikTok can help artists gain exposure.
• For some bigger artists, music is not their primary source of income.
• Example: Selena Gomez's wealth comes primarily from her makeup line, with music being a negligible part of her earnings.
• Rising musicians face challenges in breaking through and sustaining a career.
• Touring can be expensive due to rising costs of visas and production.
• Irish country singer Sima loses money every time she performs in the US due to touring costs.
• This contrasts with Taylor Swift's record-breaking Eras Tour, which generated billions.

6. Conclusion

The music industry is complex, and making a sustainable income as a musician is challenging. While streaming is a significant part of the industry, artists often receive a small percentage of the revenue. Independent artists are finding creative ways to generate income through platforms like YouTube and direct sales. Fraudulent streaming and the use of AI pose additional challenges. Diversification of income streams and adapting to the changing landscape of the music industry are crucial for artists to succeed.