A Layperson’s Guide to Music Streaming Royalties and Other Problems

Music Streaming Royalties Opinion Matt BorghiMusic streaming has never been great for the artist. It wasn’t great for the artist when it first started becoming a thing 20ish years ago and it’s less great now that there’s billions of dollars in it. But, this isn’t going to be another article with another artist bitching about how they’re getting screwed on streaming or making less than a penny per stream; there are already a lot of people telling that story. I just want to give a high-level overview of how streaming and royalties work from my perspective.

Before I even get started, though, I should talk a bit about how streaming pays me. Whenever somebody streams a track of mine, I make a royalty, some arbitrary dollar amount that I didn’t negotiate and have virtually no insight into or any knowledge of whether that rate is consistent, day-to-day, month-to-month. I have to count on the streaming service to report the amount of times a track has been streamed – Spotify is a good whipping boy, so let’s use them.

Spotify sends a report to my distributor saying, Track X was streamed 100 times, and earned five cents, cumulatively, for those streams. My distributor then sends me $.05 via check or wire transfer; actually there’s usually a threshold you have to meet before they pay you $250 is common… Anyway, where was I? Oh yeah, money is sent to me. Sweet, except for the part where Spotify is a service built on using my tracks and millions of other tracks like mine to build their business. And, even sweeter (read: not sweet at all), there’s no oversight or regulation on how or even if Spotify is accurately reporting the number of streams played and subsequently what they’re going to pay. So, basically, we’re talking about a multi-billion dollar, multinational corporation that uses the honor system to not just pay their vendors (artists) but also they use a completely opaque model of self-reporting to let folks know how much they should pay them. What could go wrong?

Sure, we could believe that Spotify, in their infinite goodness, is an altruistic, artist-centric entity that wholly exists to publicize and promote artists of the world, but that would be ridiculous. Spotify uses artists like a bakery uses flour and baker’s don’t get unlimited flour and only pay for how many loaves of bread they sell, based on their own super secret accounting. In fact, it’s artists like myself, who are willing to treat music streaming as a loss leader in exchange for greater exposure. At the same time, this model is not only not Capitalist, it’s exploitive bordering on a criminal enterprise, but only mostly because there’s absolutely no regulation on streaming services nor is there any kind of regulatory body to even look into these things. So, yeah, it’s all legal and legit even if it is ethically questionable.

In some cases, old music business legislation provides a modicum of regulation and quasi-oversight, but most of these laws pre-date the Internet and most lawyers can easily navigate these old laws to get music streaming companies a pass. That, however, infers that any real attempt at oversight and/or regulation has ever been undertaken.

The fact is regulation and oversight will come for music streaming. Why? Because there’s just too much money in streaming that could be taxed and is being done so haphazardly, if at all. With taxation comes fiscal accountability and fiscal accountability is what music streaming services don’t want. To be fair, most streaming companies are publicly traded which means that the SEC (Securities and Exchange Commission) could build in more accountability, but there just hasn’t been a mortgage crisis-like moment for them to be engaged. Music streaming services aren’t alone; many companies and in fact whole industries rely on overworked and underpaid federal employee’s inability to keep up with many scheming grifters that litter our United States. This is why Fox News is bitching about border control and Wal-Mart pays for their advertising with the savings they’ve gained using illegal immigrants to clean their stores… As fellow bard John Mellencamp once sang: “Ain’t that America…”

What’s the answer to addressing music streaming? Regulation and oversight

Why do I bring this up? Well, because I want folks to know how things work. I was fortunate enough to get in at the ground level with music streaming and I’ve watched it go from being niche to being the primary mechanism for the consumption of music, the fruit of this guy’s labors. I’ve grown my audience and there isn’t a day that goes by that I’m not grateful for the opportunity costs that music streaming has provided. Hell, I’m a Spotify Premium subscriber. I get it. Spotify is easy, convenient, has a solid user experience and is ubiquitous across many platforms, but I haven’t lost sight of the fact that it’s me and about a hundred thousand other unknown artists that have provided Spotify and other services with the content that it has needed to grow.

So, yeah, that’s how music streaming and royalties work in a nutshell. I’ll expand on this in future articles, probably, because I’m always learning new things about how janky these unregulated companies operate in darkness.

In closing, please listen to our music, but don’t forget that these digital services are absolutely taking advantage of the situation. If possible, when possible, purchase music from us at shows, our respective websites, even Bandcamp, where we can keep all or most of the proceeds. It’s a win/win because we’ll promptly spend that money on synthesizers, guitar pedals and other accouterments to keep bringing you music.

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