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.

Bandcamp’s Not Going Anywhere…

bandcamp is not going anywhereAs I sit here writing this, there’s a lot of talk on social media and elsewhere about Bandcamp’s impending demise. If you’re not familiar with the situation, Bandcamp was sold by Epic Games, who bought them from the founders about 18 months ago; they were then sold to a start up I’d never heard of called Songtradr, Google: “Songtradr is a B2B music platform that claims to facilitate brands, content creators, and digital platforms in their use of music for licensing purposes. As of 2019, Songtradr was the largest music licensing platform in the world.” As someone who uses Bandcamp quite a lot and has really benefited from it, I was surprised at how little coverage everything was getting and then Songtradr/Bandcamp busted their union; kind of a tone-deaf move in the current climate. This has sounded the current death knell for Bandcamp

But I don’t think so…. 

I rely on Bandcamp as an independent artist. It’s a wonderful tool that makes music easy to release, get paid and interact with fans of the work. There have been many such tools through the years, the last, best one, in my opinion was Mp3.com which was a going concern when I first got online in 1999. It was also a great resource for artists and musicians; it was the dawn of the Mp3 and the great DotCom boom; by 2003 it was all but gone. I had moved on to my own website and working with labels and distributors at that point, but I still felt like something significant was lost and grateful for the opportunities it gave me. For years after, I was skeptical about investing time and energy into another platform that could be gone with the wind; that’s why I was such a late adopter of Bandcamp. I believe I joined in 2014 after years of people telling me how great it was; I don’t regret joining.

In my musical life I have two primary release channels, Bandcamp and my digital distro, which includes Apple Music, Spotify, etc. As most of my readers know I haven’t done hard copy releases in over a decade, so digital is my only outlet. Basically, it breaks down like this:

Digital distro means good availability for anybody almost anywhere that wants to listen, but there’s next to no fan engagement and even less $$$ because of the pittance that streaming pays. Might be good for some, at scale, but it’s not a scale that about 95% of indie music artists can/will achieve.

Bandcamp, on the other hand, is an artist-first tool – They have great features for marketing, promotion, distributing/selling your music to fans, selling merch, doing live streams, etc. It’s a wonderful 1:1 tool for artist engagement and with the artists getting a fair share of $$$, it provides a nice subsidy, too, but it’s been lacking in some key areas:

  • Digital distro: Bandcamp should be tied into digital distro, like Distrokid, Tunecore, etc. In my mind, this is a significant missed opportunity. Sure, there’d be a lot of work to do and maybe it becomes a premium add-on or something and/or they take a cut of streaming royalties along with a premium fee, but to not have digital distro in-line with everything else Bandcamp does doesn’t make any sense. It’s possible this was on their roadmap before the acquisitions began. Maybe they’ll get to it.
  • Listener User Experience – Playlists weren’t an option until 15 years after Bandcamp was founded. Think about that. They had sold billions of dollars of music and probably billions and billions of tracks, but there was no great way to listen to them without organizing them on your own device. That lack of user focus is both the problem and the opportunity – Bandcamp is artist-centric. Spotify & Apple Music are user-centric. Bandcamp needs to evolve to be able to cater to the user/consumer every bit as much as the artist. A happy balance could definitely be struck. Bandcamp has the intellectual and business infrastructure to rule this domain.

And that’s why I think that Bandcamp isn’t going anywhere. 

I believe that there’s a significant opportunity with a big payout to anybody that can strike a balance serving both the artists and the consumers. From a product management and experience perspective, if each of these were to get equal attention, now then, you’d really have something. I’m talking about a balanced product roadmap that ensures the users and the artists are being served equally. Bandcamp is the darling of the indie music industry; they’ve made billions of dollars catering to that audience, they can make billions and billions of dollars if they can bridge this gap. The Epic purchase was always a head scratcher, but could Songtradr be the one who decides to move a bold agenda forward. So far, they don’t look great, but maybe they can turn that around? Maybe it’s someone else?

What I wonder, at this point, is if Bandcamp just ends up in the startup sales and acquisition churn where any number johnny-come-latelys come in with big pockets and big ideas, but no ability to execute so it just gets passed around like a joint on a Friday night until it burns down to nothing but ash. Or will somebody come in and make something happen? One thing is for sure, we indie artists are a viable and lucrative audience and we keep demonstrating that, but nobody’s been able to mainstream it. Admittedly, few have tried. I believe that Bandcamp could be on the precipice of that. Will it happen? Let’s wait and see…