So it’s quite likely that Google or Facebook is going to be purchasing Spotify fairly soon. Apple bought Beats. No streaming service, however, has proven profitable. It was just reported that Pandora lost over $11,000,000 in quarter 2 of this year. Eek.
Major labels are finding creative ways to screw their artists out of any streaming money that comes in. The labels strike deals with streaming services that keep streaming rates low across the board, while the labels receive massive, upfront advances and equity in the company.
How To Steal An Artist’s Streaming Money In 3 Easy Steps
Spotify and Pandora claim they pay out 70% of their revenue to rights holders. That may be true, but most of that money goes to major labels and NOT the artists.
Spotify claims that they pay about $.006 – $.0084 per stream to “rights holders,” but more and more reports are coming out (my statements included) that this is untrue – or at least isn’t represented in the artists’ statements who share them publicly. D.A. Wallach, Spotify’s official artist-in-residence, tried to explain this to me stating: “the rates we’ve quoted are averaged across the entire service.” But, why list a range if many artists’ rates fall below the minimum? Zoe Keating’s do. Mine do. Vulfpeck’s do. And many more. Sure, some of that money is paid out to Harry Fox and other collections agencies for mechanical royalties. But ever ask an independent artist if she knows how to get those mechanicals? Or even what mechanicals are? Yeah.*
Long-time readers know that I have been a strong supporter of Spotify since the beginning. There’s no denying that streaming is the future. And it can be very profitable. But we are approaching it all wrong.
Streaming Will Soon Be More Profitable Than Sales
Amanda Palmer was onto something when she said “Don’t make people pay for music. Let them.” in her Ted talk last year.
It is the best time to be an independent musician in the history of the music industry. YouTube, SoundCloud, Facebook and Twitter have given musicians direct access to their fans. And fans direct access to musicians. Musicians can build a HUGE following from their bedroom – on YouTube or SoundCloud. Artists can break out from being featured on a Spotify playlist. And, very recently, startups like Patreon, BandPage, Kickstarter and PledgeMusic (with more popping up everyday) are inventing creative ways to help independent artists monetize this fan base (because it’s increasingly clear that the large music companies don’t care about the little guys).
What all of these startups have in common is they enable artists to ASK their fans to support their art. They don’t force them to.
Patreon is the best example of using an “ask don’t make” model that works. Every creator on Patreon offers content for free and asks their fans to pay them a little bit for each new piece of content (be it a video, song, blog, podcast or comic strip).
We’re Looking At Streaming All Wrong.
Every time a new streaming service pops up everyone protests how little they pay out per stream. It’s true, unless you’re getting millions of streams, it’s very difficult to see any real income from this. There are some very rare indie artists who are making a very good living solely on streaming, but there are thousands of other artists who may have “1,000 true fans” but cannot monetize those fans into a sustainable living unless they’re on tour.
There has got to be a better way of monetizing streaming. And There Is.
Bandcamp is a digital download (and more recently a physical merch) store for independent artists (and labels). No major labels are allowed. Bandcamp only takes 15% (as opposed to iTunes’ 30%). And they boast that with their “name your price” model, fans typically pay 50% more than the required minimum.
To date, Bandcamp has paid out over $76 million USD to artists and continues to pay out nearly $3 million a month. Triple where they were 24 months ago. Everyday 6,000 unique artists sell something on Bandcamp. 50,000 unique artists sell something every month. And Bandcamp has had over 10 million paid transactions with over 85 million downloads. On Bandcamp, albums outsell tracks 5 to 1 (in the rest of the music buying world tracks outsell albums 16 to 1).
The reason Bandcamp works is because artists love it.
Independent artists have trained their fans to buy their music (and merch) on Bandcamp (and not iTunes). And why wouldn’t they? Bandcamp takes half of what iTunes takes and you don’t need a distributor to get your music up on Bandcamp.
With this “name your price” model, one fan paid me $200 for my new album and another paid $20 for a single.
Bandcamp gives artists control over their store and their price. It gives independent artists a way to monetize a (relatively) small, but loyal fan base. Many artists don’t even set a minimum price (like the screenshot of Phoebe Bridgers’ album above – for which I paid $25) and allow fans to pay what they want or download it for free (in exchange for an email – a model that also works well for Noisetrade).
Bandcamp gives fans format options in their downloads ranging from VO and 320kbps mp3s all the way up to FLAC and Apple Lossless files. Audiophiles can really only find such high quality downloads on Bandcamp. iTunes does not have a FLAC option. Pono you say? Is that a weird triangular object in your pocket or are you just happy to have gotten your wewe out of that pencil sharpener?
However, Bandcamp has not (yet) entered the streaming realm.
Bandcamp can create the new streaming model for independent musicians.
Sure, their download model is working, for now, but downloads are on their way out. They should approach streaming with the same philosophy as they approach downloads: let fans pay if they want. Don’t make them.
They don’t need to ever end their download store (as audiophiles will always like to get their hands on FLAC files), but have the download store in addition to a new streaming service.
Currently, every album on Bandcamp can be streamed for free. However, the app and website are not setup to offer a cohesive streaming experience. The streaming is meant to encourage a download.
Bandcamp should create a streaming services similar to Spotify. Every album they currently have available on the service can be easily searchable on the streaming app and a Bandcamp radio service could be setup similar to Pandora or Spotify radio, but will, of course, only play independent music. True music lovers will be happy to discover independent artists to support.
After every 4 streams of the same artist, a box could pop open asking that listener to support the artist.
A “would you like to support this artist” box with a name your price option would convert many more fans into paying customers than all the other streaming services combined.
Bandcamp Streaming could offer a My Music library with albums and tracks which fans can save. Curated playlists could thrive on Bandcamp like they do on Spotify.
Once a fan pays an artist something, anything, they are never asked again (but of course a donation box will always remain on the artist’s streaming page in case the fan would like to pay more).
This would offer independent artists AND LABELS a much better way to monetize their streaming catalogs than every other streaming service out there. Artists could train their fans to stream their albums on Bandcamp (and not Spotify, Beats, or any other service). Of course, artists would leave their music on Spotify, Beats, YouTube and the rest for discovery (like Bandcamp artists all have their albums available on iTunes).
Why Withholding Music From Spotify Only Hurts You
This new model can save the music industry. The majors will continue to look out for their best interests and continue to pay their artists as little as possible. Tech and music can work together. Harmoniously. It just has to be approached in this light.
Ask your fans to pay you. Don’t make them. And they will. Happily.
* A previous version of this article stated that no self-distributing artist can sign up with Harry Fox Agency to collect mechanical royalties. I have since been notified by Harry Fox Agency that self-distributing artists can enter their information into an HFA database to collect mechanical royalties (at no commission). But, it is highly recommended that self-distributing artists signup for a third party publishing admin company like Songtrust, Tunecore Publishing or CD Baby Pro to collect these mechanical royalties from HFA in the US and other collections agencies worldwide.
Photo is a screenshot of Phoebe Bridgers Bandcamp page. One of my new favorite albums.
Ari Herstand is a Los Angeles based singer/songwriter and the creator of the music biz advice blog Ari’s Take. Follow him on Twitter: @aristake