When Spotify, Pandora, and iTunes Pay Royalties, This Is Where the Money Goes…

This doesn’t answer all the questions, but it admirably attempts to shine light on a very murky (ie, non-transparent) payout process.  It comes from the Future of Music Coalition, part of its massive and ongoing Artist Revenue Streams project.

(and, here’s a far larger version for your viewing enjoyment…)

FMCmoneyflow

23 Responses

  1. Avatar
    Sequenz_

    Is there any way you can make this available as a PDF download? Small parts are very hard to read.

  2. Avatar
    Kristin Thomson

    Thanks, Paul. In addition, there are other iterations of this image broken down by various criteria that you can click through to see full-size versions here.

  3. Avatar
    Mike Corcoran

    This is great. Got a question Paul – do u know what the 10.5% payment for the mechanical of an on-demand, digital stream amounts to? 10.5% of what? the subscription payment maybe?

    One more question – where does YouTube fit into all of this? They definitely belong in the “On-Demand Stream”, but is their payment structure same as shown in the graph?

    Thanks –

    • Avatar
      Kristin Thomson

      A 2008 NMPA press release, which describes the voluntary agreement between NMPA, RIAA and DiMA, says:

      “Limited download and interactive streaming services will generally pay a mechanical royalty of 10.5 percent of revenue, less any amounts owed for performance royalties. In certain instances, royalty-free promotional streaming is allowed.”

      This voluntary agreement was subject to approval by the Copyright Royalty Board.

      The Federal Register notice from the CRB (May 2012) gets into the details. I think the CRB adopted the phrase “service revenue”.

      YouTube isn’t on this at all. It’s going to need a section — or perhaps a whole chart — of its own.

  4. Avatar
    Visitor

    Could we also have one that shows where the real cash goes?
    Let’s see the entire piracy chain…

      • Avatar
        Visitor

        “Unconstructive.”
        On the contrary — that’s the way you fight organized crime.

        • Avatar
          follow the money

          As any decent detective would say: “Follow the money”. It is very simple. But no reporter wants to do the research. i wonder why.

          • Avatar
            Visitor

            “Follow the money”
            Exactly.
            Paul and others have looked into this already though, and thanks for that.
            But Mainstream Piracy is the biggest robbery in history — and the commercial Piracy Industry is the biggest organized crime syndicate in the world today — so we need a complete transparency report on the subject.

          • Avatar
            the tools are already there

            Well, there is a thing called SAR but noone seems to want to go there for some strange reason.
            I bet that if you search all the “music business” and “music tech” blogs you will not find even one post about it.

          • Avatar
            Visitor

            “Well, there is a thing called SAR but noone seems to want to go there for some strange reason.”
            The strange reason is that you have to be a financial institution to file a Suspicious Activity Report [SAR].
            And financial institutions — such as banks — are central players in this game.
            The good news is we’re beginning to see who’s financing the Piracy Industry (thanks to Annenberg and Lowery).
            But that’s just the ouverture.
            Here’s what I’d like to know:
            1) How much are criminal sites like The Pirate Bay making each year?
            2) How much are ISPs making from organized copyright crime? (My guess would be 30-40% of their income, but a pirate probably would say 20%. Which is why we need the facts…)
            3) How many percent of Google’s income is based on organized copyright crime? 25%? 30%?
            4) To what extent are financial institutions involved and what do they make directly from piracy each year?
            5) To what extent are alternative currencies used for money laundering and what are their annual piracy based revenues?
            6) What are the ties between the Piracy Industry and similar organized crime syndicates, including distributors of child porn, counterfeit goods, trafficking, drugs and weapons?

          • Avatar
            Visitor

            The fact that no US bank has ever filled a SAR for a piracy website shows that they prefer to assist with the money laundering. Exactly like they do with the drug money from the cartels.

          • Avatar
            Casey

            Your guess is wrong. ISPs are not making anything from piracy. If anything they are losing money because it competes against their video service offering and causes congestion on their networks. Congestion means they have to upgrade their networks and increase the size of their pipes to upstream providers.

          • Avatar
            Visitor

            “ISPs are not making anything from piracy.”
            And the pope is not a Catholic.

          • Avatar
            Versus

            I seriously doubt this claim. One of the main uses of high-speed Internet is surely piracy. ISPs certainly make money from upgrading thieves, I mean sharers, to their high-speed (and high-price) tiers.

    • Avatar
      Versus

      Yes, I would love to see that. Let’s see the damage done.

  5. Avatar
    David Allan

    As I’ve always said, it’s not the responsibility of the STreaming Service to pay the artists, it’s the label or aggregator’s job to not only supply the content to the Service, but pay the money back to the artist.

  6. Avatar
    PROs

    This is not accurate.
    PROs are paid by iTunes, Amazon, etc for Digital Sales as well.
    It is not just about streaming.

    • Avatar
      Kristin Thomson

      In the United States, digital downloads from services like iTunes and Amazon do not constitute public performances. See US v. ASCAP.
      There are, however, different rights and different moneyflows in other countries.

  7. Avatar
    joseph nicoletti Consulting/Pr

    this is all just a Work in “Progress”,.. give it a Chance to Work out., try not to jump all over it,…ascap,BMI & Sesac know what they are doing,..it will take time,..Joseph Nicoletti Consulting/Promotions office 949-715-5382 [email protected]

  8. Avatar
    Jason

    Great, simple chart. I like it.
    One correction though, this assumes that Indie labels pay out 50%+ to their artists which is not true at all. Many offer exactly the same, or similar terms to the majors.