Where We Are Now
COVID-19 has affected so many people in the music industry—especially artists and songwriters. Without live shows and touring, artists have lost valuable sources of income, leaving them to rely on streaming as their main source of revenue. For the artist, this is new territory; for the songwriter, this is just another day in the life.
But, songwriters have always been extremely important in the industry— you can’t have a song without the songwriter. The industry is experiencing rapid growth from the hard work songwriters are putting in, as big record labels weaponize songwriting, the song economy emerges, and songwriting and production begin to fuse. Yet, songwriters still do not get paid enough for their work. This songwriter’s paradox exists for many reasons:
- The industrialization of songwriting: More record labels are forming songwriter camps/groups to get perfect hits. This means more consistent work for songwriters, but smaller proportions of royalties.
- The decline of traditional formats: Performance royalties on TV and radio are dwindling, as well as mechanical royalties because stores are closing. Also, streaming services account for recording royalties more than publishing royalties. In fact, recording royalties are 3.3 times higher than publishing royalties (Midia Research).
- Streaming royalties: Songwriters and artists will never meet in terms of income because labels continuously receive more than three times the amount of revenue compared to songwriters from streaming services alone.
Artists are getting their royalties—let the Mezzo Agency help you songwriters make sure you’re getting yours!
or call us at 1-888-413-4828 to get started!
How Streaming Has Changed the Game for Songwriters, Artists, and Labels
Streaming has had a revolutionary impact on the market. Since vinyl, cassettes, and CDs, streaming has changed music’s format more significantly than ever before, it has affected songwriters, artists, and labels, and the decisions they make in the industry:
- Labels are hiring more songwriters to write more formulaic and concise singles that stand out amongst all the songs that are uploaded to Digital Streaming Providers (DSPs) like Spotify, Apple, and Tidal. It has been difficult for artists to build sustainable careers because labels are chasing those stand-out, one-hit wonders that are going to make them quick money instead of taking the time to build artists’ longevity. This means the number of songwriters will significantly decrease too because there are fewer opportunities for them to gain experience and find opportunities to work. Labels need the rebalanced streaming equation just as much as songwriters do because chasing cookie-cutter hits is not reliable for the record labels long-term. They are relying on the algorithm and getting hit songs that go viral on Tik Tok for a couple of weeks, instead of focusing on the development of artists who will be more reliable sources of revenue long-term.
- Labels also rely on DSPs for artist discovery and revenue. Although labels resent taking part in this, they focus primarily on audience behavior and the latest algorithms, as this is one of the main ways people consume music globally.
- Streaming is only going to get bigger, and that means there will be an even bigger imbalance between label streaming revenue and publisher streaming revenue— 3.3 times more revenue, to be exact (Midia Research). However, this high percentage growth for labels and publishers does not translate to creators who only own portions of those catalogs. In order to generate more than a modest income as a songwriter or artist, you would need millions of streams. For example:
- Spotify only pays songwriters $0.0038 per stream. If a song gets played 1,000,000 times, 1,000,000 streams x $0.0038 per stream gets a songwriter only $3,800. Actually, the songwriter would probably receive even less than $3,800 because they would have to split the royalty revenue with whoever else helped write and produce the song.
Different streaming services like Spotify, Apple, and Tidal can pay the artist and songwriter any percentage of money per stream that they want. Tidal will pay $0.0125 per stream while Apple will pay $0.01 per stream— Spotify pays songwriters even less, with $0.0038 per stream. Although it seems like a small difference, these numbers add up— or you could say they really don’t. How can a songwriter make a stable living when they can’t even rely on streaming services to have a regulated amount of money they pay per stream?
Another aspect of the industry streaming affects is the Collective Management Organizations (CMOs), who help ensure songwriters get paid when their music is played. It is hard for them to keep up with new technology, as songwriters are getting paid too slowly and often miss the royalties that are owed to them. But, bigger CMOs and Performance Rights Organizations (PROs) are fighting to end this cycle by forming licensing hubs, digital-based global PROs like AMRA, and helping smaller CMOs update their technology.
Streaming has also morphed music consumption into a fast-food model: highly addictive, in large quantities, with short wait times and subpar quality. Three things are clear here:
- Playlists have become background noise for daily life rather than an immersive experience.
- Streaming services seem to be the only way to find artist discovery now that radio is focused on helping audiences develop lasting relationships between audiences and artists.
- Songs should not all be worth the same. A song detailing a person’s thoughts and experiences should not receive the same royalties as a white noise track.
Still, over 70 % of music streaming users believe that compensating songwriters fairly is important (Midia Research). According to Midia Research, “For music listeners, it is all about the song.” If this is true, why are streaming platforms not putting as much of an emphasis on fairer compensation for songwriters?
Thankfully, COVID-19’s catalyzation of the music industry has made people realize the value of songwriters and shone a light on these issues. Now, there is hope; there is an initiative to rebalance the royalty equation “in a way that is sustainable for the entire music streaming ecosystem. The songwriter’s plight is the music business’ plight” (Midia Research).
Songwriters are already not getting their fair share of streaming royalties! If you are not currently registered to a CMO or PRO you are not receiving the royalties you have earned!
Contact us here for help with your music catalog.
Solutions to the Current State
Culture and Consumption
As streaming blends lean-back (radio) and lean-forward (downloads), there is no royalty differentiation. For example, you have to buy an album but you can listen to the radio for free— see the problem? Lean-forward should have higher royalty rates compared to lean-back. This would be time-based, which means that all songs would fall into lean-back before going to lean-forward systems. Another way is based on the proportional listening behavior documented for each song in order to see which category it lies in. This would force artists to create higher quality work over a longer period of time, resulting in less spam. This also includes encouraging better listening strategies such as downloads and likes. The more you listen, the more you would pay— this means higher royalties for artists and songwriters.
Fan-centric Licensing
Fan-centric licensing is when users’ subscription revenue goes only to the artists they listen to. With the current pro-rata model, all users’ money is combined into one big royalty pot and then divided by the total number of streams for all users and artists. This does not take into account who the person is actually listening to, whereas with the new fan-centric model, users would pay based on how much they listen to an artist. As a result, streaming consumers would be able to directly support their personal favorite artists. This is much better for songwriters compared to the current royalty system because they receive higher percentages of subscription fee income by 94% (Midia Research).
Songwriter Salary and Share
Recently, publishers have been providing large advances to songwriters, but it is still on a far smaller scale compared to labels. Major record labels should work to arrange better deals for songwriters. They can achieve this by implementing the Songwriter in Residence Model. With this model, record labels sign artists who need to be developed with songwriters who work with them to build a catalog and distinctive sound. They should be hired by the label and work with artists closely as if they are an artist themselves. This bridge between publishing companies and record labels would help songwriters have a stable career in the industry, such as:
- a permanent salary to work alongside label artists
- acquiring production credits on master recordings
- lowering the number of songwriting camps
- a share in merch revenue
Streaming Pricing
Another solution is to increase royalty payments so that songwriters can earn more money. Streaming is over a decade old, yet music subscriptions are the same price they were in 2008, even though other streaming services such as Netflix have steadily increased.
Here are a few ways subscription pricing can be utilized to increase royalty payments:
- Creator weighted increases: rights holders agree to pay for most or all of the additional royalty to creators.
- Creator support: subscribers decide to support their favorite artists with their fees going directly to those artists.
- Fewer Promotions: fewer promotional offers in order to stop diluting ARPU and royalties.
- Metered Access: If streaming is now a necessary utility, it should be priced based on usage rather than “freemium.” Ad-supported should be added to the royalty pot basis.
While these are great solutions, they are not in place just yet. In the meantime, you’ll want to ensure that you’re set up to collect all your royalties properly. Let the Mezzo Agency help you with this!