Make money from music- can you really still do it?

Once again, the subject of whether, as an independent artist, you can live off the revenue from your productions has been in the news. After Thom Yorke started removing some of his albums from Spotify, the internet discussion places were full of commentators giving their reasoned and unbiased opinions. Oh, wait, no, it’s the internet: very few of the opinions were reasoned and unbiased. However, there were a lot of opinions… So, today, we ask the question “can you still make money from music?”

The answer is, obviously, yes. Some people certainly do. Rihanna seems to be doing alright for herself, Justin Bieber looks like he can afford a new pair of shoes whenever he wears through the soles of the old ones, and Daft Punk have probably recouped that million and a bit dollars they spent on recording Random Access Memories.

But that’s not really what we’re talking about, is it? We’re talking about the little guys; the independents; the self-released; the indie-label bands and artists. Do they make money from music?

But the question still isn’t that straightforward, because we’re really talking about recorded music, not from playing live. So, let’s say you record your album and you want to make some money from people hearing the songs contained within the grooves or, more likely the ones and zeros. Can you make money from music you’ve recorded? Or, perhaps more relevantly, can you make a living wage from your recorded music? In this era of streaming ‘radio’ its becoming harder to do. Perhaps now is a good time to revisit a rather nice infographic put together by Information is Beautiful from a post by The Cynical Musician:

Make money from music, can independent artists do it? It’s quite clear that smaller, independent artists are going to struggle to hit that 4 million Spotify streams a month target, and this has perhaps driven a lot of the vitriol about how streaming is not a realistic model for the ‘long-tail’ of the music business. However, how realistic is it for these small artists to sell 143 self-pressed albums a month?

Too many people trying to make money from music?

The ability to record an album on your laptop with little more than the software from a magazine cover DVD and a pair of headphones has been a wonderful thing. The internet is full of some incredible, underground, low-key, unsigned music from some incredible bands and artists, some of whom are quite happy to give it away for free, with a number of netlabels, such as InoQuo and IDMfNetlabel amongst many others, quite happy to let you have some great sounds with a Creative Commons licence and maybe a ‘Donate’ link for a spare pound or two you might have in your PayPal account.

Back in ‘the old days’, to track and manufacture a record and make it available to the world was quite a substantial investment. This meant that the the label had to pick only a few artists it thought would appeal to a large amount of the market, and then it would work hard to promote you, to make sure it got back its investment, and plenty more besides. All of this meant that the label was ‘triaging’ the music early in the A&R process, so there were fewer records competing for your money.

Now, with everyone able to record an album, there is an awful lot more competition out there and, as with many things, it’s not so much about how good your music is (although it needs to be good!), it’s about how you can get people to hear it in the first place. If you’re lucky, you might have something that goes Gangnam Style viral, but don’t hold your breath.

The thought arises then, that perhaps it’s not that there isn’t enough money going to artists, but maybe that the pot is being shared around a lot more artists than it used to be. However, that doesn’t mean that the way the system works is necessarily fair…

The wrong people taking the wrong share?

If the amount of artists is now part of the problem, then does it mean that we shouldn’t getting upset at the Pandoras and Spotifys of this world? Well, I suppose that depends on your perspective.

The streaming business are just that: businesses. They are in the business to make a profit. You can certainly argue that they offer a good way to promote your own music, giving you a way into the ears of people across the world, people who may like what they hear, look you up, and buy your record.

There are a couple of issues here. The first point is that perhaps streaming is too convenient and, basically, too good. With the radio -which actually pays considerably higher royalties (albeit to perhaps fewer people)- the musical experience is interrupted by an overpaid presenter talking what is often complete nonsense between most of the songs, not the case with the streaming services.

On the radio, the annoying waffling continues over the start of the tune, and at the end before it’s finished, making it virtually impossible to record things from the radio in a form you’d want to listen to again later. With streaming, you get the full song, you can just record your master out of your genre-specific ‘station’ of choice, and there you go. In fact, why bother recording? If you’ve got everything you want on-demand all of the time, why would you ever need to have anything that wasn’t your streaming service?

Daft Punk probably make money from music. Will they Get Lucky with online streaming?

The other point is what do you decide is a fair profit? Would it be fairer if, above royalty payments, there was a profit share? So, let’s imagine Pandora make $100m profit one year (as opposed to a net loss of $5.4m in the second quarter of 2013). Should they keep all of that for themselves and their shareholders, or should a portion of that go back to the artists that were the reason they had something music to stream in the first place?

The fact is, the streaming companies are companies that exist in a free-market (or as free a market as we have these days, but that’s an argument for another day), so surely, eventually, it will all come out in the wash. If the streaming companies continue to make a loss, they will eventually fold and people can go back to the radio or actually buying songs that they like.

Possibly what needs to happen is, instead of trying to reduce the royalty payments to artists to reduce the overheads of the streaming company, the royalty amount should be set at a fair level, and the streaming companies set their subscription prices and their advertising appropriately to make money based on that fair royalty amount. If they can’t make money, maybe it’s just that the streaming model for music distribution doesn’t work.

An article published by Statista last year that asked “Will Music Streaming Ever Be Profitable“, contained a very interesting graph that showed year on year revenue increases, but consistent net losses for both Spotify and Pandora. The author concluded the article with the statement: “These numbers show that the music industry might have to lower its demands if it doesn’t want to risk losing the growing revenue from streaming royalties in its entirety”

Can the music industry ever make money from streaming?

Perhaps the streaming companies need to realise that’s just what it costs to keep the music industry working and supporting artists. If they can’t cover their costs to make a profit, that’s not the suppliers problem. I found a very nice replica Aston Martin DBR2 that I want, but I can’t afford it. I can’t lay the blame at the manufacturer and tell them that they need to sell it to me at a price I can afford.

What perhaps does need to be worked on is a fair deal between the streaming services and the music industry. What about different amounts of royalty payment dependent on the age of the recording. So, a track from Led Zeppelin II, which has already sold plenty copies and more than paid for the investment in making it in the first place, would cost less than a single released last week?

Surely, somewhere, these industry executives in pinstripe suits can negotiate some sort of arrangement that makes both sides at least reasonably happy. Surely it can’t be that difficult! I mean, we’ve put people on the moon and got them home again, sorting out a financial model for streaming The Floral Dance via a mobile device can’t be that hard, can it?

Ultimately, it all comes down to the consumer. So, let’s say you’re paying £10 a month for premium Spotify; would you pay £25? That’s perhaps still less than you pay for your mobile phone. Would you pay £50? Perhaps less than you pay for your TV subscription with a few extra channels. At what point would you say to yourself “I think I’d rather buy a few records every month”?

The future of music consumption is in your hands!

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Fynn Callum

producer, guitarist, engineer & dj
From indie guitarist to deep house producer via Northern Soul dj; mix engineer, producer and gear enthusiast. Jaffa Cake aficionado.

One Response to “Make money from music- can you really still do it?”

Read below or add a comment...

  1. Bee Plus says:

    Pretty scary stuff. Hat-tip to George Stott for sharing.

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