It seems like we can’t go more than a couple of weeks before another article comes out complaining about Spotify payouts to musicians.
Blabbermouth had a recent article featuring Bill Kelliher from Mastodon. (the article is a write up from a podcast). In the article, he states that streaming services have to change, because artists don’t make any money from them.
Business Insider published this article in 2014 stating that Pharrell made “only $2700 from 43 Million plays of Happy on Pandora“.
For me, two questions come to mind when I read these articles:
- What is actually being paid for the song (not necessarily to the artist)?
- Why should the artist make money a living from these services?
What was paid out for the song?
What is being paid for the song, not what is being paid to the artist, is the correct measure of how reasonable or fair (to loosely use both words) the streaming platforms are. I’ll explain this in the next section, but here, let’s look at what the song is generating.
If you scroll to the end of the article on Business Insider, you finally reach a comment from Pandora stating they paid over $150,000 for three months of streams of the song Happy. The fact that $2,700 went to Pharrell is another question entirely. The spokesman from Pandora rightly states their frustration with the lack of context that is presented in articles like these.
If you look at the numbers, you can see that Pandora is paying roughly $0.003 per stream. Bearing in mind that a stream technically counts as 30 seconds of the song being played (i.e. if the song is played for 30 seconds, the rights holders to the song are paid for 1 stream, even if the listener stops listening at 30 seconds), this is… well it is what it is.
Generating revenue for song plays? That’s pretty cool.
As an aside, that $150,000 is just from Pandora. If the song is clocking 43 million plays on Pandora… it is probably doing pretty good on Spotify, iTunes, Apple Music, physical sales… and there will be sync interest in it too.
We could probably reasonably assume the revenue from that song, in those three months, to be in the region of $500,000 or more.
Why was Pharrel paid only $2,700 for a song that generated $150,000?
This depends on his contract. Firstly, let’s look at the use of language in a title like this. The use of the word “only” leads us to assume there has been some injustice. $2,700 for a song that generated $150,000? That’s only 1.8% of the payout!
See how effective it is? I just did it there.
The question comes down to… what is fair?
Broadly speaking, if two people agree to something and uphold what they agree to, the situation is fair.
So why was Pharrell paid $2,700 for 43 million Pandora streams in those three months?
He doesn’t own the rights to the song.
A record company gave Pharrell a loan of $X. In return, they own the rights to the song. The record company wants to make the money on the song back – which is pretty fair. The record company wants to make a profit… then they can re-invest on another song / album from Pharrell.
A record company gave Mastodon $600,000 to make an album. They aren’t going to give Mastodon any more money than they possibly can… for exactly the same reasons Mastodon want to make as much from the record company as possible.
Additionally, a big song, more often than not, will have complex legal agreements behind it. There can be multiple people involved in the creation of a song:
- The record company who fronted the money
- Record companies are essentially venture capital companies for musicians
- A record company will:
- Loan a musician money to make a record
- Connect that musician with specialists in their field (producers, song writers, artists, branding etc)
- Position an artist in their market
- The song writer
- The person / band that performs the song, may not be the songwriter
- A song like Happy can have multiple songwriters
- The producer(s)
- The manger
- The lawyers
And these people are either paid with cash upfront, or on a percentage basis with the revenue that the song generates.
The artist will usually be paid on a percentage of revenues from the song, after the record company has made their money back.
And importantly… the artist agrees to this, in writing.
No-one (I hope!) put a gun to Pharrell’s head and told him to sign.
No-one held a gun to Mastodon’s head and told them to sign. Mastodon’s record company offered them $600,000 to make a record. They accepted the money… and the conditions that came with the money.
They had a choice and they made it.
But how can musicians make a living from this?
To be blunt… that isn’t the service providers problem.
It is not the responsibility of Pandora, or Spotify, or Apple Music to pay any musician enough so that a musician can make a career.
Their responsibility starts and ends with the agreement that the rights holder makes, when the music is uploaded to that service.
If a musician doesn’t like the deal that is being made… then they should not take the deal. Or, they should find a creative way to make the deal work for them.
I’m a musician myself (admittedly not at the level of either of the artists mentioned when it comes to sales and streams), but I don’t assume that being able to play guitar and write a song means I should be able to snap my fingers and make a living from it.
Because I can upload a song to Spotify doesn’t mean that I should be making a living out of it (that would be pretty sweet though – I would be Happy with clocking $500,000 in 3 months from a song. Boo yah.)
Now don’t get me wrong… I want to make a living from it – and I fully intend to.
But that is my problem, not Pandora’s. Not Spotify’s. Mine.
What’s your take on streaming and the music industry?