Are music streaming services the new internet goldmine – or a total rip-off?

As online music-streaming grows exponentially, top musicians share their hopes and fears

Streaming is back in music headlines. It’s the fastest-growing sector in the recorded-music industry – between 2013 and 2014, streaming doubled in the UK from 100 to 200 million streams a week – and, since the beginning of July, streams of songs have counted towards the UK official singles chart. In the first week that streams were counted, streaming contributed 20 per cent to chart positions of songs in the Top 40, and, judging by the ongoing explosion in streaming, it’s a figure that will only be rising.

Before this year, just two tracks had been streamed more than a million times a week – Daft Punk’s “Get Lucky” and Robin Thicke’s “Blurred Lines”. But last week alone, four tracks were streamed more than a million times – Ariana Grande’s “Problem”, “Ghost” by Ella Henderson, “Budapest” by George Ezra and “Sing” by Ed Sheeran.

“That gives an idea of the change over the history of streaming. It’s growing at quite a phenomenal rate,” says Martin Talbot, managing director of the Official Charts Company. “Remember the first time a track achieved a million streams in a week – that was ‘Get Lucky’ a year ago – that’s already moved to the first track to achieve 1.5 million streams. That marker was hit for the first time at the beginning of this year and that’s happened another three times since, giving an indication of how rapid this has been. Since the beginning of the year there’s only been one week where the most-streamed track hasn’t reached one million streams.”

Use streaming sites Spotify, Deezer, Napster, O2 Tracks (Musicqubed), Rara, Music Unlimited or Zune, and your streams will count toward the chart; 100 streams are equivalent to one single purchase, whether it’s a download, CD or vinyl.

It’s easy to see how subscription streaming has caught on. In exchange for £9.99 a month to use Spotify’s Premium service, subscribers get unlimited, advertisement-free streaming of the millions of tracks available, and the ability to download albums for offline listening. For the artists, it means an average of 0.7 pence per stream, but that figure fluctuates according to Spotify’s revenue at the time; the site pays 70 per cent of its profits to artists. However, the problem for artists, and a reason why those including Aimee Mann, Thom Yorke, and David Byrne have criticised the format for the paltry fees it pays them – is that their fees depend on the deal they have struck with their record labels. Unless the artist is entirely independent of a label, their cut will be much lower still.

“The problem seems to be the enforcement of legacy contracts that were signed before streaming even existed and that don’t operate within the streaming environment,” says Paul Pacifico, director of the Featured Artist Coalition (FAC). “The FAC position is that we are calling on the labels to engage with artists to reassess and modernise contracts and make them fit for the digital age. We would like to see an industry united behind legal streaming services.”

For many artists, it’s been a matter of having to embrace the shift in the music industry, and make the best of a difficult situation. What there’s less of an acceptance of, however, is YouTube’s new advertisement-free streaming service and their rumoured low per-stream fees, and the non-disclosure agreements [NDAs] that major labels have signed that are fuelling distrust in the industry.

“The generally accepted rumour through the industry is that the major labels signed a deal with a large upfront fee in order to take the pressure off the low per stream rates”, explains Pacifico. “It’s a massive bonus which doesn’t do the artists or industry much for the longer term. And the problem is that the upfront fee doesn’t have to be shared with artists, unlike the per-stream rates. The unhealthy culture of NDAs forces an environment of suspicion.”

Billy Bragg

The more people signed up to streaming sites and willing to pay a subscription, the larger the pie’s going to be for everyone. People are undoubtedly starting to be more willing to paying for music rather than just downloading for free. That’s a positive thing.

Here’s the problem. Spotify don’t pay me, they have a deal with my record company. But I’m seeing a different revenue to everyone else because I own my catalogue and get 85 per cent. It’s not to be sniffed at. It makes a serious contribution to my income, but that’s because I get the lion’s share. When people say that Spotify doesn’t pay anything, I can tell you it’s not true. If you’re getting a lot of plays, you’re going to make some decent money.

Most people’s record contracts are the other way round. A standard record-company contract will offer you 15 per cent for retail, and that’s a historic figure from the days of analogue. With new bands there’s absolutely no excuse for charging them the same. So the real problem is with the rights holders. I don’t think Spotify is the problem, particularly if you compare it to YouTube’s streaming service. Their streaming service is ridiculously badly priced for everyone. They are really using their monopoly position to screw everyone. You’ve got to ask: why have the major record labels accepted such a bad rate of return on their back catalogue? [I reckon] it’s because they’ve been given equity in YouTube by Google, so they know that if and when YouTube is sold, they will cash in big time and they’ll be doing that off the back of artists’ back catalogues. Google has now tried to go to the independent record labels and say: “Well, the big boys have accepted this, why won’t you?”

Spotify have not only set the bar for rates, but also for how to deal with artists because they’ve made it possible to compare what Spotify has paid to what you’ve actually received from the rights holders and see where the problem is. Spotify have set an industry norm that is workable where everybody can make some money. And unfortunately YouTube are trying to viciously undercut that. It’s not Spotify that’s the enemy of artists, it’s YouTube. They are destroying the ability of artists to make a living. That’s the real problem.

Dan le Sac

It’s definitely something that artists need to pay more attention to because some of that outrage is actually the artists’ own fault, not paying attention to the deals they’ve signed, or not asking “how much are Spotify paying us?”, and then when they get that first royalty check, saying, “whaaat?”. Spotify and YouTube have been amazing for us, because we’re one of those niche, small-to-medium bands that don’t get a huge amount of marketing so those services which are free give people the opportunity to hear us. When we got a couple of videos on the front page of YouTube early on it changed our career. At this very moment Spotify have a viral top 50 and we’re in that with our first-ever song; it’s an eight-year-old song, and maybe because we’re playing a lot of festivals it’s getting played again now. It’s good from that point of view, but from a financial point of view, it’s hard. It’s a question of where the value is in music now.

When our biggest track had about 200,000 streams, we got just shy of £900. You think, £900 for something that already exists is brilliant, but if it was bought on iTunes, even with iTunes’ harsh cuts, it still brings in 36p. By the time it gets to the artist it’s probably a quarter of that, but still that’s hugely more than you get from streams.

It’s definitely difficult, but then there’s also that argument of accessibility. There are people who use streaming as a discovery service and then go out and buy the CD or download to keep a copy, so giving people the opportunity to hear it is more important to us than the money.

Any artist that was signed before the last few years was forced into accepting it. So if you’re getting signed now, you can actually negotiate your contract to be fairer, make sure that the cut you’re getting from your label is a fair share of what they’re earning.

As an artist, the only thing you can do is embrace and use their services, be active and engage. Sadly there’s very little artists can do to improve their lot other than make more people listen to them with those services.

Ron Pope

Because my catalogue is so large, streaming is an ideal setting for my music. I have 150 to 175 songs that you can stream on Spotify, so what happens is someone finds one of my popular songs and then there’s no barrier to them streaming for eight hours. That transition between, “oh I’ll listen to that song”, and becoming a fan is easier.

When I started I was averaging a million or so plays a month on Spotify, and now I’m getting four million. I have 76,759,686 total plays on Spotify, and earnings of $443,826 to date. I have made the same amount of money selling digital copies of my music as I have streaming. It used to be, “oh look, I made some money on streaming”, but now it’s a substantial part. I was lucky in that when Spotify really started to blow up I already had been putting out music on my own for seven years.

I catch on in a place based on the fact that if someone can find one of my songs they can find all of my songs, and become a fan. I just went to Sweden and played a festival to 10,000 people. I played this song that I didn’t realise was going to be reacted to in this way, where every person in the audience sang with me and I was like, “I’ll be damned”.

I think that’s a really incredible thing about streaming. Because people become a fan of  the catalogue. If I played 10 deep cuts they would still know them. I have a song called “One Grain of Sand” which has never had a TV licence or  anything like that yet it has over nine million streams on Spotify, and every person sings it  back at me.

I believe new artists should live where the  people are, whether that’s Facebook, Twitter, Spotify, iTunes… you have to be in the places where people are getting their music from. I wish I could still sell CDs for $19 a piece but I can’t, because that’s not the era I live in. I think that the rates that people are paid for streaming are  unfair; people should be paid fairly and that’s not happening right now. Spotify has been really  beneficial for me, but I can understand why it doesn’t have the same effect for artists with  smaller catalogues.

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