A new report in The New York Times indicates that SoundExchange, a nonprofit group that processes the payment of royalties from digital services to artists and labels, has managed $1 billion in royalties transactions. More impressive yet, the nonprofit expects to pay out about $100 million per quarter this year, indicating a big upward curve.
That number has accumulated over 10 years, since the service’s birth. SoundExchange processes money from Pandora and some other internet radio organizations. Also included is Sirius XM, which is in a class all its own. However, The New York Times says the number doesn’t include most on-demand services (like Spotify or Rdio) because they usually pay artists or labels directly.
It turns out that of all the legal digital music options, Spotify is one of the hardest to leverage for labels and artists. Whereas labels get a 30% take from Amazon MP3 or iTunes music downloads (and share that revenue with artists in whatever way is agreed upon in their contractual relationship), it takes hundreds of plays on Spotify to reach the same level of revenue.
Music artists Uniform Motion broke down the numbers for insider music business blog Hypebot. The verdict: You would have to listen to an entire album more than 200 times before the artist or label would see as much money as they receive from a sale of the album on iTunes.
Cultural Revolution or Business Disaster?
The popularity of Spotify may be a clash between culture and reality for 20-somethings who have since middle school come to see the commodity of music devalued by technological disruption and piracy. NPR intern Emily White published an op-ed for All Songs Considered on Saturday titled “I Never Owned Any Music to Begin With,” saying that the digital revolution isn’t a revolution at all to her 21-year old self because she has hardly spent a penny on music in her life.
The article perfectly illustrates the Free Culture movement’s discomfort with its own positions: In one paragraph she says, “As I’ve grown up, I’ve come to realize the gravity of what file-sharing means to the musicians I love. I can’t support them with concert tickets and t-shirts alone,” but then, “I honestly don’t think my peers and I will ever pay for albums.”
This cognitive dissonance represents a world struggling with its technological ideals and its ideals for rewarding artists. The truth is that while content and tech have become symbiotic, there are inherent conflicts between the two economic organisms.
Internet ethics blogger and music industry college lecturer David Lowery responded with a lengthy, detailed rebuttal. It was sympathetically written, but he clearly believed White and her peers are deeply misguided — that their cognitive dissonance could be the undoing of thousands of artists. The blog post has gone viral on social media.
His most central point is that whether you side with the “Free Culture” utopian ideal of a digital society, or the fight to retain classical control of intellectual property in the face of digital distruption, you’re ultimate siding with a corporate interest either way. Why, he asks, is Google more deserving of cultural support than a record label that compensates artists for their work?
Google makes a killing on ad revenue — first alongside the search results when you search for “Vampire Weekend MP3s” and then, thanks to its popular ad platform, on the potentially illegitimate free MP3 download site the search directs you to. The artists and labels don’t get a cut from either of these ad revenue channels, though they might benefit more from the system if they are fortunate enough and sufficiently adept at search engine optimization to land their own digital storefronts in the first page of search results.
The Myth That Digital Is Free
Exacerbating the problem is the public perception that digital distribution is substantially cheaper than physical distribution. In truth, digital distribution requires a vast and advanced technological infrastructure serviced by dozens if not hundreds of highly skilled, expensive professionals.
We’ll skip past the detailed rundown of the costs, but if you’re interested you can read it at Scholarly Kitchen. The truth is that running a service like iTunes is so remarkably expensive that Apple’s 70% take of digital sales of music may be totally justified. But what of Spotify?
As Lowery noted, Spotify’s CEO is the 10th richest man in the United Kingdom’s music industry — a top 10 occupied by only one music artist. A desperate content industry has made a painful deal with Spotify because the alternative when selling to a generation of Free Culture advocates is, well, nothing.
The digitization of content presents everyone with incredible opportunities for expression, entertainment, and profit, but it’s just as wrought with cutthroat politics as to the size of each party’s pie piece as old media was. Who’s exploiting who is an even more complicated mess than it ever was before. Before we dance in the virtual streets to celebrate the digital cultural revolution, let’s make sure we fight for the benefits going to the right people.