Yes, Major Record Labels Are Keeping Nearly All The Money They Get From Spotify, Rather Than Giving It To Artists

from the who-are-you-blaming-now? dept

A small group of very vocal musicians has decided that the new target of their anger, after attacking cyberlockers, search engines and torrent sites, should be legal, authorized streaming services. They've decided that the payouts from these services are simply too low, even though almost none of these services are anywhere close to profitable, and most are handing out the vast majority of their revenue to copyright holders. The complaints are often nonsensical. Way back in 2012, we noted that the target of these musicians' anger appeared to be misplaced, as the CEO of Merlin (which represents a ton of indie labels) admitted that the real problem was that Spotify paid lots of money to labels and it was the labels not giving that money to the artists. Yet, rather than blaming their own labels (or their own contracts), these artists lashed out at Spotify and other streaming services. Just a few months ago, we covered this issue again, with even Bono admitting that the real problem was the lack of transparency from the labels.

And, it appears, there's a decent reason why those labels haven't been eager to be transparent: because they're keeping most of the money. The Music Business Worldwide site has the details on a new report put together by Ernst & Young with the French record label trade group SNEP, concerning where the money from streaming services Deezer and Spotify ends up. Spoiler alert: it's not with the artists. Here's the overall share of the 9.99 Euros that people pay for a premium account on these services:
As you can see, the labels get the lion's share, with songwriters/publishers splitting 10% and the performers getting less than 7%. And, if you look at the specifics of the actual post-tax payout, you can see the contrast more starkly:
The labels end up with nearly 75% of the total payout, with actual artists and songwriters left with the scraps.

Of course, since this project was paid for by SNEP, which represents the major labels, it then tries to spin this as being not only perfectly fair, but a good thing for the artists themselves. What, you say? How can that be? The report claims that 95% of that money that goes to the labels goes to cover all of the "expenses" those poor poor labels have to endure to record and... um... upload(?) the actual music. Sure, in the past, it may have been reasonable for the labels to take on large fees for distribution -- but that's when it meant manufacturing tons of plastic and vinyl and then shipping it to thousands of record stores around the globe. In this case, there's no manufacturing, and distribution is an "upload" button. Sure, there are some marketing costs, but the numbers ring pretty hollow (especially for many of the artists for whom the labels do little to no marketing).

So, again, rather than blaming these streaming services, it appears that perhaps they should be discussing things with the labels.

Filed Under: artists, contracts, copyright, distribution, music, record labels, revenue, streaming
Companies: deezer, snep, spotify

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  1. identicon
    Pat, 5 Feb 2015 @ 10:16am

    Your assumptions are wrong

    First, the %s look about right for what labels usually give to artists. 15% to 20% or the gross sounds about right.

    What you have wrong is where you talk about costs and expenses.
    Because generally, as it's always been, all the costs associated with production and distribution, such as recording studios, producing, mastering, printing, packing, shipping, promotion, breakage, returns etc etc etc... ALL those costs are charged back to THE ARTISTS, it ALL comes out of their 15% to 20% share.

    The % you see going to the labels is 100% PURE PROFIT, apart maybe from the salary and expense account of the reps going around pushing the album.

    The ONLY "risk" the labels take is at the start, when they usually grant the artists an "advance". That advance is usually pretty substantial and the artists are usually led to believe that it's a form of pre-payment, when in fact it is a loan. Then all the costs of production are assigned to that loan, which gets reimbursed directly from the share of sales the artists would get, the 15% to 20% has to pay off the advance first.

    Now, the LABELS call that a risk because it's really an initial investment, paying the artists in advance in hope of recuperating the money from future sales. But in REALITY, record deals are usually for more than one record and also usually, the artists rarely recoup the full advance with their first record. So in reality the advance is the tool the labels use to pressure the artists into doing things "their way" for the second record. As in "You still owe us $$$$$$ because your first record wasn't good enough, now you're gonna do it OUR way or we're going to shelf you and you'll never work again".

    For some good reading on the subject with very good math attached, look up an essay from Steve Albini called "the problem with music".

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