Is music streaming bad for musicians?

Centre for Employment Relations, Innovation and Change

David Hesmondhalgh is a Professor of Media, Music and Culture at the University of Leeds and a co-lead for the research theme Employers’ and Employees’ Experiences of Digital Work Across Sectors at Digit. In 2019, he was Visiting Researcher at Microsoft Research New England, Cambridge, Massachusetts.

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Music streaming has hit the headlines many times over the last decade, with claims that streaming services, like Spotify and Apple Music, are damaging the record industry and that musicians are being paid unfairly. Within the last month, it was announced that MPs will be launching an inquiry into the economic impact music streaming services have on artists and those involved in the music industry. 

But are we having the right kind of conversations about this issue?  

An industry in crisis 

From around 2000 – 2014, the music industry was in crisis, and digitalisation and the internet were named as the culprits. From around 2015, music streaming brought about a recovery in global recorded music industry revenues. 

In the late 20th century, most revenue was generated by sales of CDs in shops. Radio, TV, cinema and games provided crucial exposure and publicity, as well as supplementary rights income.  

However, from 2015 onwards, most revenue was (and is) now generated by streaming subscriptions and advertising. These streaming services have largely replaced retail shops. The media still plays an important part in promoting music, and the recording and song rights are still owned by recording and publishing companies, but rights-holders now license their recordings and songs to music streaming services. The music streaming services pay the rights holders, who then pay musicians contracted to them. 

It is important to understand that there are two main sets of music copyrights - recording rights and song rights. Musicians assign their recording rights to record companies and their song rights to music publishers. These rights holders collect revenues and pay royalties to the musicians as set out in their contracts.  

The recorded music industry today is centred on two key groups that are mutually dependent on each other. Music streaming services cannot survive without the rights holders who license to them. They do not finance and commission recordings – that is what record companies do – and they do not own the rights to the music. This has restored some power to rights holders after the earlier period of crisis. 

However, an important feature of the new system is that a new sector of digital distributors and label services allow some musicians to work around the recording and publishing companies. Many DIY musicians and unsigned artists are taking advantage of this opportunity. 

Controversy about streaming payments 

For more than a decade, there have been complaints about what music creators earn from streaming. Recent interventions such as the Keep Music Alive and Broken Record campaigns, have brought the issue of music creators’ income to the attention of the public and parliament. 

Among the criticisms are two major sets of claims: 

  1. The new recorded music system is unfair, even more than the previous system; it’s now harder for musicians to make a living than before. 

  1. The new system reinforces the domination of major record companies and the elite group of musical superstars closely associated with them. 

These have included many complaints about low “per stream” rates. But are these claims valid? Are things actually getting worse for musicians? 

Music streaming services collect revenue (through user subscriptions and advertising) and distribute around 70% to rights holders. Record companies and publishers then pay royalties to the recording artists and songwriters.  

The pro-rata system 

Rights holders are paid according to the proportion of total streams in a given period. This means that there is no such thing as a ‘per-stream’ rate (as often argued by musicians and quoted in news articles). It’s an analytical construct, calculated in retrospect rather than actual practice.  

The idea of ‘per-stream rates’ is deceptive because per-stream rates will tend to go down if people stream more (because individual tracks will get a smaller proportion) but overall musician income might increase if people stream more (more users mean more subscriptions and potentially more advertising revenue). 

Complaints about per-stream rates often misrepresent the problem and how the system works. The most important factors in determining musician streaming income are: 

  1. Total streaming revenue, which is determined by the number of subscribers, advertising revenue, and the cost of subscription (which has remained the same for many years) 

  1. The proportion of total streams achieved by a track (not the number of streams) 

  1. Musicians’ contracts with rights-holders. (This is totally separate from music streaming services.) 

Making sense of the debates and evidence 

Many of the contributions to debates often simplify what happens in the music industry. This is understandable as it’s a very complex system. However, streaming has generated unprecedented and welcome public interest in the income and working conditions of musicians.  

This has particularly come to light during the COVID19 pandemic, with many people in lockdown finding comfort in music and the arts. The backlash to the government’s advertising campaign suggesting that a ballet dancer could retrain and work in cyber suggested a push back against the idea that the arts do not involve “real work”. 

What should we be thinking about? 

Here are five key questions to consider: 

  1. Are consumers paying enough for streaming? (This is an example of where digital creates great choice and convenience for consumers, but workers potentially suffer.) 

  1. Are royalty rates high enough? These were often, historically, very low but have improved somewhat in recent years.  

  1. What is the distribution of revenue across musicians? (The top 1% of artists take 77% of revenues. This ’superstar effect’ was apparent during the era of records and CDs, but there is some evidence that digitalisation made things worse.) 

  1. How many musicians can make a sustainable living out of music now and how does this compare with the previous systems? 

  1. How is musical success determined and by whom? (There is an abundance of music now available meaning that publicity and marketing are more important than ever. Exposure is key. Artists are dependent on music streaming services’ interfaces, playlists and algorithms.) 

A big problem that remains is the inequality between the most successful artists and the long tail of less successful musicians – small numbers of rights holders and musicians get most of the income.  

There is no easy solution to problems regarding musicians’ income. Some advocate a user-centric payment system (distribution according to the proportion of an individual user’s streams, not total streams), but rights holders, music streaming services and others have expressed doubts. More radical responses argue for universal basic income.  

There is potential for more musicians to make a living from the music industry than ever before. There is evidence that some music streaming services may be seeking to spread plays across a greater number of tracks and artists. But consumers will almost certainly need to pay more for music if musicians are going to thrive. And the debate about fairness may benefit from consideration of what number of professional music creators is feasible and desirable in modern societies.  

Professor David Hesmondhalgh launched the Digit Debates webinar series from the Digital Futures at Work Research Centre, last week, discussing the problems of evidence and argument around whether music streaming is bad for musicians. 

Throughout the series, leading thinkers will be talking about how digital technologies are changing work. From music streaming, to the digital lives of black women in Britain, and crowdwork platforms to online employee reviews, the seminar series covers a wide range of pertinent topics.  

The series aims to spark debate, challenge assumptions and become an essential resource for anyone who wants to understand how new technologies will impact employers, employees, job seekers and governments. 

Register to join Digit on Wednesdays, 1-2pm (GMT) online, from 4th November – 9th December.  

The next webinar taking place is on Wednesday 11 November and will see Dr Francesca Sobande, lecturer in digital media studies at the School of Journalism, Media and Culture at Cardiff University, discussing “The Digital Lives of Black Women in Britain: Between Creativity, Community and Commodification”. 

Digit is jointly led by the Universities of Sussex and Leeds Business Schools with partners from Aberdeen, Cambridge, Manchester and Monash Universities. It is funded by the Economic and Social Research Council (ESRC). 

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The views expressed in this article are those of the author and may not reflect the views of Leeds University Business School or the University of Leeds.