Music Doesn’t Pay the Bills… Merch Does
As music royalty rates drop, artists turn to merchandise for answers
A few days ago, I stumbled upon this post on Reddit. It generated lots of chatter online (even T-Pain chimed in), with many people pointing out how abysmally low the music royalty rates are. I wanted more clarity regarding where these figures were coming from, so I did some research (predominantly into Spotify’s practices). The amount an artist makes from streams is dependent upon a multitude of factors, including record label deals and the number of monthly listeners. So, I poked around the Internet to find out exactly what music royalties are and why artists these days are making more money from merchandise than from music.
Music royalties are payments distributed from streaming platforms to record labels in exchange for the rights to use their music. Since music is original work, it is protected under copyright. There are usually two different copyrights associated with a song: composition copyright and sound recording copyright. The former is owned by the songwriter and includes the lyrics & notes of a song; the latter is owned by the record label & artist and consists of the actual recording & performance of a song. Some artists write their own songs, whereas others work with separate songwriters. Typically, any revenue generated from a song is split accordingly between the owners of each copyright. Here’s a handy flow chart that gives a more in-depth look into royalty distribution:
The Reddit post I initially linked shows the amount of money that goes solely to the artist/performer. To demonstrate how this plays out, take Glass Animals’ “Heat Waves,” which recently reached 1 billion streams on Spotify (I definitely helped contribute to this…):
“On average a billion streams on subscription services brings in about $7m for big labels, with perhaps $1m of that going to the artists.” — The Economist
This example shows one of the best-case scenarios since not many songs end up with a spot in the coveted Billions Club; most artists make significantly less than this. Spotify royalties are a combination of premium subscription and advertising revenue, so if an artist has more premium listeners they tend to receive more money per stream. Assuming Spotify does pay around $0.00318 per stream (this number varies between countries and artists), it would take approximately 315 streams to generate one dollar of revenue — and that dollar will then be split between multiple people. To add to this, the following report was released in 2018:
“The current effective per stream rate at Spotify has now dropped to 0.00397, a reduction of 9% since last year. This [is] a cumulative reduction of 24% since 2014, which is an average decrease of 8% a year of the per-stream rate.” — The Trichordist
With payout percentages reducing over the years, it’s no surprise that artists are heavily encouraging their listeners to purchase vinyl copies and CDs of their albums instead. I was initially shocked to see such high prices from Tyler the Creator’s luxury Golf Le Fleur brand (his standard Golf Wang brand is also on the pricey side), but later I realized that this marketing move made sense. After looking at the numbers, it simply isn’t lucrative to release music and not have anything else to supplement it.
If we still follow Spotify’s $1 per 315 streams figure, it’s much easier to sell a $40 hat than to wait for the revenue from over 12,600 streams. This calculation doesn’t even account for one of the advantages merchandise has over music: the artist’s ability to take home a significant percentage of the profit. In other words, the sale of that hat will end up being much more beneficial than those 12,600 streams since the revenue is divided between fewer parties.
As a heavy Spotify consumer, these facts put a lot into perspective for me. The 188 times I streamed Lorde’s “The Man With The Axe” from her new album generated roughly 60 cents; the music box I purchased from her online store was worth $20. These numbers were evidence enough to show me that streaming does very little for an artist.
Streaming giants are taking over the music business, but their reign benefits consumers more than artists. In an age where music is right at our fingertips, it’s necessary to acknowledge that what’s convenient for us will come at a cost to others, whether we like it or not.
I don’t have a merch brand, but dropping me a follow will do! Thanks for the support!
