For much of the last twenty years, if you asked a music industry insider about their business, they’d roll their eyes and throw up their hands and say something to the effect of: everything changes every twenty minutes! While that’s an exaggeration, it’s easy to see how one could feel that way. The digital revolution obliterated the business we knew, transforming it from one based on physical album unit sales with some touring income into a tour-or-perish revenue model, while albums became loss leader content. But it’s a better business now than five years ago. The mistake today would be to not appreciate how things have actually stabilized to a significant degree and how streaming music has become a viable source of income for tens of thousands of artists. But indie writers and bands have to play their hand carefully, say the two Nashville consultants interviewed here for a year-end wrap.
Charles Alexander is founder of Systemic, a label services and digital marketing company. As founder of Outside The Box Music, he’s been an artist manager and strategist, as well as a professional singer-songwriter. Jeremy Brook, founder of The Brook Law Firm, is an attorney who represents artists, producers, songwriters and startups in the music busines. They’re planning a new venture called Launcher for 2022. We talked on Dec. 1 to take stock of the year that’s ending and the year ahead.
I’ve aimed to keep the talk from getting too insider, but a couple of things to remember. Recordings have two separate rights and revenue streams attached – the “master” which is the recording itself, controlled by the artist and label, and the underlying song, which is controlled by the writers and publishers. Also, Digital Service Provider or DSP is the industry term for streaming companies like Spotify. With that, here’s our exchange, edited for length and clarity. You can listen to the full interview with additional questions about the Music Modernization Act and Spotify streaming competitor Tidal.
Craig: Artists today are surrounded by commentary that says streaming, Spotify in particular, is ripping them off and that making a fair income from their recorded music is virtually impossible. Is that an accurate picture or too negative?
Charles: I guess it depends on the context. Ever since the beginning of time, there's been an inequitable relationship between the people who create art and the people who distribute art. So, is it a complete rip-off? I don't think so. Is the per-stream payout rate really low? Yes. But is that a function of the DSP trying to rip you off? Or is that a symptom of the larger music industry?
Craig: Because there are many possible parties between the creator and Spotify who take a cut before the royalties finally arrive in the creators’ hands right? A publisher, a label, a manager, an attorney and so forth.
Jeremy: Yeah, if an artist has a full team, those people are all taking some percentage of what the artist is getting. The label, of course, on the master recording side, is getting perhaps the lion's share of it, perhaps 50%. On the publishing side, the publisher is going to get a portion of what the songwriter is getting. And of course, it depends on the structure of their agreements. So yeah, every step along the way does diminish what the artist gets. Charles used the word inequitable, and I think unequal is the more correct word there. Sometimes it is inequitable, because sometimes what the various parties are putting forward is not equal to the value that they're taking. But the various people that are working with an artist are putting in their sweat equity or their capital and taking some risk along with that artist. So fair is in the eye of the beholder.
Craig: I’ve heard you guys say for years that if an independent artist owns their own master recording and owns their own song publishing, and isn't splitting it with anyone else, there is potential for making substantial income from streaming. What’s an example of that?
Charles: Oh, I can give you a very real-world example. My entree into the music industry was being able to work with a young independent talent named Keeley Valentino. Up to the point where we got features on Spotify (playlists), she didn't have a career. All the public conversation around an entity, like Spotify was extremely negative. It's trying to rip off artists. What was never part of the conversation was, if you own the entire pie, then you see the complete picture in terms of where the revenue goes. The year we got on Spotify and she blew up, (her income and my commission) were significantly larger. And I don't care what anyone tells me, that opportunity would not have existed at radio for her. It just wouldn't.
Craig: I also think that the media narrative often emphasizes the many thousands if not millions of artists who make almost nothing from their streams, without recognizing the staggering number of people submitting content, which now amounts to something like 60,000 new tracks per day. Which is insane. The artists to look at are the top few percent, because we can’t engineer a world where most recording artists are successful. It’s a very long tail world.
Charles: Yeah, I think the bigger conversation around all of this is not what you're being paid per stream, but what are you doing to market your music and to build a fan base? Because once you have a fan base, then everything downstream from that becomes very doable (and) viable. And if you don't have a fan base, then you're just looking to throw things up on a Spotify playlist and hope that somehow all those people magically convert to fans. And that just doesn't happen.
Jeremy: If you think of it in transactional terms, your fan base are your repeat customers. They're the ones that are coming back. You might have those 100,000 spins on Spotify. But if that’s 100,000 people listening one time, that's not a sustainable model for an artist.
Craig: Spotify themselves put out a finding that the number of artists on the platform generating total royalties of $50,000 a year or more is about 13,400, and that number had doubled from 2017. I ask myself, well, how many artists were making the median national income in 1979 or 1995? 13,000 seems to me to be a pretty big number. Because it’s only one stream of income on one platform. When you really pull back and look at all streams, all synch royalties, all live performance, all Patreon, etc. we might be talking about an economy where 100,000 artists are making $50,000 or more per year. And suddenly the gloom and doom starts to lift, and I think, Wow, that's a healthy arts economy. What do you think?
Jeremy: I'm very encouraged by that. You know, on the one hand, you have something like two million artists on Spotify, and so 13,000 out of two million doesn't seem like very much. But I think that's because the barriers to entry are so low. Now, anybody can create, record and distribute music. You don't need a label to do that anymore. These 13,000 artists have somehow found a way to stand out from that otherwise large field. And historically, I think we're more or less at the beginning of the streaming economy. It's going to continue to go up over time.
Charles: Yeah, I think one of the things we can't lose sight of is that Spotify gives you shelf space. What you do with that shelf space is really up to you. And the other sort of corollary discussion is, it's a business that pays out 70% of its entire operating budget (to rights holders).
Craig: Which was, for Spotify alone, reported to be more than $5 billion in 2020, and it’s rapidly rising. Now, maybe the most important factor in making Spotify work for you as an artist is getting on playlists. What's a brief history of playlisting? And how do you think about them as artist strategists?
Charles: I launched a company in the streaming strategy and playlist space immediately after we had success with Keeley. And in the early years, we could have conversations with folks at Spotify. It was a really beautiful system, in that we could serve as the frontline advocates for some projects that may not have come up through the major label system. We could put that in front of the folks at Spotify and create some strategy around that music. And we could approach third-party, user-generated content (UGC) playlists made by private curators and give the music a place to live and be consumed within and outside of the Spotify editorial system in order to be exposed. And very soon after that, it became like the wild, wild west. And they even coined a term called play-ola, where people started paying for playlists spots on some of these third-party, UGC playlists. As a matter of fact, in the early years of Spotify in the United States, there was a tab in the Spotify app that said ‘tastemakers,’ and you could actually go see in that tab independent, user-curated playlists. Not long after that, Spotify shut it down because there was so much abuse.
Craig: Oh, right. I can see how that would be perilous. Then that evolved into the dominance of the official Spotify curated playlists, the company playlists, like Indigo in Spotify for country.
Charles: Yeah, well I would say that stuff was always important. In trying to get into the system, that was your number one goal - to get into editorial playlists, because consumption happened on those playlists, sometimes at a rate of up to ten to one compared to UGC playlists. And that kind of makes sense, because they own more real estate. We just did this research paper on the impact of Spotify trigger regions, especially in the Americana and folk genres. And what we found was the impact of third party or UGC playlists was about 1%. And Spotify editorial playlists was like 98 or 99 percent.
Craig: And there are a lot of Spotify editorial playlists. You name ten of just the biggest folk lists in your report. And those, to be clear, are curated by human beings who work for Spotify and who are supposed to be informed tastemakers. They’re like the new A&R of the modern era. Is that fair?
Charles: I think that's a really accurate way to put it. But you also can't discount the fact that the algorithm plays a huge part in that stuff. So, you have a way to sort of impact or influence the algorithm based on how your music is reacting organically on the platform. There's the algorithms, the feeder playlists, and then the top-tier premiere playlists.
Craig: Spotify playlists have had a really important shake-up effect in country music in the past few years. Women and African American artists are seeing progress in their careers and reaching audiences via Spotify lists, where radio hasn’t given them a chance to compete. Why is that happening?
Jeremy: If you think about it, the cost to Spotify to putting an artist on a playlist is close to zero. If listeners don't like it, they'll skip it. It'll be gone in a couple of weeks if it's not doing something. The radio model depends on listenership and advertisers. And if listeners don't like what they're hearing on the radio, they'll turn it off, they'll change the station. The stations will lose listeners, they'll lose advertisers, etc. So, I think radio is less prone to take a risk and take chances. Spotify, and more generally, the DSPs, have more of an opportunity to take those chances on trying to bring some new artists to the forefront. And that's a big part of what playlists do.
Charles: Yeah, Billboard just had its year-end charts come out yesterday. The top 10 most played artists on Country FM radio were all men. One of those ten men is biracial. Everybody else is white. And what seems really strange to me is that country radio - hit country radio - doesn't think that's a problem, right? At Spotify, Apple Music, and everybody on those teams think it's a problem that aren't more women, that there aren't more people of color. And so, if you recognize there's a problem, you go and try to effect change. If you don't think there's a problem, you have zero motivation to change. So, there's a larger conversation there, I think around what that means for the country as a genre.
Craig: So as we arrive at a new year, what are the mega-trends you’re watching from the viewpoint of independent artists?
Jeremy: Maybe this is just because I'm generally an optimist, but for the most part, my independent artist clients have seen some kind of increase in streaming over the last year. Some are relatively stable, and for the most part, it's increased. And so, it's a long tail, and it's a long game. And I think that you have to settle in for a long-term strategy. There's a parallel to TV streaming. The consumption of streaming media is going to continue to go up. And I think there's real opportunity for independent artists with a strategy to make money.
Charles: I've been on a sort of evangelization mission this last couple of years. The place that is closest to my heart is with songwriters and publishers, because I moved to town as a songwriter. And one of the things we're trying to do is to get more songwriters and publishers to act as their own label, or their own master rights holder, because the ratio of ownership and the ratio of revenue is something like five to one. And so it's a lost opportunity, if you don't at least attempt something, and put it out on the services as a master rights holder. In terms of trends, I'm not the first to say this, TikTok is huge right now. It’s a relatively frictionless platform. And it's an incredible opportunity to build a fan base. And I know that there will be listeners to this presentation who are going to think oh, TikTok is not for me. And all I'll say is that are 85-year-old people on TikTok who have built huge audiences. And as a parallel thing, I think livestreaming is going to be the story of 2022. For a lot of people that I work with, being able to perform is their lifeblood. And using video platforms to perform live is a huge opportunity that everyone should look at.
Craig: Do you think in part that's because the industry got a crash course in having to livestream in 2020, and everybody learned a lot more about audio quality, performance capture all that stuff?
Charles: Yes, both of us work with a specific artist in Austin named Jackie Venson, who just dived headfirst into the whole thing. And she was top 10 in Pollstar in live streaming. And it completely changed her career, you know? What better way to connect with people that you can't be in the same room with? And really, do you want to drive from the East Coast to the West Coast for a $50 gig, when you can broadcast from your living room and maybe sell some merch alongside your performance, and even monetize that in some form?
Craig: All right, two more lightning round questions. In the realm of monetizing art, to me, the winner of 2020 and 2021 has been Bandcamp. They paid artists hundreds of millions. They built their brand and created conversation and dynamism. Should artists be on Bandcamp?
Jeremy: I think for an artist who has some sort of following, some critical mass of people who are dedicated, a platform like Bandcamp, and a strategy like Bandcamp - selling something to those people, and not just relying on that passive shelf space of streaming - can be a really viable strategy for making money. Because you may not be able to sell things to the more general market, because there are so many flowers in that field in which you're sitting. But to those people that are really dedicated to you. Yeah, they're going to buy that thing. And Bandcamp is a really good platform to do that.
Charles: Yeah, I think Bandcamp has been great. But I also think you have to be everywhere where your community exists, you know? Bandcamp is probably more for folks who have got physical merchandise that they can sell. While artists who maybe have blown up on TikTok, Bandcamp might not be a viable place for them, because they don't have capital up front to go create things that they can sell on Bandcamp. So for those folks, streaming live on any of the social platforms, putting out a tip jar or something like that is more viable. But you’ve got to be everywhere where you think your people are.
Craig: Great. And lately, vinyl. What's really up with the LP record boom?
Charles: It’s the biggest story of 2021, don’t you think? I kind of think so. Overall music consumption went up something like 7.4%. And in the first half of 2021, vinyl sales doubled, in the same period compared to last year. So I kind of feel like there's a huge opportunity in vinyl, if you can get it manufactured. Because most people are like 18 months behind. But yeah, it’s great.
Jeremy: I think there's something innate in human beings about a physical presence. I think there's actually kind of a parallel here to the livestreaming and the Zoom conferences that we've all had so many of in the last two years. We have these new technologies that add convenience, and immediacy. But then there's something different about being at a live show. And there's something different about holding that tangible physical vinyl record, or that book that's printed on paper. It's that same concept, and I think there's something innate about that. And I think that is something that's going to be much harder to replace, as technology changes over time. And I think that people actually will appreciate it more as we get deeper into these newer technologies.
