Eyebrows rose throughout the music industry late last month when it was widely reported that Apple was renegotiating its deals with major record labels for its subscription-based streaming service, “Apple Music”. Those renegotiations centered on Apple’s desire to reduce the per-stream revenue percentages it pays to the labels as compensation.
When Apple first began its subscription-based music service in 2015, it was the new kid on the block in a neighborhood where Spotify was the 300-pound bully. So in order to compete with Spotify and entice labels to join the service, Apple offered a 58 percent split to the majors – which represented a small but substantial premium over Spotify’s 52 percent split. And reports from Bloomberg and the Washington Post — gathered from unnamed industry sources — suggest that Apple’s current renegotiations seek to reduce the label split closer to that 52 percent mark.
So what is at stake here for the actual artists? Well, it may not mean much. The artist’s split is usually only a percentage of the 52 percent Apple is looking to pay. And unless an artist’s music is a runaway success or getting premium, curated playlist placement, one’s streaming revenue is going to be miniscule – we’re talking thousandths of a cent per stream.
Joe Stanziola, a local rapper who performs and records as Second Hand King, hustles as much as any artist in the game, but still finds it difficult to reach that hobby/career tipping point.
“I’m on every single streaming site through TuneCore. And after four years of digital distribution, I’ve amassed $4 a month off streaming sales. And I worked my ass off to get that,” Stanziola said. “It’s not easy. I have to clock into my day job at 3 p.m. today. And every time I do that, I’m very aware that I’m not making enough money to live off my dream.”
So six points may not mean much to artists. But it will definitely make a difference for labels. And if six points seemed like a lot in 2015, by 2017 standards it’s enormous.
The Recording Industry Association of America’s 2016 end of the year report revealed that streaming generated more revenue than any other format. That made 2016 the first time in the history of the RIAA’s metrics that a physical format, like CDs, did not hold the top spot. In fact, streaming grew by a whopping 68.5 percent from 2015 to 2016, and ultimately generated more revenue last year than all physical formats and digital downloads combined.
Streaming generates more revenue for artists than downloads, physical formats (CDs, vinyls, etc) and synchronization (movie or television play) combined.
With the original deals inked between Apple and the major label set to expire at the end of June — two years after they were originally signed — the timing of Apple’s efforts to increase their own share of streaming revenue makes sense. Bloomberg reported that the original terms were likely to be extended if a new deal was not reached before expiration, and they presumably have.
The word throughout the industry is that the majors intend to work with Apple on a split reduction, provided Apple can continue growing its subscriber numbers. As it stands, Spotify is still the de facto streaming king, boasting more than 50 million subscribers, compared to Apple’s paltry 27 million.
Considering the trend toward streaming and the lack of income it generates for artists, why would an artist want to put their music on the services in the first place? Despite the potential shortcomings, Mac Lethal, one of our city’s most successful artists, sees a net monetary and creative benefit for artists in streaming services.
“I’d argue that in 2017, you’d make less money as an artist who doesn’t put their music on streaming services. Taylor Swift keeping her music off of Spotify helped her sell more records a couple of years ago, but in the scope of today’s industry, that was an eternity ago,” Lethal said, “I’d argue she couldn’t even do that now and be as successful. Selling albums is becoming a thing of the past, at least in terms of trying to do it to make huge financial gains. It’s the nature of technology. It makes things that need to be obsolete, obsolete, and puts the spotlight on the new ways we’re meant to evolve.”
Lethal has found many nontraditional outlets to monetize his talents, including a cadre of viral YouTube videos. But videos and traditional music sales aren’t the only options for monetizing recorded tracks. KC’s Yes You Are, who is currently in L.A. recording tracks for its first full length, struck licensing gold last year, when the track “HGX” was featured in the film “Bad Moms” and a Pepsi commercial that aired during the Super Bowl.
However, Jared White, guitarist/vocalist for the band, is trying not to put the cart before the horse when it comes to streaming.
“I’ve always looked at any revenue that came our way through streaming as a bonus. As far as making a living in music, we’ve been doing just fine with licensing our songs,” White said. “But for where we’re at now with our career, I just haven’t focused on anything but making the best recordings possible. You’ve got to make recordings that people want to hear – want to stream – before you can worry about being compensated.”
— Dan Calderon is Kansas City native, an attorney, and contributor to Flatland. You can contact him by emailing email@example.com, or on Twitter @dansascity.