Spotify Payouts, YouTube Users: The Music Business's Biggest Myths - Rolling Stone
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The Three Biggest Myths Deluding the Modern Music Business

From Spotify payouts to YouTube’s global user base, the music industry is rife with misinformation. Let’s set the record straight

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Music streaming isn’t just a big part of the record business: It basically is the record business. According to RIAA data, streaming services like Spotify, Apple Music, Amazon Music, and YouTube contributed 85% of all record industry revenue in the United States in the first six months of last year, up from 80% in the same period of 2019, and they’re on track to be an even bigger presence in the future.

But amid this boom, stubborn myths and misinformation persist across the music industry — from the DIY bedroom artist all the way up to powerful industry executives. Some of these myths are driven by optimism and excitement; others are driven by skepticism and anger. All of them are plain wrong. Here are three of the biggest misconceptions right now, plus the information you require to burst their bubbles next time someone mentions them in earshot.

1. “This is the most lucrative time for the record industry ever, thanks to streaming.”

Nope. According to global trade body IFPI, the global recorded music business generated $20.2 billion over the course of 2019. (2020’s numbers will come out later this year.) That was the largest official annual global revenue tally for artists and record labels since 2004, when the global record industry generated $20.3 billion. But prior to 2004, this figure was even higher: in 2003 it hit $20.4 billion; in 2002 it hit $21.9 billion; in the CD-era heyday of 2001 it hit $23.4 billion.

Where the “most lucrative” myth really crumbles is when inflation is invited to the party. For example, in 2005, the global recorded music business generated $19.8 billion in trade revenues, according to IFPI data. This may seem a lesser sum than 2019’s $20.2 billion — but when you apply retrospective inflation and convert the 2005 figure to 2019 dollars, the total rises to $25.92 billion.

In fact, with inflation factored in, the $20.2 billion generated in 2019 was only the global record industry’s largest revenue haul since 2007, when it generated $18.0 billion in real terms, but $22.19 billion adjusted for inflation. 2007 was the year before Spotify launched in Europe. Ergo, over the past decade, the record industry has so far failed to outgrow the size it was before Spotify arrived on the scene.

2. “No new artists are making real money from streaming.”

Patently false.

Last year, Spotify confirmed it has 43,000 artists amongst its “top tier” earners, who get 90% of the plays on the service. Under Spotify’s “one big pot” business model, those 90% of plays roughly translate into 90% of Spotify’s royalty payouts, meaning those 43,000 artists would have generated around $3.0 billion together in the first nine months of 2020. That’s a per-head payout average of approximately $69,000 during this nine month period, or close to $100,000 for the full year. (These calculations are based on the fact that Spotify’s total revenue stood at USD $6.36 billion in January-September 2020, and that it has previously negotiated agreements to pay a 52% share of revenue to major record labels and artists. For the sake of this exercise, we are not factoring in the 10% to 15% cut of revenue that Spotify pays out to songwriters and music publishers.)

What’s crucial here is that Spotify’s “top tier” number keeps growing in size. Spotify said last year that the 43,000 figure was up 43% from the size of its “top tier” in June 2019, when it only counted 30,000 members. If we see a similar percentage rise this year, there will be over 60,000 artists earning “top tier” money from Spotify by this summer.

The growth rate of the “top tier” suggests that, by 2023, over 100,000 artists will be sharing 90% of Spotify’s payouts. Generally speaking, that’s enough money to enjoy a comfortable living. (Quite how much of this money said artists are then contractually obliged to share with their record labels is another matter. For some, unrecouped on their record deals, it will be 100%.)

But then why, if more and more artists are making a living from streaming each year, does it feel like the overwhelming majority of musicians out there are furious about their pay from Spotify?

The answer to that question may lie in a recent submission from Spotify’s ex-Chief of Economics, Will Page, to a UK Parliamentary inquiry. Page noted that UK royalty collection society PRS For Music saw its artist/songwriter membership more than double in the decade from 2009 to 2019, up 145%. Page observed: “One of the perverse outcomes of this ‘long-tail’ growth is that if there are more voices expressing concerns about the economics of streaming, it is because there are more artists and songwriters participating in the market than ever before.”

In short, no matter how many of streaming’s “winners” we see, they remain the 1% elites — because there are ever-increasing millions of artists operating outside of their coterie.

3. “Spotify is the world’s biggest music-streaming platform.”

This one’s more of a technicality, but it’s still a pervasive error. Spotify is the world’s biggest music streaming platform in terms of paying subscribers. As of the end of September 2020, the service had 144 million Premium subscribers worldwide. According to Midia Research, Spotify claims a 32% market share of total worldwide music streaming subscribers, nearly double the share of nearest rival Apple Music (18%).

Spotify, thanks to its near-unique freemium model, also seems to have the most monthly active users (MAUs) worldwide of any audio-streaming service. In September 2020, it counted a whopping 320 million MAUs around the globe, a figure that was up 29% year-on-year.

And yet calling Spotify “the world’s biggest music streaming platform” isn’t accurate for a couple of reasons. First, it depends on the metric you’re talking about. In Spotify’s most recent investor updates, it’s talked of its music library exceeding 70 million tracks — but that pales in comparison to the amount of music available on rival SoundCloud, which confirmed in November 2020 that it plays host to over 250 million recordings. By size of catalog, SoundCloud is unquestionably the bigger platform.

And if we’re looking at MAUs, Spotify’s 320 million is dwarfed by the number boasted by video-and-audio streaming platform YouTube. In November, YouTube announced that some 2 billion logged-in YouTube users were playing at least one music track on the service each month — a.k.a. one-fourth of the entire world.

Despite this gulf in user popularity, Spotify still pays out significantly more money to record labels and artists than YouTube, and influential quarters of the music industry remain unhappy about the amount of cash they see from the video service versus the avalanche of music consumption it hosts. However, YouTube, whose subscription app YouTube Music has over 30 million subscribers globally, offers a robust retort to this accusation: The platform wrote in a UK Parliamentary submission earlier this month that “labels agree it is possible we will become the music industry’s number one source of revenue by 2025.”

Tim Ingham is the founder and publisher of Music Business Worldwide, which has serviced the global industry with news, analysis, and jobs since 2015. He writes a weekly column for Rolling Stone.

 

In This Article: music industry, music streaming

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