The Economics of Making Money as an Artist in the Digital World…

Whilst numerous self-titled “media futurists” and new digital music services alike proclaim that digital music sales are the future, the reality is a lot bleaker for the actual artists who have to make a living from music…

According to Billboard, for an artist to make money that would be equal to $1,160 per month an independent artist would require: 1,813 downloads per month on iTunes (this must define an independent artist as without a label, as generally an independent label would take 50% of the above figure and a major closer to 85% of that figure before the artists sees a cent).

Going further, this same artist with the aforementioned caveats, would require 3,392 downloads per month via eMusic as their main source of income. With streaming services, it becomes pretty much impossible to reach the $1,160 per month. It would take 127,473 streams per month on Rhapsody; or 7,733,333 plays per month on Last.fm. Yes you did hear that right! Please also remember that not all artists are solo artists as well (all figures taken from the cynical musician blog).

Sam Leith in the Guardian states that the “British Academy of Songwriters, Composers and Authors has complained that Spotify’s payments to songwriters are “tiny”, and that the way they are calculated is distressingly opaque”.

Clearly relying on streaming music services to earn money, as an artist is essentially at commercial suicide at this point in time. Obviously, this does raise numerous questions; the most important being, so how do artists (little own labels) make money in the 21st digital century? Going further, what’s in it for the actual digital music services that sell music to fans (as they make a fraction of what the labels make)?

The Guardian newspaper in the UK has also stated that a “spokesman for the body that collects songwriters’ royalties has boasted that it sets a minimum rate of 0.085p per stream. So, unless I mistake the arithmetic, a song played 1m times would net its author £850“. As such we as an industry and consumers need to decide whether that is ‘fair’ recompense for so many streams…

Despite many “futurists” proclaiming that purchasing music is outdated, demand for purchasing music is still high. The iTunes juggernaut easily reinforces this. So you may ask what’s holding back the onwards push to non-ownership of music? Quite simply it’s numerous factors. In TMVs view the critical factors though are; lack of interoperability and synchronization across different device and service types.

So as an artist where is that honey pot of money? According to a 2009 Country Music Association report of over 7,000 music consumers, 65% of Country Music fans between the ages of 18 – 54 were CD dominant. Reinforcing this is a 2008 Pew Internet study, which found that 82% of music consumers still want to purchase a CD as opposed to a digital download.

Subsequently, it seems clear to TMV that if you are an artist you should keep selling CDs. Regardless of the digital hype, consumers still want that physical product rather than a digital copy. As we all know its not that hard to convert the file on CD into whatever digital format your require for your digital music player. This is not to say that as a label or artist you ignore digital sales. As time moves forward digital will become more important.

Yet TMV do worry that if digital services like Rhapsody, Last.fm and the like are paying such low rates in terms of royalties, how will the greater recorded music industry survive as physical sales do continue to decline? Its clear these new digital services do not provide a viable source of income for labels or artists alike. One wonders how they manage to make a sustainable living for their own businesses as well…

According to PaidcontentUK, UK collection society PRS is reaching out to artists on myspace, apparently in a £100 per new member drive. But is it really worth it for the majority of artists on Myspace? We can all be pretty damn sure bugger all receive anywhere near the level of monthly track plays required to make the measly sum of $1160 per month. Even megastar artists will struggle in reaching the level of listens required on last.fm. This does not detract from the fact PRS provides a very important role in collecting publishing royalties owed to artists.

So how can artists make money in the digital age? Firstly start selling physical CDs at every show and sign them so they are special for the fans of your music. The margins are a lot higher, and your fans get a physical product they can cherish. CDs could be given away as a bonus with concert tickets (albeit for the up and coming DIY artist this would require concert promoter buy-in). Tickets. Physical CDs and merchandise should be bundled together in as many different combination’s as possible.

All in all, it is crystal clear many current digital models are not sustainable for labels or artists alike in their current form. If it’s an advertising funded model, quite simply brands need to be educated on the extra value that being associated with giving away music brings to their brand in consumer acquisition and loyalty. If the model is subscription it needs to be at the right price point and enable music fans the cross-devices interoperability they have so clearly
required. Above all user experience and portability across devices and services is key in TMVs view.

On a final note, tools that enable artist and labels alike to deal on a direct basis with their artist music fans are the tools that will help the industry navigate its current unchartered waters. There is definitely a market for music as a service, but coupled with its current small user base and non-viable levels of money coming through to artist and labels, TMV do believe it is 5 – 10 years off before it represents a serious threat to traditional al-la-carte models.

Related Posts:

When Commerce Eliminated Art… (The Story of the Music Industry)

The Impact of Messing up the Lyrics

EXCLUSIVE INTERVIEW – Independent Musician Jon Gomm

One Step Forwards or Two Steps Back?

Why Refusal to Engage is No Longer Acceptable

The Contents of Pandora’s Box = $$$$

Evaluating the New Business Models: Benefit or B.S.?

How Will We Listen to Music in 2020?

Related posts:

1. Black Box Income? The Digital Black Hole! So What Incentive Is There To Be An Artist Anymore?
2. Exclusive: TMV Analyse Report Examining Impact of Social Networks on Artist Income
3. Event Report – Billboard Music & Money Symposium (NYC)
4. The Key To Making Free Music Services Work
5. Show Me The Money

Posted by Jakomi Mathews on Apr 19 2010. Filed under Business Models, featured. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.