The (Music) Game Hasn't Changed: On Music Streaming & RIAA Certifications
Streaming services are revolutionizing the music industry.
In an industry that's been plagued by piracy due to many sites offering illegal downloads of copyrighted materials, streaming sites like Spotify, Pandora, Tidal, Apple Music and more have helped labels gain some of their money back by providing this service. But, I've always questioned how these labels earned their money via streams and how that money is divided before the artist(s) receives his/her/their money. This question came even more in mind once the Recording Industry Association of America, or RIAA, changed its 50+ year rule for gold and platinum certifications by including music streaming.
For those that aren't familiar, the RIAA is an organization focused on protecting the financial rights and creativity of record labels and their artists. They work to stop piracy and infringement, provide the "parental advisory" labels, and categorize album successes based on their sales through certifications. The new certification standard for gold and platinum song and album sales have started to include music streaming. The RIAA changed this by counting one song sale per 150 song streams and one album sale per 1,500 song streams (or 10 songs).
Streaming services are profiting a lot from paying subscribers and advertisements. But, it's safe to say that most of that money is going in the pockets of everyone but the artist. Based on an infographic from Information is Beautiful last updated in October 2015, the streaming services are paying less than one penny for each song stream. The infographic also compares the amount of times an artist's music would need to be streamed on each service for an artist to make the federal monthly minimum wage, which is $1,260, solely based off of a streaming platform. Based on the service's usership multiplied by the amount of money each service pays back to the artist, an artist could make around $1500 a month from YouTube by having 5 million of its 1 billion users stream the artist's music once per month -- from 3/10 of a penny per play. If you'd like, look at the infographic and then do the math. Crazy, right?
I see a different explanation, however, for artist payment from Spotify that shows that the artist isn't paid a set price per stream. The artist's royalties come from a combination of things given in an equation, which I will try to explain. Each month, Spotify calculates its revenue based on paid subscribers and multiplies it by the amount of people streaming the artist. Then, they divide that total by the amount of overall streams on the platform, multiplied by the average percentage of the music's publishing rights rewarded (which is around 70%). Finally, Spotify multiplies that total by the artist's royalty rate from the record label (which is set in the artist's record contract) to get the artist's monthly streaming revenue. I won't break down the math here, but as you can see, there's a lot involved in calculating this total. Based on the royalties paid out to the publishing owners, it seems that Spotify only makes around 30% of its streaming revenue, that these royalty rates are pretty ridiculous, and an artist doesn't make much money if they don't own his/her publishing.
When I first heard the RIAA news, I was extremely excited for some of the artists whose songs and album certifications went from gold to platinum. But, arguments popped up on my timeline against it. Then, I became a little upset because it made me think more about the artists and how this doesn't really change anything for them. Other than a change in their certification, what does it do to fix a pretty serious problem for creatives, like receiving money for their music? I truly believe that with the RIAA's changes and the serious rise of music streaming usage that artists aren't making much money from sales than they were making before.
If labels are already taking out so many things from the top of an artist's royalties in sales (like packaging and "free goodies" costs) mentioned here, then I'm sure that labels are taking various things from the top in streaming revenues. On top of that, the RIAA changes can add the icing on the cake in encouraging people not to buy albums because listeners can listen to millions of songs for free with ads -- or ad free for the amount of an iTunes album purchase per month as a paid subscriber -- if you have access to the Internet. Let's also think about illegal downloading. The RIAA's goal in counting streams seems to be that it's rewarding streaming services for promoting anti-piracy, but will this help anti-piracy efforts? Will illegal downloaders really care about these RIAA changes? I highly doubt it. If someone wants to "own"/download music for free, they're going to find a way to do it.
There are a few more questions that may arise from this situation. In the certification changes that occurred, only a few artists' standings changed. I wonder why that happened and if other artists will see their statuses change too. I also question why the RIAA counts only 10 songs, or 1500 streams, as one album compared to 12 to 15 songs (or 1800 to 2250 streams). It's also worth it to question whether the price of an album calculated by the RIAA is accurate as well. It could be based on the price of most physical copies (which consumers don't buy many of anymore), but is that appropriate? Finally, which streaming services are they counting for the certification standings? Is it only the major ones or all of them? How will they retrieve all of that information?
All of this is to say that outside of an artist receiving accolades for their successful sales, there are a lot of questions that need answers and issues to consider when thinking about this change. My hope is that the RIAA does more to protect the artist from the labels, instead of the industry as a whole against piracy and copyright infringement. The former is a liiittle bit more important than the latter.