As reported on Bloomberg, musical artists can expect yet another decrease to their already razor-thin slice of music revenues.   Apple is leading the way to a lower overall revenue share for labels (and therefore artists) from music streaming services as it pushes for its own burgeoning streaming service to lower its payments to labels.  As we know, less money for labels means less money for artists–especially emerging ones still finding their sound and audience.  While Apple Music and the other streaming services are a real source of revenue for the music industry and are responsible for the recent uptick in overall industry revenues, they simply do not represent anything even close to a relevant amount of money for the vast majority of artists out there.

Building on Past Wrongs

As we transition to an entirely subscription-based music distribution system, artists more and more depend on laws created for copyright and performance royalties in the era of radio.  The problem is that these royalties are already below where they should be historically.  Radio publishing rates were initially negotiated at a reduced level because, the radio stations argued, they provided valuable promotion for artists’ records.  The artists would more than recoup the amount lost in these reduced royalties from increased record sales.  Streaming royalties were based in these reduced radio rates, yet streaming is an end-point for consumption and result in no additional revenues.   Bottom line: streaming royalties were based on obsolete, grandfathered rules which already shortchanged the artist.

Adding New Wrongs

As music streaming services are already the beneficiary of artificially low publishing and performance royalties they and at the same time are also seeking a reduction of the amounts paid for the use of the actual recordings.  For most popular artists the ownership of the actual master recordings (a specific version of a specific song by a specific artist) is held by the record label which financed the original recording.  These are “master rights”.  The income from master rights is the major source of income for record labels, though that is changing as labels pursue comprehensive deals.  Problem is, there are no real replacements for record sales, nothing else stepped in to fill the gap and only by taking a larger slice of the artists’ pie can labels justify signing and producing new artists.  Keep in mind most record deals these days do  not even allow artists to quit their day jobs.  Any hits to record labels equate to a hit to artists.  As much as we love to blame the blame the man and stick to large corporations it is important to note the labels have been working on thin margins for years now and the there really is not much more they can give up and still stay in the business of making music. As streaming companies like Apple seek to reduce amounts paid to record labels they add additional stress to the finances of the already put-upon artist and the label system that supports many of them.

Who should fix this?

Apple especially has built its success on the backs of musicians.  With a virtual monopoly on digital distribution with the iTunes store they forced a de-bundling of songs and a lower price onto the overall distribution landscape.  Labels have been negligent in their handling of the digitization of music and the infighting which held back blanket ISP deals was truly a low point.  Rights organizations have been interested in only their own piece of the pie and have been slow facilitate digital reform. Musicians have been slow to raise the alarm with anything close to a unified voice for fear of seeming greedy or supportive of the corporate status quo.  Streamers such as YouTube have been happy to sell truly breathtakingly creative musical content at bargain basement ad prices alongside novelty videos.  The public has been more than happy to get their music where they can consume at the lowest possible cost, without considering the long-term effects on the creatives that make music.  So as we are all at fault, we should all fix this.  The public is already stepping up in the crowdfunding world, labels are becoming better partners to each other as well as artists and streaming is a step forward to a promising new distribution model.

Just please don’t squeeze the artists further.  The power of corporate dollar should be put to use powering creativity, not burdening it.  Brands like Ford, Red Bull, Converse, American Express, Chase and many others are already actively supporting artists and music.  Let’s all join this new renaissance and finally put artists on the solid footing they need.


Krish Sharma

CEO and Founder