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Spotify is the largest subscription music streaming service which allows any artist to get their music in front of fans and new audiences. Music streaming is one of the many ways artists can earn royalties. This is money owed to an artist, writer or rights holder when their music is performed, downloaded or streamed. When a user on any of the streaming platforms (Spotify, Amazon Music, Apple Play, etc.) listens to your music, you earn money. Simple.

Well, let’s look into it a bit more and answer these 3 questions:

It’s time to uncover some of the mystery shrouding the illusive royalty payouts on Spotify…

How Spotify calculates your royalty split

In April 2020, Spotify set out to explain how royalties are split and why they vary from artist to artist, and around the world. Contrary to popular belief, Spotify doesn’t pay an artist a set amount every time their track is streamed. In fact, many of the major streaming services don’t have a pay-per-stream rate. Instead, Spotify works out a ‘stream share’.

Spotify makes money through subscription fees and advertising. From there it figures out the artist’s stream share. The stream share determines your cut of the revenue. To break it down, Spotify works out this stream share by tallying up the total number of streams on Spotify in any given month, in any given country, and figures out what proportion of those streams were people listening to your music. You are then paid royalties accordingly.

After Spotify calculates stream share, the money gets divided up in 2 ways:

Of course, Spotify also takes a cut to keep business booming.

How much can you expect to earn

Unfortunately, there isn’t a lot of conclusive data to explain exactly how much of the revenue split an individual artist will earn in 2020. Much of the data that is bandied around online is taken from prior years and repackaged. Furthermore, many of these studies haven’t considered the many variables that affect an individual artist’s experience of stream share.

Here are some figures from statista.com from the end of 2019:

Number of music streams needed for artists to earn the U.S.

monthly minimum wage in the United States in 2019

Spotify Graph

However, broadbandchoices.co.uk claims that in order to earn a bare minimum living off your music through streaming alone, you’re going to need millions of streams.

How to increase your streams

There are many ways you can take action to increase your music streams, and they all centre around promotion. Letting more people know about your music, sharing with others and getting eyes (and ears) on your music is the aim of the game.

Share on social media platforms

Make sure your social media platforms are up to date and you are engaging with your followers. When you have a new release, let all your fans across Facebook, Instagram, Twitter, YouTube, TikTok, etc. know about it and nudge them over to Spotify to check it out! If you’re having a lull in your content creation, re-share nostalgic tracks from when you started out, or links to your most popular anthems.

Submit your releases in advance of their release dates

Make sure you submit your releases well in advance of the release date. Spotify suggests submitting tracks at least 7 days in advance of their release date but be aware that distributors may have different systems set up to get your releases onto the platforms. Submitting tracks well in advance allows streaming services enough time to consider your tracks for playlists such as Spotify’s Release Radar.

Apply to be included in curated playlists

You can pitch your songs for Spotify’s playlists through Spotify for Artists as long as they are unreleased. High production value is one of many factors needed for playlist consideration.

Reach out to people with user playlists

User playlists can carry huge influence and there are a lot out there. Find playlists that carry the genre of music you create and ask to be considered for inclusion.

Paid promotion

Sometimes it costs money to make money. Look into social media ads and Spotify’s tailored audio ads to reach more people that could be your next greatest fans.

Sponsored recommendations

Spotify is currently testing a sponsored recommendations features which allows artists to pay to get their releases in front of users. According to techcrunch.com these ads are charged on a pay-per-click basis.

Embed your tracks into your website

If you have a website, make sure you embed the Spotify player and the Spotify follow button into your website. This gives website visitors an easy way to stream your songs and follow you as an artist.

Don’t rely solely on music streaming

Think of the money you make from streaming services as a piece of a much larger pie. In 2020, artists can make money from music in a multitude of ways. Even with some concern over the future of gigging and touring, we are seeing many artists finding creative ways to connect with their fans and continue to make money. Offer live online gigs with a donations pot via Paypal, create and sell special merchandise, and put out additional content on social media platforms or Patreon.

Where are we now?

In my previous blog, we examined the circumstances leading to the current state of play in the music industry and the growing divide between labels and self-releasing artists. In this follow up we reflect on the way major record labels reacted to the changing environment and the state of the marketplace now.

The major labels had previously enjoyed a monopoly of the market and displayed a certain amount of arrogance at the changing digital picture. They were caught by surprise and paid a huge price – job losses, shrinking departments (Guy Hands sacked the majority of EMI’s A&R department on acquiring EMI in 2007) and ultimately a need to focus on only signing the one artist that would break through as a mass selling commodity, rather than the ten they would have signed to find them in the past. Their reaction came in a shifted business model where they look to extract more revenue from the artists income to supplement the reduced revenue from sales. So was born the ‘360 Degree Deal’, better termed ‘The Multiple Rights Deal’.

In simple terms, the 360 Degree Deal ensures the label makes money from other activities undertaken by the artist traditionally sitting outside of the remit of the label. Labels used to sell recordings. Simple! The newer structure of deal sees labels take a share of live income and often publishing in return for the investment made. Some argue they are right to do so as the declining revenue from recorded music sales was not enough to recoup large marketing spend. And whilst the label invests in the recording, the artist used to enjoy increased ticket sales and publishing revenue as a result of that investment. As Anne Harrison puts it in ‘Music, The Business’:

A record label may say to an artist - in effect - 'We cannot make enough money just from selling your records to justify the level of advances, royalties and recording costs you want us to pay. We cannot invest the kind of marketing budget this record needs because we can't make enough money from record sales alone. So, if we are going to sign/extend your record deal we can only do so on the basis that we also get a share of the money you make from other activities”. (Harrison, 2017)

Harrison was involved in such deals from very early on, negotiating the (in)famous Robbie Williams multiple rights deal with EMI in 2002. She tells us that “The record company is usually looking for a share of income from things like the artist's... sponsorship and ticket sales and publishing income if it can get it“. Percentages of each area paid to the label vary massively from 10-20% up to as much as 50%. It is important to remember that a standard first record deal at a major label will see the artist on a 15% royalty rate (Harrison. 2017).   These deals are now standard fare at major labels and whilst they were heavily contested in their early days, they are now very often the only deals on offer and artists (as well as their managers who of course will see reduced income from commission as a result) have come to accept them.

However as the marketplace changes again, the argument that money cannot be made from the sale of recorded music by labels begins to feel increasingly harder to wear. Data on sales shows increased revenue coming to rights holders of recordings year on year now as they learn the new marketplace and how to work it. Furthermore, major labels dominate the playlists of Spotify and the other streaming sites. As we learned in the last blog, they are the rights holders who own 87% of the content on Spotify (Business of apps, 2020)

MIDA Report

Here is a little insight into how they manage it.

“Outside of the Spotify staff-curated playlists, those curated by Filtr, Digster and Topsify have more visibility on the Browse pages than any other playlisting brands, individuals or labels. With these playlists, employees of Filtr, Digster and Topsify can simply log in and add tracks… the majors effectively use these playlists to pump their artists into Spotify-owned algorithmic playlists.

Applying 360 Degree thinking to our own careers.

We can apply a similar kind of logic to our own careers. The labels’ logic was to replace declining recorded music revenue streams with multiple revenue streams. The numbers soon add up. As self-releasing artists we can do the same – we need to ensure our house is in order and the pennies that are available from ALL of our activity are being gathered in effectively. The secret now lies in the pence rather than the pounds.

Choose the right distributor.

Do your homework. Look at the rates per stream/download. Look at the hidden charges.  Think like a label not a self-releasing artist. There are so many things we can do to improve performance and revenue coming in from sales and streaming. Homework and research is essential to develop the best relationships with distributors that effectively maximise activity and subsequently, revenue.

What’s happening with your publishing?

Rather than just registering with PRS to collect royalties for your song exploitation, play a proactive role. Upload set lists, see where the activity is happening, analyse reports, understand what leads to revenue spikes. It is crucial that we monitor our song writing activity and understand the trends and revenue coming in to ensure potential is maximised.  If the time is right and the revenue is there you may attract a Music Publisher to get involved. Begin the conversations early – develop your networks in this area.

Neighbouring rights.

Are we collecting all revenue streams? There is income related to the exploitation of the recording as well as the song. Is our PPL registration up to date and functional? Think like a label. Who is collecting revenue from YouTube? Is our channel partnered? There are a growing number of high-quality organisations that will manage and collect neighbouring rights for us. Some distributors offer the service, so do some music publishers. Understand what is out there. Homework is key.

D2C

As mentioned in the previous blog – maximise D2C (direct to consumer) sales to ensure profit is maximised. The simple equation to understand here is the following:

CWF + RTB = £

Connect with Fans + Reason to Buy = Revenue

Give the fans interesting things to buy, treat them well, allow them to spend as little as they want – but also as much as they want. The true fan will buy everything you offer. Simply put; if you don’t offer it, they can’t buy it!

Anything else?

There are a growing number of revenue streams developing in the digital world. Which ones work for you and are you exploiting them fully? To name but a few; subscription platforms, teaching platforms, sync agencies, etc . Understand your brand and what avenues will work for you.

At the time of writing we are in the depths of COVID-19 lockdown. The live scene has changed forever… we just don’t know quite how yet. It has the potential to place the DIY artist in a powerful position, so watch this space.

You have written the hit and with it you have spent countless hours in the studio tweaking and polishing. You ask yourself; what happens next? How do I get my music to fans and a larger audience? The answer – you need a digital distributor to get your music out there.

In the traditional music industry, distribution was an important function for a record label. The label needed to supply key  retailers with physical product. Fast-forward to 2019 the process still exists. However, it is being outmoded by digital distribution companies. This is an exciting time for independents and DIY artists. As testament to this, major artists such as Billie Eilish and Lil Nas X have broken to massive audiences largely due to DIY efforts.

The label’s power as a gatekeeper is fading. The power to release music to the masses is yours. In a sense, you don’t have to wait for the music industry to offer you a contract; you are your own music industry.

In addition, there are a multitude of things you can do to promote a release. A six-week PR campaign, photoshoots, music videos, creating social media content or all of this activity. However, there is one thing that needs to be at the centre of your strategy; the distribution of your art.

In the age of option paralysis, who do you pick to distribute digitised audio to fans? Who can do this safely and with care? Who will release your music to Spotify, and the big music stores? Never fear, the team at WaterBear wants to give you five recommendations that are up to the task!

AWAL

AWAL are one of the first distributors to offer label services alongside distribution. Over the years the platform has become choosier about the artists that can join the roster.

Reasons to join.

Enhanced data analytics - see where your music is being played and market to it.

A&R functions and capacity - gain industry attention and opportunities if your music does well.

Potential difficulties.

It can be hard to join their network if you are just starting out.

A 15% take of revenue can work out pricey for some artists.

Ditto Music

Ditto music distributes your music to the biggest music stores such as Spotify and Amazon. They offer optional extras such as chart registration, pre-release and Vevo distribution.

Reasons to join.

Unlimited distribution to digital service providers (DSP) with cross platform analytics.

Keep 100% of your Royalties.

Potential difficulties.

 Yearly fee (£19) might turn some people off.

Landr

Originally offering online mastering services to artists., Landr has now branched out into the distribution game. Another strong competitor that offers the usual menu - access to leading DSP’s but with the addition of mastering your tracks via their app.

Reasons to join.

Built in quality mastering service.

Distribution to a network of music stores.

Potential difficulties.

It can work out quite expensive if you are using the Pro plan and not uploading a lot of music.

Spinnup Music

Set up in 2013 and part of the Universal group, Spinnup Music offers music distribution and the potential to be scouted by Universal Music. It offers release to all major players; and comes with a great analytics suite priced at a competitive rate.

Reasons to join.

Potential to be headhunted by Universal Music.

Full suite of release tools to break your tracks.

Potential difficulties.

Although competitively priced, the more you release the more you are charged. There could be cheaper alternatives.

FUGA

Fuga are an innovative artist/label service provider. They work with large labels who are making at least £750 per month from their recorded music revenue. They offer the largest network of music stores to release to including niche stores.

Reasons to join.

Large network of distribution to music stores.

Advanced analytics aimed at understanding micro shifts in your business.

Potential difficulties.

Not suitable for an artist starting out. However, one to aim for if you are serious about making money from recorded music.

I hope that makes your journey through distribution a little easier and thanks for reading. If you are interested in learning more and are serious about progressing in your career as a musician, please join us at WaterBear HQ for an Open Day or Order a Prospectus.

 

 

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