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September 01, 2018
“My Main Goal in Life Was to Have an Annual Salary Under $14,000”*: Technology and Changes to Musician Income Streams
Examining the changes to how musicians have made their money over the years.
by Harry Walton
It’s hard to make it in music. More interestingly, it might be becoming harder via traditional routes. As any musician knows, the early years of being in a band are akin to being a poorly received traveling salesman: you spend most of your time on the road or working odd jobs while begging people to buy your stuff and come to your shows. The end result of this effort is a paltry amount of money, and a varying set of experiences. On the other end of the scale, Taylor Swift made $170 million in 2016. The scales are a bit unbalanced, but is this different from any other era? The trope of the “starving artist” is about as old as they come, and I reckon a rock-n-roll boy from the 1960s had similar complaints to current day garage-rock folk. The major change of the last 20 years is the advent of the internet, which has fundamentally altered the relationship, and payout, between artists and listener. The easy distribution and production of music has made it better to be a music-consumer or a high-profile musician, while it adds costs to early-career musicians.
Since the advent of the internet, the music industry has hemorrhaged money, but there are signs of stabilization in recent years. Revenue has held at around $7 billion annually since 2010, but that’s a fraction of the revenue brought in as recently as 2006 (almost $12 billion). Technology has proved both the detractor and savior of the music industry. The birth and growth of streaming was a powerful tool for thwarting piracy, but remains nowhere near as profitable as traditional CD or cassette sales. Imagine an average album of 10 songs, priced around $10 in CD format: each hypothetical album sale generates $1 per song. Contrast that with streaming: Billboard estimates that a song generates $0.00506 per play. The loss of a single CD sale would require the album to be streamed 197 times to compensate. That’s an enormous number of streams, challenging for any artist early on in their career to achieve.
Spotify premium costs $10 a month. That means for the approximate price of an album a consumer can listen to as much music as they desire. And because Spotify is a fixed input cost, there is no additional payment for each song consumed. The upper limit on your music consumption becomes however much music you want to hear, which is a significant discount to people who consume a lot of music. Streaming also increases the variety of artists one consumer can reach. Purchasing an entire album has what’s known as an opportunity cost; spending money on an album means you cannot use that same money to purchase a different album. Opportunity cost limits the number of artists you can hear. With a streaming service the opportunity cost is gone, so a consumer switching to a streaming format experiences the greatest savings if they have a varied taste in music. While a new artist might be making up to 1/200th of their former revenue, consumers translate this into hefty savings.
Declining music industry profits haven’t tripped Drake into a panic, or sent Taylor Swift into overtime, because high-end musicians are virtually unaffected by streaming. Not to misrepresent the facts: Drake and T-Swift have absolutely lost money from the switch to streaming, it just doesn’t matter as much if they still pull in millions of dollars. Think about it like this: the jump from earning $20,000 to $40,000 a year matters far more than jumping from $2,000,000 to $4,000,000 because groceries and rent define your ability to live more than the third yacht or penthouse. While a new artist might really need the extra money from album sales, the lost income doesn’t affect high profile musicians nearly as much. Streaming could even help the most well-known musicians through partnerships and sponsorships.
“The birth and growth of streaming was a powerful tool for thwarting piracy, but remains nowhere near as profitable as traditional CD or cassette sales.”
Streaming has not been an exclusively negative force for early career artists. They can increase the breadth of people that their music reaches, and streaming drops the cost of producing CDs and physical mediums to zero. It’s never been easier to make an album and put it out for all of the world to hear. But this ease of entry could also be increasing the number of artists, growing the competition. I think a valid argument could be made that streaming encourages consumers to listen to more artists. But I don’t think that this argument addresses if consumers tend to fixate on a few artists they enjoy and ignore the rest. Consumers might take the entire world of music granted to them and still only stream and listen to the same ten artists. Recorded music has clearly slumped a bit in revenue terms, but has live-music picked up the slack?
Maybe. In a couple of articles from 2014, Jack Conte of the band Pamplemousse, and Santos Montano, drummer for Old Man Gloom, debate the effectiveness of touring as an income stream. Mr. Conte describes his experience of a recent tour, citing the enormous number of personnel and space involved in creating a successful touring experience as reasons that the tour ended with his band making a net loss. In response Mr. Montano points out that Pamplemousse might be overpaying for their touring equipment and staff. Mr. Montano focuses on the experience of his band’s tours, and says that they usually make a healthy profit by doing much of the administrative work themselves.
From personal experience, and talking with other local musicians, shows can be pretty hit-and-miss. Payout is venue dependent, and it is both physically and financially strenuous to go out and play regularly. The rewards are obvious: playing your music is the best form of advertisement and the only way to get consumers interested when you’re starting out. I’m not sure I could definitively say touring in 2018 is more difficult than earlier eras, because the internet makes finding gigs and setting up tours far easier. However, lowering the cost of becoming a touring musician also means that more people can enter the industry, so clearing yourself above the competition is harder.
With the advent of streaming (and the internet in general), recorded music has lost any viability of providing steady income for early-career artists. Merchandising and brand recognition are more important (and lucrative) with internet distribution networks. Competition has increased as the old gatekeepers to creating and distributing music have fallen away. With some admitted bias, I don’t think it would be an awful idea for streams to pay more to musicians. Currently the bridge to financial stability via music is rickety, and a small slip can be a plummet in a world that cares about prior job experience. Giving startup musicians help could encourage them to stick with it during the tough early years. But ultimately, I’m not sure if the change in payout will fundamentally alter the dynamic between musicians and their work. As Mr. Montano alluded to in his article, you don’t really get into music to grind a stable 9-5 income. You get into music because you love it.