How does the internet result in less profit for musicians/recording artists?

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Ghost91
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12:53p, 4/27/16
I've randomly come across several articles recently that stated that one bad thing about the internet is that it has drastically reduced potential income for recording artists, which is going to eventually result in fewer of them going into a music career, etc. etc.

I don't understand how this works. Okay, I get that more artists can now release their music via social media or whatever, but still - won't the really good ones still get picked up by the big labels and paid millions for recording rights, etc.?
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SeattleAgJr
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12:55p, 4/27/16
Music is easily downloaded (Usenet, torrentz, various file shares).

You can download ANY album, many times even before formally released, and never have to pay a penny for it.
Most songs seem to also find their way to YouTube. Never have to pay for a song.

Edit to add: It results in less REVENUE, not necessarily profit.

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Ghost91
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1:19p, 4/27/16
Thanks, I guess that makes sense.

I'm probably revealing that I'm an old, but wouldn't the quality be crap compared to a legit commercial release? I guess I'm comparing this to bootleg movies where the picture quality is poor and you have things like the little digital counter in one of the corners of the screen. I can't imagine that one of those music downloading sites you listed has the crystal-clear, 'studio' version, do they? How?
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jabberwalkie09
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In reply to Ghost91 • 1:22p, 4/27/16
AG
Someone may correct me on this, but I'm pretty sure that most if not all music is recorded digitally now so there isn't really any degradation or at all really.
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MGS
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1:23p, 4/27/16
Because people no longer pay $15 for a cd with one good song and a bunch of filler. They just get the song they want for $1.29.
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Bruce Almighty
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1:24p, 4/27/16
AG
Young people today do not care about sound quality. Kids today would rather watch a bootleg copy of a movie on their laptop then go to a theater and see a much better version.
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Professor Frick
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1:30p, 4/27/16
AG
Our ability to discern quality differences between sound sources and movies are completely different though; anyone can tell the difference between a grainy low res image on a small screen compared to hi def or film on a big screen, but most people won't be able to tell the quality difference between an MP3 and a lossless file.
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Whos Juan
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In reply to Ghost91 • 1:31p, 4/27/16
AG
quote:
I don't understand how this works. Okay, I get that more artists can now release their music via social media or whatever, but still - won't the really good ones still get picked up by the big labels and paid millions for recording rights, etc.?


That's not remotely close to how labels pay their artists.

Record labels advance a set dollar amount to artists to record their album, often with many restrictions in place (what studio they can record at, which producers they can work with, etc). It is then up to the artists to deliver a mixed and mastered album, again with label oversight, at or under the amount of the advance. This usually means the artists not only have to finance the recording expenses, but their own living expenses with this money.

Once the album is delivered, the label spends money on promotion, touring, and manufacturing costs for the album.

Contacts start to vary at this point.

Artists are paid a percentage of the net profits of the album. For example, Band A gets 25% of each record's profit. If the labels sells 10,000 cd's and nets a profit of $30,000 after manufacturing and promotion costs, then Band A gets $7500 to split amongst the band members. That is, after they pay their management, agent and whoever else is on their payroll.

Oh, did I say $7500? I meant the band gets paid nothing!

They haven't recouped the advance the record label gave them in the beginning, so they owe their entire cut to the label until that's paid off.

Let's say Band A gets an advance of $200,000. With their 25% cut of each record's net profit of $3 per, Band A wouldn't even be in the black until after they've sold over a quarter million records.

It's easy to understand why so many artists choose to go independent, though if you cut off their revenue stream by just listening to YouTube or even internet radio, then it makes things just that much tougher for them to turn a profit.

It's not just up and coming bands getting hit either. Plenty of big names have been touring more and more and releasing less new material. That's just how the business model has changed in the last 10-15 years.
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Ghost91
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2:06p, 4/27/16
Very interesting, Who's Juan - thanks.

And I totally get the "paying $1.29 instead of buying a whole $15 CD". Although I still prefer to have the whole album, cover art, 'digital booklet' in most cases, etc.

But the $1.29 deal sounds like iTunes. How do these 'underground' streaming sites or whatever they're called get ahold of the music in the first place before they can turn around and "share" it away for free?
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Professor Frick
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2:11p, 4/27/16
AG
Once an album's out, it's obviously as easy as copying it and uploading.

As far as leaks go, there was a fascinating and very long article someone posted here a while back profiling a guy who worked at one of the very few CD manufacturing plants in the US, who had a whole convoluted system of stealing physical CDs that were still months from release and selling copies on the streets.

http://www.newyorker.com/magazine/2015/04/27/the-man-who-broke-the-music-business
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mhayden
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In reply to Ghost91 • 2:12p, 4/27/16
quote:
Very interesting, Who's Juan - thanks.

And I totally get the "paying $1.29 instead of buying a whole $15 CD". Although I still prefer to have the whole album, cover art, 'digital booklet' in most cases, etc.

But the $1.29 deal sounds like iTunes. How do these 'underground' streaming sites or whatever they're called get ahold of the music in the first place before they can turn around and "share" it away for free?

One person buys it and rips it and then, depending on the sophistication of the person/groups, it goes through a method of distribution.

Back in my day there were multiple groups that all competed for "0-day" releases. Basically who could be the quickest to get pirated material out there. Never really sure if these groups make significant money or if it's just a adrenaline/pride thing.
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AggieOO
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2:42p, 4/27/16
the above article is interesting (read it a while back), as he was able to sustain it for a long period of time, but music is easily leaked prior to it getting to a manufacturing plant.

In the early 2000s, I interned under the VP of A&R at MCA records in NYC. The stuff that came across my desk was straight from the studio and/or mastering studio. I still have mastered versions of albums that came right out of Sterling Sound, WAY before those track listings were even finalized in some cases. In that summer alone, I could have leaked at least 6 albums probably 4-6 months before their release. I didn't, but there are a lot of shady people out there.

Things are obviously more digital now than they were back then (i was handling a lot of cds), but interns still have access to a lot of stuff if you are working in the right department.
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WestAustinAg
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In reply to MGS • 3:15p, 4/27/16
AG
quote:
Because people no longer pay $15 for a cd with one good song and a bunch of filler. They just get the song they want for $1.29.
I'm not buying the whole argument yet. Let's look at the market from a 20,000 foot level. Two points; 1) he pool of global consumers still have more expendable money now than they use to and 2) they still likely spend as much of their money on a % of their income on music in all forms as they once did.

Music isn't out of favor...it's likely more in favor since its better marketed now.

So if you were to add up all the revenue generated by the downloading of music, the streaming of music, concert revenue and the buying of albums I would think that as % of global GDP it's likely the same or higher (as more countries have GDP that supports entertainment) than its ever been. Again because of an increase in global wealth and the increase in hand held devices that allow us to buy and listen to music at the touch of a button. The world wide market for smart phones is 3 billion. That's more than all the radios in the world in the 80's.

And the revenue is probably more widely distributed to bands/performers (more egalitarian) than it ever has as we can buy music from tiny recording companies, can hear about music from the downloading apps or sirius/xm. We can also buy music directly from a small garage band directly.

As for illegal downloading I doubt it is as big as it was even 10 years ago on a per share basis. Illegal copyrighted music has always been with us. In the 70's radio DJ's used to give out free unsellable albums all the time. And techy consumers used to record albums onto cassettes and other systems. It seems to me that after enormous growth in the illegal trade in the 90's and 00's it's probably shrunk its share of the industry over 10 years as countries have done more to fight the downloading sites.
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AggieOO
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In reply to WestAustinAg • 3:34p, 4/27/16
you have to take into account streaming music services, which pay little to nothing to the artists. Spotify is one of the biggest culprits. Then look at how many people listen to full albums on youtube, which tries to police copyrights a block the audio if there's infringement, but they really don't do that great of a job.

people do not buy music like they use to.
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jbsj9698
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5:16p, 4/27/16
AG
Maybe I'm mis-remembering, but I thought that even in the age of CD's and cassette tapes, artists made very little money from the the sale of an album. Rather, the bulk of their money came from concert tours. I always understood that it was the labels/studios that made the money from album sales. If true, nothing much will have changed for artists, just for the studios. Again, I could be totally off base on my presumption.
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burnerET
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12:21p, 4/28/16
There's a good documentary on netflix that covers this subject in depth. Its about 30 seconds to mars, Jared Leto's band and their court battle with their label.
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62strat
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In reply to Professor Frick • 2:08p, 4/29/16
AG
quote:
but most people won't be able to tell the quality difference between an MP3 and a lossless file.
Ding ding, especially while traveling in a vehicle, with road noise, etc.. Sitting in a quiet room with good quality headphones is about the only situation you may notice a difference, but who is listening to music like that?
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GrayMatter
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2:57p, 4/29/16
AG
In the dance industry, I know producers prefer to release singles rather than albums because they know their album will hit the internet the day it is released. You can get lossless and 320 mp3 quality music files nowadays so it's not like the downloadable quality is like it was in the past.

Musicians make so much more on appearances and gigs so more of them are debuting their new releases through concerts.
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Kashchei
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In reply to Professor Frick • 2:46p, 4/30/16
AG
quote:
Once an album's out, it's obviously as easy as copying it and uploading.

As far as leaks go, there was a fascinating and very long article someone posted here a while back profiling a guy who worked at one of the very few CD manufacturing plants in the US, who had a whole convoluted system of stealing physical CDs that were still months from release and selling copies on the streets.

http://www.newyorker.com/magazine/2015/04/27/the-man-who-broke-the-music-business


Great read - thanks
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VanZandt92
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In reply to Professor Frick • 11:09p, 4/30/16
quote:
Once an album's out, it's obviously as easy as copying it and uploading.

As far as leaks go, there was a fascinating and very long article someone posted here a while back profiling a guy who worked at one of the very few CD manufacturing plants in the US, who had a whole convoluted system of stealing physical CDs that were still months from release and selling copies on the streets.

http://www.newyorker.com/magazine/2015/04/27/the-man-who-broke-the-music-business


I read this article also when it came out. It is crazy.
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TMoney2007
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In reply to AggieOO • 12:33a, 5/1/16
AG
quote:
you have to take into account streaming music services, which pay little to nothing to the artists. Spotify is one of the biggest culprits. Then look at how many people listen to full albums on youtube, which tries to police copyrights a block the audio if there's infringement, but they really don't do that great of a job.

people do not buy music like they use to.
How much does the radio pay on a estimated per person basis?

Spotify is providing the service for what people are willing to pay. They provide the free side to convert customers. You are always going to have to operate on a sliding scale that balances between how much you can charge (what the artist ends up getting is out of Spotify's control) and what people are willing to pay. When the value to price is messed up like it was in the past, many will steal.

Spotify came in at a price that stopped many people from stealing music.
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PatAg
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12:50a, 5/1/16
AG
Think most bands make most of their money via tour related stuff now, right?

Personally, I think it's a good thing that new bands can get their music out there very easily, but maybe I'm wrong.
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hunter2012
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1:33a, 5/1/16
AG
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hunter2012
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1:38a, 5/1/16
AG
Also:

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Jugstore Cowboy
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In reply to WestAustinAg • 8:04a, 5/1/16
AG

quote:
Music isn't out of favor...it's likely more in favor since its better marketed now.
This is an aside from the OP's questions, but I'm not sure about this point. I have quite a few relatives and family friends in the millennial generation, and I see far fewer music lovers than in their parents' and my generations. Video games and apps and crap take up a lot more of their time and money than for us. When they do buy music, it's probably individual songs through iTunes or something. They certainly aren't hanging around the record store browsing shelves or getting recommendations from live humans. And record stores were declining and contracting even before downloading became huge.
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AliasMan02
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In reply to WestAustinAg • 9:34a, 5/1/16
AG
A lot of your post relies on the global market to connect those dots, but there isn't a global market. People pay for music in North America and parts of Western Europe. In most of the world music is damn near 100% pirated.

Also, comparing the ease of access and lack of risk of Internet piracy to your other examples of bootlegging is pretty laughable. You have to see the difference between accessibility of copying a buddy's cassette versus having literally every song in existence at your fingertips.
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rbtexan
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10:15a, 5/1/16
S
The "physical product" days, that being CDs or MP3s, are quickly becoming history. The business is trending towards streaming, primarily interactive streaming, that allows a listener to pick what songs they want to hear without purchasing them. It's great for the consumer. Been a killer for the music industry, primarily on the creative side, songwriting being the hardest hit.

As a writer, my hands are tied. I can't negotiate in the open market, my payment rates are set by a federal rate court in NY. Furthermore, there is something called a compulsory license that means that even if I think I'm being screwed on a rate, I can't stop it from being released.

The rates that streaming services are paying are laughable. One of my colleagues had a song that was played over 30 million times on one of the services, and he was paid around $300. Hard to feed your family on that type of money. That's why in the past decade and half, 85% of the professional songwriter in this country have left the business. In the 90s here in Nashville there were close to 4,000 paid songwriters on Music Row. Now it's hovering around 250.

The artists can make up for a lot of lost revenue in sales from live performances, merchandise, etc. Writers don't participate in that, and the lack of $$ is crushing the profession. It is trending towards a world where in the next 10 years or so there will be no more professional writers, only artists who write their own material. That means no more Johnny Mercer, Jimmy Webb, Harlan Howard, Sammy Kahn, etc.

It's a pretty bitter pill to see your chosen profession becoming extinct, not because of a lack of demand for what you do, but because of a complete breakdown in figuring out how to compensate writers fairly.
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62strat
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2:15p, 5/1/16
AG
A writer receives no royalties from live performance? Like, taupin gets no money from Elton playing live?

That's hard to believe if so.
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AliasMan02
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In reply to 62strat • 2:19p, 5/1/16
AG
quote:
A writer receives no royalties from live performance? Like, taupin gets no money from Elton playing live?

That's hard to believe if so.
Any band can play any song by any artist live at no cost. How in the world would you ever hold anyone accountable for such a thing if royalties had to be paid?
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rbtexan
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2:38p, 5/1/16
S
Live venues pay a blanket license that is split up between every writer of every song that is played during the year - it's micro-pennies and so insignificant that it's virtually irrelevant.

The artists get paid a fee to perform that the writers get none of. The artist can sell t-shirts,ball caps, etc. and the writers don't get any of that either, not to mention endorsements, etc.
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superunknown
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In reply to TMoney2007 • 2:59p, 5/1/16
AG
quote:
quote:
you have to take into account streaming music services, which pay little to nothing to the artists. Spotify is one of the biggest culprits. Then look at how many people listen to full albums on youtube, which tries to police copyrights a block the audio if there's infringement, but they really don't do that great of a job.

people do not buy music like they use to.
How much does the radio pay on a estimated per person basis?

Spotify is providing the service for what people are willing to pay. They provide the free side to convert customers. You are always going to have to operate on a sliding scale that balances between how much you can charge (what the artist ends up getting is out of Spotify's control) and what people are willing to pay. When the value to price is messed up like it was in the past, many will steal.

Spotify came in at a price that stopped many people from stealing music.
radio pays a percentage of revenue (last I remember it was around 1.5%) and webcasters pay something like .0015 cents per song per listener.
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TMoney2007
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In reply to superunknown • 2:53p, 5/2/16
AG
quote:
quote:
quote:
you have to take into account streaming music services, which pay little to nothing to the artists. Spotify is one of the biggest culprits. Then look at how many people listen to full albums on youtube, which tries to police copyrights a block the audio if there's infringement, but they really don't do that great of a job.

people do not buy music like they use to.
How much does the radio pay on a estimated per person basis?

Spotify is providing the service for what people are willing to pay. They provide the free side to convert customers. You are always going to have to operate on a sliding scale that balances between how much you can charge (what the artist ends up getting is out of Spotify's control) and what people are willing to pay. When the value to price is messed up like it was in the past, many will steal.

Spotify came in at a price that stopped many people from stealing music.
radio pays a percentage of revenue (last I remember it was around 1.5%) and webcasters pay something like .0015 cents per song per listener.
That's not what I asked. I want to know a ballpark of how much the radio station pays per listener per play.

You can't say that streaming services don't pay enough if no one can actually tell how much other modes of distribution are paying.
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rbtexan
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In reply to TMoney2007 • 3:25p, 5/2/16
S
quote:
quote:
quote:
quote:
you have to take into account streaming music services, which pay little to nothing to the artists. Spotify is one of the biggest culprits. Then look at how many people listen to full albums on youtube, which tries to police copyrights a block the audio if there's infringement, but they really don't do that great of a job.

people do not buy music like they use to.
How much does the radio pay on a estimated per person basis?

Spotify is providing the service for what people are willing to pay. They provide the free side to convert customers. You are always going to have to operate on a sliding scale that balances between how much you can charge (what the artist ends up getting is out of Spotify's control) and what people are willing to pay. When the value to price is messed up like it was in the past, many will steal.

Spotify came in at a price that stopped many people from stealing music.
radio pays a percentage of revenue (last I remember it was around 1.5%) and webcasters pay something like .0015 cents per song per listener.
That's not what I asked. I want to know a ballpark of how much the radio station pays per listener per play.

You can't say that streaming services don't pay enough if no one can actually tell how much other modes of distribution are paying.
It's an impossible question to answer accurately, because there is no way to know for sure how many people are listening to a given song on a given radio station at a given time of day. Streaming services are point-to-point, radio stations aren't. There is a formula that I've seen, and I've got a call in to lock down the best information available, will post it at soon as I get it.
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WestAustinAg
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In reply to Jugstore Cowboy • 3:37p, 5/2/16
AG
quote:

quote:
Music isn't out of favor...it's likely more in favor since its better marketed now.
This is an aside from the OP's questions, but I'm not sure about this point. I have quite a few relatives and family friends in the millennial generation, and I see far fewer music lovers than in their parents' and my generations. Video games and apps and crap take up a lot more of their time and money than for us. When they do buy music, it's probably individual songs through iTunes or something. They certainly aren't hanging around the record store browsing shelves or getting recommendations from live humans. And record stores were declining and contracting even before downloading became huge.
If this chart is representative of the global market then the industry was declining fast but digital music has begun to turn the industry trend around...

<a href="https://www.statista.com/chart/4713/global-recorded-music-industry-revenues/" title="Infographic: Rise of Digital Music Stops the Industry's Decline | Statista"><img src="" alt="Infographic: Rise of Digital Music Stops the Industry's Decline | Statista" style="width: 100%; height: auto !important; max-width:960px;-ms-interpolation-mode: bicubic;"/></a><br />
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double aught
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3:43p, 5/2/16
AG
Interesting thread.
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