Why do indie musicians put up with penny payouts? | Music Feature | Chicago Reader

Why do indie musicians put up with penny payouts? 

Streaming your favorite artists’ music is the least helpful way to support them. But they can’t abandon those platforms, because we won’t.

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For many niche artists, revenue from streaming is negligible. But the user bases of streaming services also represent huge numbers of potential new fans. - ILLUSTRATION BY RACHEL HAWLEY
  • For many niche artists, revenue from streaming is negligible. But the user bases of streaming services also represent huge numbers of potential new fans.
  • Illustration by Rachel Hawley

The price of music has been in flux since it was first commodified on wax cylinders. Artists have rarely had much say in that price, though, or in how much of the money reaches them—and in some ways recorded music has never been worth less. As long as you have a stable Internet connection, you can hear anything from several vast, overlapping catalogs at any time. Streaming services have made countless hours of music available for monthly subscription fees that average around $10, and if you're willing to listen to ads, it can all be free.

The days of listening only to music you could hear on the radio, afford to buy, or copy from friends are long gone. Most musicians have had to accept that sales of records, CDs, and tapes will never support them again—and given the notoriously stingy payouts from streaming, they're focusing on live shows and other merch to make money. But now the pandemic-related shutdown of live music has made even that precarious realignment untenable. "Most of the money I made from being a musician would come from playing a show, or speaking on a panel, or doing something physically with an audience," says Chicago rapper CJ Run.

Stripped of gig income, independent artists and labels are trying to squeeze more income out of their recordings. It's become suddenly urgent for them to decide whether the benefits of streaming make up for its drawbacks.

In 2019, according to a year-end report by the Recording Industry Association of America, streaming services such as Spotify and Apple Music accounted for 79.5 percent of U.S. revenue from recorded music, or $8.8 billion. Artists and labels are paid from the pool of subscription fees and ad revenue that each streaming service accrues. Payout rates vary, but they're typically a fraction of a cent per play.

Spotify is the most popular service: according to a December 2019 report by Midia Research analyst Mark Mulligan, at this time last year it had 36 percent of total streaming subscribers worldwide, and this spring it claimed 271 million users, including 124 million subscribers. As a result, it's been able to exert industry-wide influence on pay rates. The way Spotify calculates royalties is far from simple or transparent, though. The rate can vary depending on type of listener—subscribers generate more royalties—and by what country they're in. In the U.S., mechanical royalty rates are set by the Copyright Royalty Board, while performance royalty rates (Spotify pays both) are mostly negotiated with organizations such as ASCAP and BMI. Other countries have their own mechanisms.

Glenn Curran, cofounder of local indie label Sooper Records, estimates that Spotify pays Sooper roughly $3,000 for a million plays, or 0.3 cents per play. Spotify isn't a monopoly, of course, but its dominance gives it power: as Rob Sevier of reissue label the Numero Group puts it, "They are able to dictate rates, and no one can say no to them."

The Numero Group has posted a Spotify playlist of the shortest songs in its catalog, which it describes as "perfect for . . . getting our artists paid in the least amount of time." (Spotify pays by the stream, not by the minute—bad news for jazz musicians, doom-metal bands, and other artists who tend to make longer tracks.) The playlist is titled ".004," because that's what Numero earns on average per Spotify stream (the playlist's description says the amount is in cents, but it's actually in dollars). For comparison's sake, an $8 digital album sold on Bandcamp would typically net an artist or label a bit less than $6.80, after the platform's 15 percent cut and payment-processing fees. Assuming the album has ten tracks, you'd have to stream the whole thing 170 times on Spotify to equal $6.80 at a rate of 0.4 cents. Few fans are that devoted.

Still, Spotify doesn't pay the least for streams. Bandcamp doesn't pay for them at all, instead basing its business model on sales. In early 2019, a community blog called the Trichordist, which advocates for fairness in the online music marketplace, published a data set that analyzed the 2018 streaming revenue of a real but anonymous midsize indie label with about a billion streams annually. It estimated 0.331 cents per play on Spotify, which provided 29 percent of the label's streams and 49 percent of its streaming revenue. Pandora, now part of Sirius XM, managed just 0.155 cents (4 percent of streams, 3 percent of revenue), and YouTube Content ID trailed far behind with an abysmal 0.028 cents (49 percent of streams, 7 percent of revenue). Apple Music delivered the best combination of volume and rate, with 10 percent of streams and 25 percent of revenue on a per-stream payout of 0.495 cents.

Legal efforts to increase streaming payments to songwriters and musicians (frequently one and the same in the indie world) have been halting, and the industry continues to fight them tenaciously. Despite public criticism from A-list songwriters (among them Nile Rodgers, Kenneth "Babyface" Edmonds, and Starrah), Spotify, Google, Pandora/Sirius XM, and Amazon are all individually appealing a 2018 ruling by the U.S. Copyright Royalty Board in favor of the National Music Publishers' Association and the Nashville Songwriters' Association International, which would increase streaming royalties owed to songwriters by 44 percent over a five-year period.

Even if you do pay for a streaming subscription, hoping to support your favorite artists, little of your money will end up in their pockets—unless they happen to be everybody else's favorites too. Like most other streaming services, Spotify uses a pro rata model: all subscription revenue is pooled, and artists are paid a share of that total that's proportional to their number of streams for the month. This is "fair" in a strictly mathematical sense, but it's also a little like the electoral college, in that you'll end up paying Drake even if you never listen to him.

A user-centric model, such as the one being developed by French service Deezer, could benefit fringe and indie artists at the expense of market-dominating stars, though industry observers are divided on how significant the effect would be. Each user's subscription money is split proportionally among the artists that user streams, and the formula is unaffected by a user's total number of plays—which has the side effect of minimizing bot fraud and the outsize influence of "super users" who stream hundreds of hours per month.

Though pop stars such as Taylor Swift have fought for better treatment from streaming companies, the currently dominant pro rata model would continue to disadvantage smaller players even if rates increased. Artists operating at a smaller scale also lack her leverage. "We're not like Taylor Swift," says Scottie McNiece, cofounder of Chicago-based progressive-jazz label International Anthem. "We don't have the power to be like, 'We're not gonna use your streaming platform because you don't pay good enough royalties.' No one's gonna give a shit if we do that."

Spotify clearly has money to throw around—it just doesn't want to share any more of it with artists. It continues to invest heavily in its podcast business, and recently struck an exclusive $100 million deal with Joe Rogan. Last month, Mark Mulligan of Midia Research told Rolling Stone that musicians would need tens of billions of streams to earn what Rogan was paid. "What Spotify is saying basically is, 'We value this podcast more than we value any single artist on our platform,'" he said.

To its credit, Spotify has attempted to address the COVID-19 pandemic's devastation of the music ecosystem. The company has donated ad time to governments and charities, and it's created a music relief fund to match up to $10 million in donations. In April it also debuted a new feature called Artist Fundraising Pick, a button that artists can add to their Spotify pages in order to solicit donations for themselves or for charities of their choosing.

Unsurprisingly, many independent musicians see this as a paltry response from the biggest player in the biggest segment of the music business. "They haven't really done much to remedy the fucking cataclysm that has happened to people," says rapper-producer Joshua Virtue of Chicago label and collective Why? Records.

"The tip thing on Spotify and all of that is a very half-assed way to be like, 'If you wanna . . . ' What's so hard about that is a lot of these fans aren't doing well either," adds Frances Farlee, a Sooper employee who also works for Why? Records and manages rapper Matt Muse.

Saxophonist and Aerophonic Records founder Dave Rempis doesn't stream his label's catalog through Spotify or any of the other major players—Aerophonic maintains a Bandcamp page, but Rempis has also built a clear, detailed label website to allow fans to buy CDs and vinyl directly from him. He's frustrated by listeners who treat streaming services as a "one-stop shop for music." The way streaming services siphon revenue and attention away from musicians, he believes, is much like what Amazon has done to bookstores or social media have done to independent publications. "It requires one extra step for people to go to the source," he says, "rather than to buy it from these aggregators."

It's hard to argue that Spotify and its ilk don't operate by extracting value from music—they'd be nothing without it, and if they didn't pocket a share of what listeners think it's worth, they'd never be viable. Why do so many independent artists and labels tolerate the miserly royalty rates they get in return?

The market of streaming listeners is simply too large to ignore. Curran estimates that for Sooper's most successful projects, streaming revenue is large enough to match sales revenue. "Not having digital revenue would be a huge loss," he says. Because streaming has low or no barriers to entry for listeners, it can help artists grow a fan base—it's much less of an investment to stream an unfamiliar album than to buy one. Placement in the right streaming playlists, whether created by users, labels, publications, or the services themselves, can also help musicians reach new audiences.

Playlists can help artists in fringe genres too. "We all know that a lot of these streaming sites have crook-level rates," says Doug Kaplan, cofounder of oddball Chicago experimental label Hausu Mountain. "Things we've gotten into playlists have done very well, and that's provided additional income. I'm not gonna complain about it."

Labels and artists generally can't conduct A/B tests to determine whether streaming is a net winner—that is, they can't meaningfully determine whether abandoning streaming would help them make enough additional sales to offset the loss of streaming revenue, because they're operating in an environment where most listeners expect streaming to be an option. "Thinking of the music business as you either use streaming or not is silly," says McNiece. "You have to use all the channels available to you. I don't think people consume that way either."

And success on Spotify can lead to additional sources of revenue significant enough to be worth sacrificing an awful lot of potential sales. Curran estimates that a popular song could pull down $10,000 to $30,000 for a single sync in a commercial or TV episode. But the song's popularity generally needs to be demonstrated by significant streaming numbers before it'll attract the attention of music supervisors.

Matt Pakulski owns eclectic Oak Park label FPE Records, and his streaming payouts are so meager that for the past two years he's focused on earning revenue through syncs. He sees it as the only way to provide a middle-class lifestyle to fringe or indie musicians. "You're either Kanye or you're somebody playing to a basement with your friends," he says. "I feel like there should be that mid level, like, you're a good musician and you get money for it. Not a lot of money, but more than negative. That's what I think is missing."

Despite a steep but brief dip in March, streaming consumption has continued to increase—unsurprisingly, self-imposed isolation and social distancing haven't decreased people's appetites for music. But if your goal as a fan is to help the artists you love support themselves, streaming their music is probably the least helpful thing you can do, short of nothing at all.

Buying music, for those who can afford it, obviously puts more money into artists' and labels' pockets. Record stores continue to operate online during the pandemic (albeit mostly in a diminished capacity), but no intermediary is necessary. The ease and ubiquity of e-commerce has made it easier than ever to buy directly from artists and labels, if listeners are willing to seek them out. "I like to bring people to my website, to my storefront, and actually create long-term relationships with fans," Rempis says.

Bandcamp, founded in 2008, allows artists and labels to set their own prices for digital downloads, physical media, and other merch—for many of them, it's replaced a freestanding website. Artists and labels can offer their customers subscriptions, but generally the site works like a shop. Bandcamp's basic artist accounts are free, and it also sells premium monthly professional services. In contrast to the complex, opaque royalty schedules of the major streaming services, Bandcamp takes a fixed 10 percent cut of physical sales, and its aforementioned 15 percent cut of digital sales drops to 10 percent if a client does more than $5,000 in business per year. The information fits on a single Web page.

"That's one of the best things about Bandcamp," says Jessi Frick, cofounder of Bay Area label Father/Daughter Records. "They are transparent about their fees and where they allocate their money." Bandcamp is often compared to a giant record store, with an inventory that includes a range of esoteric genres, and it builds fan communities through social sharing features and the journalism on its editorial site (to which I occasionally contribute).

Bandcamp's profile has risen in recent months thanks to its response to COVID-19. On Friday, March 20, as lockdowns were beginning around the country, the company waived its cut on all purchases for the day. Bandcamp customers eager to send that extra 10 or 15 percent to their favorite musicians and labels spent $4.3 million in 24 hours, 15 times the total on a typical Friday; when the company did it again on Friday, May 1, customers spent $7.1 million.

"Even before March 20th we were already seeing huge numbers of fans use Bandcamp to support artists who were seeing tours canceled," Josh Kim, Bandcamp's COO, told the Recording Academy earlier this month. "So we wanted to highlight that even more and engage as an entire community, and also encourage more fans to continue supporting artists until things are recovered." The company had another "Bandcamp day" on June 5, and there's a fourth planned for July 3. This Juneteenth (and every subsequent Juneteenth), it will donate its share of sales to the NAACP Legal Defense Fund.

The revenue-share days have been a boon to independent musicians and labels. Curran says March 20 and May 1 were the two all-time best sales days for Sooper Records, with May surpassing March. "The real magic behind what Bandcamp is doing," he says, "is they're mobilizing their consumer base in a really intense way."

Chicago industrial musician Jordan Reyes estimates that each revenue-share day has made enough money for his label, American Dreams, to commission an entire album pressing. "It's nuts, dude," he says.

Bandcamp's quick payment turnaround—usually one or two days after a digital sale—has also helped artists in urgent need of funds. Streaming services typically pay monthly, but for streams that happened two or even three months ago. Kaplan has been trying to get money to Hausu Mountain artists within a week. "A lot of artists can't wait right now," he says.

Not everybody is Team Bandcamp—it's still a middleman, after all. While Rempis acknowledges that Aerophonic's sales went up 400 percent on May 1, he dislikes that Bandcamp uses the rhetoric of charity and community to push what he considers a marketing tactic. "Even if sales go up a ton that day, which they have, [the extra 10 or 15 percent] is not a lot of money for artists. And for Bandcamp, it's way less than they would spend on marketing to get that number of new users and new data into their service," he says. "For them, it's a genius move, and I find it very cynical and problematic."

Rempis would be more impressed with the company's commitment to musicians if it made the revenue-share days weekly, or reduced its percentage permanently. An organization with Bandcamp's resources that really wanted to take a stand for musicians and labels, he suggests, could commit to taking a temporary loss itself, instead of leaving artists to absorb so much of the pandemic's pain.

Some artists have used Bandcamp as the only platform for their projects during the pandemic—especially when they're looking to see significant revenue in a hurry. Rappers Open Mike Eagle and Serengeti released Quarantine Recordings, their second album as Cavanaugh, on March 20. "We started making these songs a couple years ago and never finished them," they explain on the release's Bandcamp page. "Since we're quarantined and are trying to replace lost income from shows we decided to put them out over the bandcamps to stimulate our personal economies."

Eagle says that the statement was meant to set expectations appropriately for an unmastered album. "I can be confident it would have taken us a long time to make the same amount of revenue from it if we had put it on streaming services," he notes.

When Eagle is promoting a solo album, he's reluctant to deliberately limit access to his music, even if doing so might mean a faster payout. He has to worry about reaching as many people as possible. "When something is what I base my next year or two of career cachet on, I have to take every precaution to make sure it doesn't fall through the cracks," he says.

CJ Run was preparing for a year filled with national tours before the industry shut down. Instead Run is self-producing new music, posting exclusive digital songs and albums to their Bandcamp page (which they hadn't really been using before) to make up some of that lost income. "I can actually make a few hundred dollars from selling my music, because it's actually worth that," they say. "Once all of this is over, I can know that I can go out on tour to make a living, but I can still also sell my music. Why did it take me this long to put my first thing on Bandcamp?"

Joshua Virtue has been unable to work his service-industry job, so he recorded the new album Jackie's House in three days and released it in April as a pay-what-you-can Bandcamp exclusive. He's using it as a fundraiser for his mother, who's supporting his sister, his grandmother, and other relatives at her home in Florida. He didn't expect many sales beyond friends and relatives, but in the first two weeks he earned more than $2,500 in donations ranging from $2 to $100. Jackie's House has made more money than any of his previous projects.

Virtue believes the clear charitable aim of the project, amplified by community-oriented peers in Chicago, was key to its sales. "I wanted to make it clear that if you're coming to listen to this album, you're coming to help," he says. He may upload Jackie's House to Spotify eventually, but for now he's happy to see it valued in a concrete way. "It lets me know you give a fuck about my family in this moment."

Following the success of Jackie's House, Virtue and the rest of the Why? Records crew released another Bandcamp exclusive in May: the compilation Art Is Love Vol. 1, which features musician friends from a variety of Chicago scenes. It's a fundraiser for the Chicago Community Bond Fund—the $1,300 raised so far is more than any of the label's previous releases have earned in their lifetimes on major streaming services, where the main benefit is the potential to reach vastly larger pools of users.

Inspired by the most recent wave of Black Lives Matter protests, many musicians used Bandcamp's June 5 revenue-share day to fundraise for local charities, activists, and other organizations supporting Black communities. Sooper Records artist and cofounder Nnamdï raised more than $10,000 from sales of his new EP, Black Plight, one of the best-selling items on the site that day, and donated the money to Assata's Daughters, EAT Chicago, and others in need. Soul singer Wyatt Waddell wrote and recorded his protest song "Fight!" in less than 24 hours, and has so far raised more than $1,000 for Black Lives Matter Chicago, the Chicago Community Bond Fund, and the Greater Chicago Food Depository. Rapper Saint Icky released the single "Black Skin" exclusively on Bandcamp and has raised $600 each for Healthy Hood Chicago and My Block My Hood My City. Bandcamp also made its Juneteenth announcement in response to the protests.

While musicians are unable to gig or tour, recordings remain a core source of income for them, whether streamed, sold, or licensed. But they're also by necessity finding other ways to earn money. Livestreamed performances have proliferated rapidly, some supported by donations and some ticketed. Each seemingly emulates a different kind of in-person show: in Chicago they include street fests such as the first virtual Do Division, public-funded shows hosted by the mayor's Instagram account, blues concerts from the stage of a mostly empty Rosa's Lounge, and avant-garde showcases such as Experimental Sound Studio's Quarantine Concerts series.

Livestreaming can make even the process of creating music into a source of revenue. Chicago producer GLOhan Beats has worked for A-list rappers such as Gucci Mane, Juice Wrld, and Lil Uzi Vert. He occasionally livestreams his work in progress, talking viewers through what he's doing, and his audience sometimes donates via Twitch's tip function. "This generation is mostly focused on music that is everywhere for free," says GLOhan's friend and collaborator D2X. "I think I enjoyed albums a lot more when I used to buy them and listen to the CD."

Open Mike Eagle suggests that consumer attitudes are at least partly to blame for the current state of the industry. "People get upset at streaming, as if Spotify or Apple are devaluing music," he says. "Us as a society, we already devalue music, and these companies have stepped in to fill that void and create what the new marketplace is." Though he continues to sell physical releases, he admits that in the digital realm he prefers the easy, instant access that streaming gives his fans—it beats the way he used to release music via carefully arranged zip files on file-sharing sites such as Mediafire.

He wishes fans and critics better understood the economic differences between indie and major-label artists. Even when he appears on year-end lists next to the likes of Drake and Young Thug, he feels closer kinship with indie rappers such as JPEGmafia and R.A.P. Ferreira—not because they make especially similar music, but "because we come from the same world economically; we're craftspeople trying to live on the strength of the craft." Eagle also says it more bluntly: "Everything about our career is life or death. If I don't treat my album release properly, that's my rent."

McNiece hopes listeners use self-isolation to actively engage with music, not just passively absorb it. "The importance of artists and creative people and culture has never been more apparent than it is now, when we're all stuck at home and we have nothing to do besides cook for ourselves and consume art and media," he says.

Much like independent venues, independent musicians need extra support during the pandemic—otherwise they won't be around anymore by the time the virus is under control. And for the vast majority of them, streaming revenue won't cut it. For Joshua Virtue, the imperative is simple: "I don't want you to be broke, because then you won't be able to make your sick art that helps me live!"  v

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