Spotify, Pandora and Streaming Music: Should You Post Your Music?

Spotify, Pandora and Streaming Music: Should You Post Your Music?

By NationWide Source -
Estimated reading time: 10 minutes

How charitable are you feeling?

You see, neither Spotify nor Pandora is making any money, and they could really use a little bit of yours. So, if you are feeling charitable and believe in their cause, sign right up, and let the giving begin!

If you heard the real numbers, though, you might change your mind about that donation. They’re quite staggering. Pandora’s stock price has tripled in the last 12 months, and they have a stock market valuation of over $7 billion dollars. At the same time, they have yet to create a profit. Spotify has not yet gone public, but it is anticipated to do so in the near future. Initial estimates put Spotify’s valuation at close to $10 billion dollars.

Don’t feel sorry for them, though. This is the new model for becoming a Wall Street darling. In effect, both of these companies have created a business model that offers a great product to music fans but fails to charge those fans a reasonable amount for the experience. Therefore, the companies lose money. Then, they use their losses as an excuse to pay musicians virtually nothing for their music. By the way, the best music streaming interface in the world is useless if it has no music to play.

These companies might feel that they cannot get fans to pay a fair amount for streaming music—probably a correct assumption, by the way—so instead they offer it for free and let the musician pay for it, not the listener. Sound crazy? Some people would argue that the listener pays by listening to commercials, or by paying a fee to hear commercial-free music. But, if you examine the pitiful payout that musicians receive, it will become clear who is footing the bill.

Somewhere along the way, the indie music community bought into the idea that streaming music is a good thing. After all, can’t a person listen to traditional (terrestrial) radio for free? How could streaming be any different? The answers are both subtle and significant.

Traditional Radio vs. Streaming

In the past, when we heard music on traditional radio and really liked it, off to the music store we would go. Why? We wanted control over our listening. A listener has no control whatsoever of what plays on traditional radio. The most they can do is change the station. Purchasing the music allowed us to control how often we were able to listen to it.

Streaming changed this. With streaming, there is no reason to purchase the music. On Pandora, users have substantial control because they can use the tools that Pandora provides to tailor the station to fit their taste. With Spotify, the listener has complete control. Play what you want, how you want it, when you want it, and as often or little as you like. This is nothing like traditional radio.

What’s worse is that traditional radio stations are jumping on the streaming bandwagon, just like everyone else. Platforms like iHeartRadio have the potential to be just as damaging to musicians as any other music streaming services. Don’t get us wrong; we are in favor of listening to traditional radio stations online; however, we are not in favor of traditional radio stations streaming music self-crafted to anyone’s personal listening preferences.

Worse still is this: Pandora is making the case with Congress to lower payments to musicians. Pandora says they cannot compete with terrestrial radio because radio pays a lower royalty. In fact, Pandora is asking for legislation that lowers their payments by 50% or more. This is ridiculous! Traditional radio and music streaming are two entirely different things.

Let’s call streaming music what it really is: a financial failure. Generally, when a business model fails because it is not financially viable, the business closes and declares bankruptcy. The only way that streaming music survives is if someone picks up the financial shortfall; right now, that someone is the musician.

What Does This Mean To You As A Musician?

A streaming music company’s success is realized at the expense of the musicians who unwittingly contribute to the corporate craziness with their music and receive very little in return. As a musician, the best move you can make is to put money in the stock market and invest in Pandora stock (Spotify, too, when it’s available). You should not contribute your unique sound to their portfolio of music.

Let us tell you why: if companies like Pandora and Spotify continue to make it big, you will not receive any of the benefits, and they will ruin the music business. Sure, they offer to expose you to large numbers of people who will listen to your music. But at what cost?

Some musicians believe using these companies results in additional sales of their music along with increased exposure, which is ultimately good for their careers. We believe this to be far from the truth. Our own experiences seem to demonstrate the complete opposite of these claims.

Confessions Of A Streaming Junkie

When we play music on Pandora, we enjoy the experience. Their technology does a nice job of playing music that we like, and it comes up with new artists that we have never heard of before. We have no control over who plays next, but we can select an artist or song that we want Pandora to consider when choosing what music to play. It also allows us to skip a song, hit thumbs up, hit thumbs down, etc. The software learns more about what we like and makes adjustments to better fit our listening style. All good, so far. (Good for users, that is).

This is what makes Pandora so compelling. Free music that is tailored to our listening tastes is much better than a traditional radio station! In fact, if we are willing to invest just $0.10 per day (that’s 10 cents), we can get the music without any commercials. Wow, what a deal!

Spotify is a little different. It offers more overall functionality through its apps, artist radio, library function, messaging, etc. The biggest difference for users is that they can create playlists and choose exactly what they want to listen to. Spotify will also make artist recommendations, but not in the same way as Pandora. Spotify offers a free service for a limited time but you can pay just $0.334 per day (that’s 33.4 cents) to get full access without commercials. Some people we know, in an effort to avoid paying anything, keep signing up for the 30-day free trial after the initial trial period expires by using a new email address. Spotify also lets paying users download playlists to listen to offline.

Truthfully, both services are great for the listener, and that is what makes them so popular. Several other streaming services are also available that offer similar features. Every one of them is focused on the listener experience, and most do an acceptable job. This is where the problems begin for musicians. Fans love these products for what they offer: your music the way they want it. Most importantly, it’s free (or almost free) and it enhances the listener experience.

Since we began using streaming services, our purchases of music have dropped considerably. In fact, we no longer open iTunes to listen to our library of music. There is no need. Why would we do that when we can access everything we want on a streaming player? Plus, the players offer features that iTunes does not. (While we might be unique, our conversations with others suggest that we aren’t the exception.)

The Tale Of The Tape

An artist friend of ours recently showed us her statement of income from digital streaming services. Over the past 12 months, she had a total of 14,932 streaming downloads and was paid $71.02. This is an average of $0.004756 per stream.

During the same period, she sold 2,200 CDs at her gigs. The income from the CD sales was $20,300.00. It is only fair to note that she had to pay something for the CDs to be manufactured, but that cost was only $2,046.00, making her net income from the CD sales $18,254.00.

In addition to the sales of physical CDs at gigs, our friend did have some sales from digital downloads of music on iTunes. iTunes is her only way to sell digital downloads; because she mentions it frequently at her shows, she believes that most of her sales on iTunes come from people who attend her shows. For the same period that we mentioned above, her album sales on iTunes were 113 albums for a total of $668.57.

Let’s run those numbers. She made 257 times more money selling CDs at her gigs than she did with streaming her music. That’s impressive… or, it might be more appropriate to say that the streaming income was dismal. Either way, she would not have survived without the physical CD sales at gigs. (She also made money on other merchandise sales and a fee from doing the gig, but we are not including that income in our example.) She could have gone to the gigs and not sold any product, but who would choose to do that?

You might make the argument that she had to gig to sell physical CDs, whereas with streaming services you don’t have to do anything other than sign up, and you would be mostly correct, but…

We want you to consider one thing: the expense to create quality music is significant. Even if you do not place a value on the time it takes to write music, write lyrics, practice, etc., the production costs are still high. (Just for the record: we think you should consider all time and effort necessary to produce your music. Even if you don’t write yourself a check for your time, it doesn’t mean it’s free.)

It would be fair to say that a solo indie artist could easily spend $3,000 to $5,000—excluding the cost of CDs or paying other artists—to produce one album, if they stayed on a tight, tight budget. How do the numbers work? Let’s suppose you spend $3,000 to produce your album and then posted it with several music streaming companies. If you used our artist friend as a test case, it would take 40+ years just to recoup your initial investment. Even if you are an incredible success and experience 10 times as much play as she did, it would still take more than 4 years to get your investment back. That’s 630,782 streaming plays just to break even. Of course, you haven’t made any money yet.

So, What Can Artists Do?

Clearly, streaming music complicates things, and it’s not the best business plan for an independent musician to adopt. If you feel that streaming is a necessary part of your music marketing plan, then try posting just a single song or a small sampling of your work. Hopefully, this will help you gain exposure with a larger audience, who will then purchase your music.

Is the future of the indie music business bleak? Absolutely not. There is a great deal more to it than streaming downloads. The future holds great promise, and as an artist you have to be prepared to grab it. For indie artists, the biggest challenge remains the same: how do you, as an independent artist, build a sustainable career?

 We’ll continue addressing that question in future articles.



Comments

These truths were so rich and a confirmation to a person who has done his homework as my music went live in over 15 digital stores but only tell people about the 4 I really like(ITunes,7digital,googleplay and slightly amazon).Musicians/Artists need to protest against Pandora and Spotify and a few others to drive them off the scene by raising awareness for us to never submit another song there and take others off.

yeah I learned this the hard way. I received a statement from cd baby and spottfy and pandora paid me 1 to 2 cents a download. How did I fix this? I first followed the Bob Seger model, when asked why he doesn’t sell 99 cent downloads Bob said I make albums not singles. Second do what the retailers do, on your merch page put your own pay pal account on there then sell everything yourself. That way all downloads go right into your bank account no middle man.

You can also sell CD’s and t shirts what ever, this gives you control to up sell like save $2.00 when ordering 2 or shirt and cd deal this way you are in control, just set up shipping costs they can use credit or debit cards push the button and buy. If you are worried about fulfilling lots of orders, with the extra money you will make you can hire somebody to work for you and send them out.

Jed, we agree. Selling music instead of streaming it for free, selling albums instead of singles, and selling directly instead of through third parties are all steps artists can take to protect their art, increase the market value of their product, and gain control of the artist/fan connection.

Very interesting. Not to be the devils advocate but to some MUSICIANS, being streamed, and accessed to by a massive crowd of listeners like pandoras, is more valuable than the potential royalties. This is strictly from the mind of a “financial musician”. Which I am not against, just seeing both sides of the tracks here. I would personally let pandora use my catalog of music for free. If your a smart musician making your money is not your priority with streaming, simply exposure. Capitalizing off of what to do with that exposure is how you profit.

Hi Morgan, thanks for your comment. I agree with you when you say that a smart musician uses streaming to gain exposure, but we do not agree on the details, and the devil is in the details. You also state that you believe this article was written from the perspective of a “financial musician,” and I want to assure you that it was not.

In fact, I cannot think of any musician that comes to mind that I would classify as a “financial musician”. I do know a large number of musicians who are struggling to make a sustainable living with their music, even after years of effort. This does not mean that they are bad at making money or that they are focused on money rather than their music. It means that, while it has never been easy to make a living as a musician, times are more difficult than ever if you want to be a professional musician and make a sustainable living.

Streaming music is not the answer. You would let Pandora use your entire music catalog for free because you want the exposure that streaming music provides, believing that you can then capitalize (make money) on this exposure.

Question: Which of your fans that found you by streaming will seek you out and invest money in your music when you have already given them all of it for free?

Since you do not even know who these fans are, I suspect that your ability to capitalize on their free engagement with your music will be far from easy. For example, you may think that these streaming fans might attend your concert and pay for a live performance when you come to town. How do you let them know you are coming? Streaming sources do not give you enough of the fans’ contact information; at most, you can see downloads or streams based on zip code. If a musician were given complete fan contact information (email address at least) for streaming downloads, then I would reconsider. Otherwise, this is no way to create a sustainable fan relationship.

As a musician, you are unique, your sound is unique, and your performance is unique. These are things that have value to fans. When you give away your music, you are giving away the only thing that fans are willing pay for. If you said that you wanted to place a small sampling of your music on streaming sites and then leverage that exposure into a larger relationship with the fan, I would have agreed with you.

I must say that my experience with Pandora and similar sites has been vastly different from the example sited in the article. Most of my income has come from Pandora and I feel I have been paid very regularly and very well, while my iTunes sales are satisfactory. Many fans email me to buy scores because they heard my music on Pandora. I have found Pandora to be a wonderful site that pays very well to independent musicians such as myself.

Rachel, based on what we’ve heard from artists, you seem to be the exception. With that said, we’re happy to hear it’s working for you.

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