It’s Time For Transparency On Music Streaming Rates

Major labels may be hoping that new-wave digital music jukeboxes can make up for slowing downloads growth. But a drip-drip of labels pulling out of the services in protest at low fees is continuing, and may grow to more than just indies.

ST Holdings, the distributor for drum ‘n bass act Blu Mar Ten on Tuesday became the latest to pull its content from streaming services including Spotify, Rdio and Napster, joining Projekt Records, Prosthetic Records, Century Media and Metal Blade Records so far this year.

Consumption through these services is booming. ST Holdings says 82 percent of listens to its songs this Q3 was through Spotify, Rdio, Napster and Simfy. But just 2.6 percent of its revenue came from these services. In particular, for 750,000 Spotify streams, it got just £2,500, it says. So ST Holdings has pulled from streaming services music from 234 of the 238 labels whose work it distributes; four of the labels want to stay online.

European royalty collector PRS For Music licenses on-demand digital music operators using a clearly laid-out industry rates structure that, in the UK, requires either 10.5 percent of their gross revenue or 0.085 pence per track streamed.

But, unlike transparent operators like We7, which is only too happy to talk about the rates it pays, every time I have asked whether Spotify is paying industry-standard rates, both Spotify and the industry’s PRS For Music have clammed up, including the latest time I asked just last week. The lingering, unanswered perception is that Spotify, part-owned by the labels themselves, enjoys more favourable rates than its competitors.

Spotify tells paidContent: “I’m afraid we can’t give any detail. It is important to note that Spotify does not have a direct relationship with artists – we pay revenues to the rightsholders, and the authors, composers and musicians they represent.” Rdio, too, says it cannot talk about rates thanks to confidentiality clauses in label deals.

In this vacuum, irate artists and labels like Uniform Media are creating their own disclosure by posting their royalty statements. Projekt founder Sam Rosenthal recently wrote: “5,000 Spotify plays generates around $6.50. In comparison, 5,000 track downloads at iTunes generates $3,487.”

Against the industry’s hush-hush, everyone is trying to figure out why artists are feeling aggrieved by their new income, and potentially misleading maths like those in this infographic are allowed to proliferate.

Not everyone feels the same. Indie labels’ Merlin representative group points out that, of the many hundreds of indies across the globe, only a handful have balked. It is also entirely logical that an ephemeral stream should command a lower fee than a permanent download, and that these streams will grow in to more meaningful revenue for all concerned as streaming consumption grows. Legal streaming services are also helping reduce piracy whilst reintroducing a paid consumer culture.

Are artists just grumbling about the relative value of a stream versus a download? Analyst Mark Mulligan recently wrote on paidContent: “Average pay-out per activity for streaming services (premium ones included) is over 300 times smaller than the average pay out per activity on iTunes.” Or is money being withheld from artists elsewhere? One possibility is that, compared with downloads like those from iTunes Store, labels are keeping a larger portion of the money they get from streamers, and giving artists a smaller share. But, in lieu of some openness, it’s hard to know for sure.

But music streamers’ silence risks them getting their knickers in a twist. Against a 2010 report that one million Poker Face plays earned Lady Gaga just $167, Spotify countered that the figures were partial, misleading and out of date. But it has not fronted up with explicit logic to the contrary.

Spotify told paidContent today: “We have driven over $150 million of revenue to the music industry since our launch three years ago.” But it is unclear how much of that total has ever found its way back to artists, without which there would be no industry to speak of.

But the incongruity has reached an effective crescendo with one of the world’s biggest groups, Coldplay, contrary to its labelmates, withholding now its latest album, Mylo Xyloto, from streaming. When you scale up streaming rates to an act as big as Coldplay, it seems to throw the gap to actual purchase in to stark relief. And that could redefine what streaming is actually for – for actual consumption or for promotion?

There is no risk of major labels pulling out of Spotify. But if their individual acts like Coldplay can win opt-outs, the landscape could get fragmented indeed.

So what do the industry’s power brokers have to hide? If the rates really are fair and have merit, it would serve everyone better to get them out in the open now.

NB. Leo Wyndham, one third of Blu Mar Ten, is European director of music for iTunes, a rival to streaming services like Spotify. Blu Mar Ten co-founder Chris Marigold tells paidContent Wyndham is no longer an active band member and has no influence over its public stance toward streaming services. Marigold also says this week’s decision of its distributor ST Holdings to withdraw from streaming services was taken independently of Blu Mar Ten itself, which itself nevertheless pulled most of its music out of streaming services long ago.