Special Report: New Future of Music Coalition study finds that technology is a double-edged sword for musicians

by Kristin Thomson

Sam Smith’s recent post about whether musicians benefit financially from on-demand streaming services like Spotify revived a poignant discussion that’s been going on in the music community. Now that the digital dust is settling and a handful of business models are maturing, how are musicians and songwriters being compensated for their creative work?

Meteoric transformations in the creation and distribution of music over the past ten years have drastically changed this landscape. New technologies like digital music stores, streaming services and webcasting stations have greatly reduced the cost barriers to the distribution and sale of music, and a vast array of new platforms and technologies — from blogs to Bandcamp to Twitter — now help musicians connect directly with fans. Subsequently, it’s easier than ever for musicians to retain control of their creative output and to benefit more directly when their music is performed, licensed or purchased.

It’s undeniable that musicians’ access to the marketplace has greatly improved, but how have these changes impacted musicians’ ability to generate revenue based on their creative work? Almost all analyses of the effects of these changes rest purely on assumptions that they have improved musicians’ bottom lines.

Since our inception in 2000, the nonprofit group Future of Music Coalition has strived to provide artists from all backgrounds and genres with valuable information about the issues that affect their ability to earn a living. Consequently, these questions about musicians’ ability to make a living from their music in the 21st century are at the forefront of our minds. In 2010, we launched Artist Revenue Streams – a multi-method, cross-genre research project to assess whether and how musicians’ revenue streams are changing in this new music landscape.

Throughout 2010 and 2011, we collected data from US-based musicians, composers and performers through three methods: in-person interviews with a small but diverse set of musicians; financial audits, which were presented as robust case studies; and a widely distributed online survey that was completed by over 5,300 musicians in October 2011. The core research question: on what revenue streams are you relying, and how are they changing over time?

We began releasing data memos, case studies and reports in January 2012, each diving into a specific angle on this question about musicians’ earnings. Reports have examined how revenue streams are different by genre, by amount of radio airplay, by professional training, by the types of “teammates” and relationships musicians have, and more.

Do Musicians Make Money Selling Music?

One of the most obvious questions for us has centered on the changes in income from sound recordings. Whether on vinyl, cassette, CD or via digital download, income from the sale, license or performance of sound recordings has been a core part of many musicians’ income streams for decades. But there’s no doubt that this income stream — perhaps more than any other — has undergone serious changes in the past 10 to 15 years.

While the existing music marketplace was fundamentally disrupted by peer-to-peer filesharing, there has also been a decline of brick-and-mortar stores, the development of legitimate download stores like iTunes and Amazon, and licensed subscription services like Rhapsody and Spotify. There’s also been rapid growth in a new revenue stream for sound recordings — the digital performance royalties that are generated when sound recordings are streamed on any webcast service (like Pandora) or played on satellite radio (like Sirius XM). How have musicians felt this change?

A brief detour into copyright law. A recorded piece of music embodies two copyrights: there’s a copyright for the composition (the lyrics and notes), and a separate copyright for the sound recording (what gets captured in the studio). There are separate revenue streams earned by these two copyrights. The sound recording earns money when physical or digital copies of the recording are sold, licensed or performed. Because we wanted to be able to drill down into the data, we broke the survey questions into six buckets:

  1. Income from physical retail sales (brick-and-mortar, Amazon, mailorder)
  2. Income from digital sales (iTunes, Amazon MP3, Bandcamp)
  3. Income from sales of recorded music at shows/merch table
  4. Interactive streaming services (Spotify, Rhapsody, Slacker)
  5. Digital performance royalties (Pandora, Sirius XM, via SoundExchange)
  6. Master use license for synchs, ringtones, etc.

The resulting income from sound recordings report includes dozens of charts and interviewee quotes that focus specifically on musicians’ income from sound recordings. In summary, the data suggests:

  1. For many musicians, the income derived from sound recordings is a small part of their overall revenue pie, and it’s decreasing. Though differences exist by role and/or genre, the survey data suggests that income from sound recordings represents a modest share of most musicians’ income — a sentiment also expressed by a number of interviewees.
  2. The sources of income from sound recordings are shifting. The data suggests that income from physical retail sales has been shifting downward and that sales at shows are holding steady, while income from digital sales, on-demand streaming, synchs and digital performance royalties have been shifting up. But it’s important to note that the survey data can only indicate the direction of change, not the dollar value of change. As one survey respondent so aptly noted, the fact that his income from digital sales was moving in a positive direction does not mean that the income derived from digital sales was greater than that previously earned from physical sales.
  3. Technology has had a significant impact — both good and bad — on the sound recording landscape. Clearly, the traditional mechanisms for selling sound recordings have been severely impacted by unauthorized filesharing facilitated by technology. It has not only cut deeply into the retail sales marketplace, it has also impacted the value of music and the prices that musicians can charge for recordings. However, technology has also led to an explosion of legal, licensed music services and given individual musicians the ability to experiment with bundling options and variable pricing in ways that would have been nearly impossible 15 years ago. Also, emerging technologies have led to the development of new revenue streams — digital performance royalties, in particular — which are steadily becoming a noticeable source of income for an increasing number of recording artists.

The Value of Sound Recordings: from a non-issue to a new puzzle

Sound recordings are an income stream of varying relevance, depending on a number of factors.

For some musicians, questions about income from sound recordings are simply “not applicable.” Our research pool included hired-gun session players, salaried orchestra players and composers who write music for film and TV. Because they are paid a flat fee, salary or commission for their performance or creative output, their income is not directly tied to recorded music sales.

For others, it is one revenue stream of many (see all 42 possible revenue streams here).

And for others still, income from sound recordings is a shifting puzzle. Faced with the near ubiquity of recorded music, they are using any means possible — technological and otherwise — to extract value from their work, whether it’s limited edition vinyl, variable pricing or specialty box sets.

Sound recordings are valuable for many musicians, serving as an artifact of creativity that can not only earn money, but be used to leverage other income sources, from live performance money, to merchandise, to radio airplay, to synchs. These recordings will remain an important part of the ecosystem for years to come; what will change is the delivery mechanisms, the licensing structures and the pricing.

Technology has simultaneously decimated some revenue streams and facilitated entirely new ways of making money from music that were unimaginable even five years ago. Now that platforms like Spotify, YouTube, Rhapsody and Pandora are maturing and reaching more of the listening public, musicians will continue to debate the questions about how to comfortably participate in this marketplace. Artist Revenue Streams is a benchmarking effort, designed to get a snapshot of these changes from the perspective of musicians themselves so we can have substantive conversations about musicians’ earning capacity, now and in the future.

Kristin Thomson is a social researcher, organizer, guitarist, and indie record label owner. She is co-director of Future of Music Coalition‘s Artist Revenue Streams project.

2 comments on “Special Report: New Future of Music Coalition study finds that technology is a double-edged sword for musicians

  1. Oh…I love the information here, but even more so, I feel like I would need someone to hold my hand through attempting to fill out paperwork, remember numbers, and passwords to reap money through the new music busniness methods. I guess that is why I am on the no show list with revenue. This info – great to know, but for most stereo-typical artists, I am sure appears to be so scientific, accountant-ty, and business-y. I do music so as to cure the twitching in my eye, not enhance it… :)

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