What does it take to earn a living with digital music?

Posted on 02. Jun, 2010 by refe in STRATEGY

I’m sure many of you have seen this already, but it’s just too good not to share. Below is a beautiful info-graphi.c that breaks down the amount of music in various digital formats that a single artist would have to sell in order to meet the US minimum wage in a given month.

As you can see as you scroll down through graphic the returns become increasingly low. In order to earn minimum wage through spins on Spotify alone, your track would have to be played 4,549,020 times in a single month. A little intimidating.

Pink dots can’t tell the whole story

Now, it’s important to note that the data being visualized here is somewhat flawed. This is for a couple of reasons. If you look at the fine print at the bottom of the graphic you’ll notice the following:

Rates do not include publishing and performance rights for songwriters.

These royalties can actually make a huge difference, especially when it comes to internet radio.

For example, I got myself into a bit of trouble a few months back by mis-interpreting one of Lady Gaga’s Spotify statements. After just over one million plays on the streaming music service, Lady Gaga earned an abysmal $167.

These numbers were shocking at the time. Lady Gaga’s earnings were one of the first real case studies of the kind of revenue artists should expect from services like Spotify, and the results were less than promising.

However, after more details emerged it became clear that the $167 payment was only a piece of the puzzle. The $167 was only Gaga’s half of the publishing royalty, and didn’t include the performer’s fees paid by Spotify. The real total was probably more like $1837. Still not great, but streaming is only one small part of an artist’s digital strategy.

Would those additional numbers make much difference in the size of those massive pink dots at the bottom of the graphic? Probably not. But every little bit helps, so it’s worth being as accurate as possible.

How to react

Some artists and labels have looked at these numbers and react by threatening to boycott streaming services due to the extremely low returns. That type of knee jerk response ignores the realities of the digital music market.

The challenge for artists today is not simply how to earn enough money to pay the bills. Any new artist has the formidable task of rising above the noise of an intensely crowded market. Services like Last.fm and Spotify may not pay well, but can be a great way to expose new listeners to your music.

Using Lady Gaga once more as an example: Lady Gaga had her track streamed over one million times in 5 months. During that same period she also sold over 20 million paid downloads. Do you think maybe all that streaming had something to do with it?

Diversification

If this graphic teaches us anything it is that the key to a successful digital music strategy is diversification. There is simply not enough money to be made by focusing in on one format.

Take the smallest dots in the graphic and do what you can to drive revenue from those formats. Read Monday’s post on a recent report that shows listeners still want to purchase physical formats, such as vinyl. This graphic preaches the same message.

Remember, though, that streaming radio and other services that drive little to no revenue may still drive the sale of some of the higher margin items, such as paid downloads, CDs, and vinyl releases.

Making a living as an artist is not an easy thing to do, as these numbers make painfully clear. But it can still be done. And remember – these pink dots are not the only revenue streams available to an artist. Live performances, special edition products, merchandise, licensing, etc. are big slices of the revenue pie. They may be missing from the chart above, but they should certainly be present in your strategy.

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Tags: diy, independent, lady gaga, online streaming, Spotify

15 Responses to “What does it take to earn a living with digital music?”

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02. Jun, 2010

[...] This post was mentioned on Twitter by Refe Tuma, Naive Harmonies. Naive Harmonies said: RT @refeup: What does it take to earn a living with digital music? http://bit.ly/cSwrM7 #diy [...]

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Brian Sapp

02. Jun, 2010

Good article. I recently met an artist who I would have considered to have “arrived’. What I mean by that, is the band was selling out large venues in the U.S. (1K+ size venues). They’ve also sold 150,000+ albums of their most recent record, had their music licensed in TV shows, etc. but the lead singer confided in me that he still couldn’t pay his rent. It was a very disheartening conversation, and he was considering quitting the band if he didn’t start earning money soon.
Artists who are reaching certain levels of ’success’ don’t see the money that’s earned as it’s used to cover ever expanding costs. The pie is divided by more and more parties – ie. label, management, promoters, etc, especially early in their career – and it’s always a battle to get their fair share.

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Brian Sapp

02. Jun, 2010

Please excuse the typo above I meant to say 15,000 albums not 150,000 – big difference!! My apologies.

Reply to this comment
- refe
  
  03. Jun, 2010
  
  That is a big difference – I imagine that if they were selling 150,000 albums their story would be a bit different!
  
  Even with selling 15k (let’s assume that was in one year) they’d be averaging 1250/mo. That’s pretty close to the numbers listed above, depending on how they are distributing those albums (iTunes downloads, CDBaby, self-pressed, etc.)
  
  The problem is that they are splitting all that revenue between 3 or 4 people. The above graph was created for individual artists to make minimum wage.
  
  Nevertheless, I’d be interested to find out what kind of money they are making from those 1k+ seat venues. It seems like with their revenue mix they should at least be close to the point of making a decent living.
  
  Of course, all of this depends on good book-keeping sense and smart decisions when it comes to expenses. It is a business, after all. That’s an area that many artists still have a lot of trouble with…
  
  Reply to this comment
Brenda K of The Panache Orchestra

03. Jun, 2010

Hi there Refe,

Good post as usual! Another incisive dissection of that same visual aid took place, followed by a lively discussion here:

http://www.stevelawson.net/2010/04/how-do-musicians-earn-online/

Do you know @solobasssteve?

Reply to this comment
- refe
  
  03. Jun, 2010
  
  I don’t know him personally, although we’ve crossed paths once or twice. I think Rich Huxley, who contributes to this blog, knows him fairly well.
  
  Steve’s is a great post – I hadn’t seen it before posting my own thoughts. He delves much more deeply into the value of streaming music as a promotional vehicle, and his opinions are spot on.
  
  I think that for many the argument over streaming music boils down to two major camps:
  
  On the one side you have those who assert that artists should be paid what they believe to be a reasonable fee, and that this takes precedence far above the promotional value of streaming. (An even more extreme example of this can be found in the debate over the Performance Rights Act here in the US.)
  
  On the other side, you have those who are happy that they are earning anything at all from streaming, because they understand the incredible promotional value of having your music included in the catalog of a service like Spotify.
  
  In Steve’s post he compares streaming to ads, arguing that having your music streamed is like free advertising.
  
  This is accurate, I think. Just like broadcast radio was never meant to be a primary revenue source, but rather a promotional vehicle for recorded works and live performances.
  
  Reply to this comment
  - Brenda K
    
    04. Jun, 2010
    
    Steve resonates with me for many reasons, starting with the fact that he’s a career instrumentalist (to place that remark in context, as a career instrumentalist/orchestra player/session player turned indie artist, I have found the dearth of information relevant to that particular career trajectory extremely frustrating since the indie artist scene is extremely singer-songwriter/indie rock band-biased) who is making a viable go of it as an independent artist; he shares his wisdom liberally with others; and I love his sense of humor and spot-on posts that have amassed an especially interesting community.
    
    He did another blog that incited an especially impassioned response from his fan base (including moi, and in fact it literally hijacked my entire weekend!) on the subject of your remark about the camp that believes musicians and creators of content ought to be reasonably compensated for their product. You can peruse that here if you like: http://www.stevelawson.net/2010/05/sharing-is-not-stealing-cost-value-and-the-desire-to-share/
    
    Do you happen to have a link on hand that encapsulates the essence of the extreme debate about the performance rights act in the US that you alluded to? Apologies for my indolence – I’ve been trying to follow that, but am stretched so thin (in fact, the stress of it all is making me fat!) that I’m always delighted to be treated to a “Cliff’s Notes” version of any given flashpoint….For that matter, Steve did a brilliant post on a similar subject in Europe: http://www.stevelawson.net/2010/04/my-letter-to-the-musicians-union-about-the-digital-economy-bill/
    
    For the record, Steve has not hired me to flack for him – I just find his posts exceptionally insightful and helpful, as well as humorous, kind of like my favorite journalist Firas Al-Atraqchi. (He’s gonna trip hard on being name-dropped into a music punditry conversation!)
    
    It’s all just food for thought and/or creative fodder.
    
    Very best wishes,
    
    Brenda K
    
    Reply to this comment
    - refe
      
      04. Jun, 2010
      
      Here are two pieces that I wrote on the Performance Rights Act last year. As a quick disclaimer, my views have changed considerably since writing this, largely because the bill has changed considerably. They’ve put in place some safe-guards to (hopefully) insure that this bill doesn’t have the kind of huge, unintended consequences that seemed inevitable in earlier revisions.
      
      Read this one first:
      http://www.creativedeconstruction.com/2009/06/5-reasons-why-the-performance-rights-act-is-a-bad-idea/
      
      And this one for some updates:
      http://www.creativedeconstruction.com/2009/08/performance-rights-act-discussed-in-heated-senate-hearing/
      
      You can see in the comments of the first article that my opinions were not well taken by the musician community, of which I myself am a member…
      
      Hope that helps!
      
      Reply to this comment
Carla J. Patterson

03. Jun, 2010

I find this really helpful as I am producing my own music and have limited opportunities to get out and perform for various reasons. I think it’s awesome that the plans I have to release my own CDs through CD Baby pan out about the way I thought they would. I’m already releasing my original music and collaborations at iCompositions.com, MacJams, AcidPlanet, and MySpace and have always considered it as less of a money maker and more of a way to find artists I’d like to work with and to get my music out into the world. It’s nice to know that I may be able to recoup the expenses I have in terms of equipment and software through selling a few CDs (let’s say a few hundred a year). That’s awesome for me since I don’t need to make my living through my CDs.

I think that young musicians and/or those who can still tour and make money that way have a chance to make enough money to live at least – being a musician is not an easy or a lucrative life for most – never has been. But, if music is the thing you love most and do best, perhaps that’s still a tradeoff worth considering. Or it may be a good way to live while young and fit, with fewer responsibilities, then follow it up with teaching, being a studio musician or backup singer, and/or the many other ways one can use music in a career which isn’t quite as focused on one’s original music and performing.

Anyway, thanks very much for posting this and for the discussion of what it all means as well. Enjoyed reading it and it’s being discussed at iCompositions.com as well (where I saw the link to your graphic and these comments).

Carla JP
singer/songwriter/composer/arranger

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Rich Huxley

04. Jun, 2010

I’m very interested in the rates applied here. It’s to do with the number of plays versus the payment.
Two breakfast show plays on BBC Radio1 play in the uk, could very well be the same number of “listens” as the spotify stream in the above diagram. It will not however result in anywhere near minimum wage, or anything like enough to live off. Spotify is actually playing More per listen on that basis.

And yes, I wholeheartedly agree with you Brenda… Steve’s an inspiration.
xR

Reply to this comment
- refe
  
  04. Jun, 2010
  
  Setting revenue aside entirely, the quality of a single listen on a streaming service like Spotify, compared to the quality of a single listen on broadcast radio is much higher. In general, the listener makes a choice to listen to a track, rather than have it passively inserted into their day. That’s another consideration that swings in streaming radio and on-demand services’ favor.
  
  Reply to this comment
Carl L.

04. Jun, 2010

Great article. Thanks for breaking this down. Bottom line is that making money from recordings is harder than ever. Artists need to find another channel – performance, use in films, whatever.

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Shane Foxx

06. Jun, 2010

Well actually, even if you don’t get a lot of money from that, you get noticed and foundable in public places, and that’s important for after selling self pressed CDs, for example…
Independant artists get their money from gigs mostly anyways.

Reply to this comment
- refe
  
  14. Jun, 2010
  
  You’re right – just because something pushes a little bit of revenue your way doesn’t mean that’s all it’s good for. Or that it should be measured exclusively by how much revenue it earns an artist.
  
  Setting aside streaming, digital downloads themselves are being given away by many artists to drive the sale of other products or to gain exposure in general.
  
  Reply to this comment
Chris Bracco

22. Jun, 2010

I saw this infographic a while back, and it really is an eye-opener, especially to those who continually praise the digital success of artists.

It is insanely easier and more profitable to sell 143 CD’s at a gig than to hope spotify users will stream your song 4.5 million times. However, that doesn’t mean that your music shouldn’t be there! It should just be another piece of the revenue stream.

Like you said, what streaming services like Last.FM lack in royalty payouts, they make up for in the potential exposure your music can receive.

Thanks for sharing this!

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