In our MW:M Core Focus Newsletter #3, we spoke with platinum-certified songwriter, Linda Stark, and Chris Cooke, founder of the music industry media and consultancy firm CMU. We wanted to know how artists and songwriters can keep the advantages of the various platforms, data systems, and algorithms, while making sure that money created via this tech is shared fairly. We are excited to share the full interview with Chris with you below – enjoy reading!

Q: Technology has – supposedly – democratised just about every corner of the music industry, and yet plenty of people – DIY/indie artists and smaller labels for instance – still report that they are feeling the financial squeeze. In today’s industry, where does the financial power balance lie in the complex music business structure, and how should technology be moving that power – and where should it be moving?

The big shift to digital – in the way music is produced, distributed, consumed and marketed – removed many of the barriers to getting music to market, which was a brilliant thing. 

It’s much, much easier to make and release music, which is why millions of music-makers are doing just that. But now millions of people are making and releasing music, while the record industry’s vast catalogues are also easily accessible, which means every music-maker is facing unprecedented levels of competition. 

If we look at streaming income, the streaming services operate on a revenue share model, committing to hand over 65-70% of their revenues each month to the music industry. 

Each track is allocated a portion of the service’s revenue based on what percentage of total consumption it accounted for. Then 50-55% of that allocation is paid to whoever controls the recording, and 10-15% to whoever controls the song contained in the recording. 

Once you average everything out, the payment per play is fractions of a cent. However, there are billions of plays and, for the industry at large, streaming generates huge amounts of money. Yet many artists and songwriters make nominal income from streaming. 

There are various reasons for this. 

First, simply, the competition. You need to be getting millions of streams to make decent money and, given the huge quantity of music being released, that is a challenge. And artists with big fanbases – and artists working with record companies with big marketing machines – always have a big advantage. 

Second, where an artist has signed a deal with a record label, they will be sharing streaming income with that label. Maybe the artist gets a majority of the money, maybe the label gets a majority of the money, maybe it’s a 50/50 split. Where the label keeps the majority, maybe that’s fair given its investment in the artist – which should help grow the artist’s other revenue streams – or maybe it’s not fair. Depends on the deal. 

For artists that signed long-term record deals in the pre-streaming era, what share they are getting will depend on how their label is interpreting a record contract that doesn’t mention streaming. They could be getting a CD royalty rate of less than 20%. 

Third, for songwriters, there are two issues. For various reasons, significantly more streaming money flows to the recording than the song. And because of data issues in the industry, the payment of song royalties is very inefficient, so a chunk of the money will be lost to admin fees, and payments may not reach the writer at all. 

Fourth, in most countries, session musicians don’t earn anything from streaming, even if they performed on a track that gets millions of streams a month.

The big challenge for music-makers is that they are not involved in negotiating the licensing deals that dictate the streaming business model. 

A small number of streaming platforms and large rightsholders negotiate those deals. So, I guess, ultimately, that’s where the financial power lies. 

But music-makers and independent music businesses should make sure they understand how the business model works and that their concerns are heard, and the best way to do that is through trade bodies and industry organisations.  

All that said, for frontline artists, there’s something else to consider. The most important change caused by the shift to digital was in the direct-to-fan relationship. 

That relationship is hugely powerful and the opportunities to monetise it are still often under-utilised. This is where frontline artists have more direct control over how they capitalise on an opportunity created by digital innovation. 

New technologies and platforms are further growing the opportunities in this domain. Whereas direct-to-fan was originally about having an online artist store selling physical products directly to fans, now it is also about providing superfans with premium digital content and experiences, with various different platforms able to assist in that process. 

The challenge with direct-to-fan is that the products, experiences and platforms that work for each artist’s fanbase are very different. So, the artist and their team need to utilise all the fan data that is now available to identify what will work for them and their fans.