CMU:DIY Notes

Lecture Notes | The Streaming Business

Published on Wednesday 27 September 2017

These notes accompany the CMU:DIY lecture ‘The Streaming Business’ and provide a beginner’s guide to the streaming music market and how DIY artists can get their music streaming.

In addition to these notes, you can also download the slides for the ‘Streaming Business’ lecture HERE and you can access the ‘Dissecting The Digital Dollar’ reports and guides these notes are based on HERE.


 

INTRODUCTION
We all know that the story of recorded music over the last fifteen years is all about the shift from CDs to downloads to streams.

That shift is still ongoing. Worldwide, physical product – mainly CD – still accounts for about a third of the record industry’s revenues. Though certain markets where CD sales are still significant (mainly Japan and Germany) skew that figure, and overall CD revenues continue to decline.

It is streaming where revenues are booming, and that boom has pushed the wider record industry – which saw its income slump in the 2000s – back into growth. And for new artists, getting your music online and streamed is the main priority.


 

THE DIFFERENT STREAMING SERVICES
There are, of course, a number of different kinds of streaming services.

Paid-for on-demand streaming services
The big two paid-for streaming services worldwide are Spotify and Apple Music, though there are plenty of others to choose from, including Amazon Music Unlimited, Deezer, Tidal, Google Play Music and Napster.

Most offer a similar sized catalogue of music (40-50 million tracks) for a similar price point (usually £10 a month with student and family discounts available).

In terms of the royalties paid out to the music community, these are by far the most lucrative services for artists, songwriters, record labels and music publishers.

Free on-demand streaming services
The free-to-access streaming services – paid for by advertising – have many more users but generally generate much less income for the music industry.

YouTube is the biggest streaming music platform overall in terms of users. The other big free streaming platforms are the free versions of SoundCloud and Spotify.

Then there is Vevo. This is actually a standalone music video service with its own website and app. Though most people know Vevo because it manages the official YouTube channels of many artists.

This includes the official YouTube channels of most Sony Music and Universal Music signed artists, the two major record companies being key shareholders in the Vevo business.

Services with less functionality and catalogue
Although in most countries the big streaming services are Spotify, Apple Music, YouTube and SoundCloud, in the US you also have Pandora and iHeartMusic, which both command very big user-bases.

These are mainly ‘personalised radio’ services, which means they play you a personalised stream of music they think you will like based on information you provide, but you can’t request a specific track or album at anytime.

Most people are on the free versions of Pandora and iHeartRadio, though they offer premium options too. This includes an ad-free version of the personalised radio experience and an on-demand option more like Spotify.

Standalone personalised radio services have never really taken off in Europe, though most on-demand streaming services like Spotify and Apple Music offer this kind of experience within their platforms, in addition to the fully on-demand streaming set-up.

In addition to the services that offer less functionality there are those streaming platforms that offer access to a smaller catalogue of music for a lower price point. The biggest of these is Amazon Prime Music, which offers a few million tracks to stream as part of Amazon’s Prime membership scheme.

Services elsewhere in the world
Although YouTube, SoundCloud, Spotify and Apple Music are the big players in streaming globally, in some markets there are important local services too. These include: QQ Music (China), Line Music (Japan, Thailand), Saavn (India) and KKBox (Taiwan, Malaysia).


 

GETTING YOUR MUSIC STREAMED
Before we talk about how DIY artists can get their music onto the streaming platforms, it’s worth saying a few things about music copyright.

Music copyright
Every time you write a song you create a copyright. Every time you record a track you create another copyright. Which means there are two separate sets of music copyright:

1. The song rights (aka ‘publishing rights’) created by songwriters and managed by the ‘music publishing sector’.

2. The recording rights (aka the master rights) created by artists and managed by the ‘record industry’.

Copyright controls
Copyright provides copyright owners with certain controls over what happens to their content. There are six main controls: the reproduction control, the distribution control, the rental control, the adaptation control, the performance control and the communication control.

Copyright makes money whenever another person or company wants to exploit one of your copyright controls. So they want to reproduce, or distribute, or rent, or adapt, or perform, or communicate one of your songs or your recordings.

Whenever that happens, they must get your permission to exploit your copyright controls. You charge for your permission (aka licensing), which is how copyright makes money.

Digital licensing
A digital service streams recordings of songs. Which means it needs to get permission to exploit both song rights and recording rights.

Also, a stream is BOTH a ‘reproduction’ and a ‘communication’ of the recording and song at the same time.

So when a streaming service gets its licences covering song rights and recording rights, it also needs to make sure that the licences cover both the reproduction and the communication controls.

Your music: YouTube and SoundCloud
The easiest way to get your music onto YouTube and SoundCloud is to simply set up a profile with each platform and upload your tracks.

Once you have set up your YouTube profile you should become a ‘content partner’ with the platform. This means that YouTube will share any ad income that is generated around your content. This is going to be a nominal sum of money until you are getting significant streams on YouTube, but you might as well get set up as a content partner straight away.

SoundCloud offers a similar option for content creators to share in ad income, though this system is much less developed and is still available on an invite-only basis. However, it is worth requesting an invite for when SoundCloud’s content partner programme gets properly rolled out.

Your music: All other services
With the other streaming services you need a distributor to get your content online. The distributor provides your tracks to the streaming service and then collects and passes on your royalties.

There are a number of digital distributors that work with DIY artists, including AWAL, CD Baby, Distrokid, Ditto, EmuBands, Spinnup and TuneCore. Some charge you an upfront fee and some take a cut of any income you generate.

When choosing a distributor, you might also want to consider what streaming services they distribute to, what other marketing services they offer, whether they can advance income to more established artists, and whether they have an actual UK base.

Your music: Remember your song rights
If your track is a recording of a song you wrote, you are also due publishing royalties. These are not collected by your distributor and will instead be paid via a thing called a ‘collecting society’.

In the UK there are two collecting societies for songwriters. PRS collects whenever your ‘performance’ or ‘communication’ controls are exploited. MCPS collects when your ‘reproduction’ or ‘distribution’ controls are exploited. Remember, a stream is both a reproduction and a communication, so both PRS and MCPS collect streaming income.

To access this money you need to join the two societies. The good news is that PRS and MCPS work together, so you can join both via one platform. It costs £100 to join PRS and £100 to join MCPS, but those are one-off charges. Though you join as individuals, so in a band of four you will each have to join, and each pay £100 to PRS and £100 to MCPS.

PRS also collects royalties whenever your songs are performed live at a gig, or are played on radio or TV, or in a pubic place like a pub, club, cafe, gym or workplace. MCPS also collects whenever your songs are pressed to CD or vinyl, or synced into a TV programme.

The streaming income you initially receive from PRS and MCPS probably won’t be enough to justify the joining fees, though when combined with the other royalties the two societies collect it is probably worth signing up.

Your music: If you sign with a label or publisher
If at any point you sign to a record label, it will take over the distribution of any recordings covered by that record deal. The label would then deliver the content to the streaming service and collect the money, sharing it with you subject to the terms of your record contract.

If at any point you sign to a music publisher, it will collect the ‘reproduction’ royalty, either from MCPS or the streaming service direct, and share that money with you subject to the terms of your publishing contract. PRS would continue to collect the ‘communication’ royalty, but would pay 50% of the money to the publisher.


 

WHAT’S THE DEAL?
OK, your music is now streaming online, how does the streaming service work out what it needs to pay you? Now we need to talk about the deals the streaming services do with the labels, distributors, publishers and collecting societies. They are quite complex.

How streaming services pay
The core deals done between labels, distributors, publishers and collecting societies and the streaming services are “revenue share based on consumption share”. Every deal is different, but…

• Approx 50-60% of advertising and subscription income goes to the labels and distributors – which share that money with artists.

• Approx 10-15% goes to the publishers and collecting societies – which share that money with songwriters.

• The streaming service aims to keep about 30% overall.

Remember – it’s revenue share based on consumption share. This is how it works…

1. The streaming service works out how much money it made and how many streams were delivered in any one month.

2. For each label, distributor, publisher and collecting society, it works out what percentage of overall streams were of tracks or songs they control.

3. It then allocates that percentage of all the money it made last month to that label, distributor, publisher or collecting society.

4. It then shares that allocated money with said label, distributor, publisher or collecting society according to the relevant revenue share deal (which could be anything from 10-60%).

So how much you earn per track can vary from month to month, depending on how many tracks were streamed overall.

The money you earn per track will also vary from service to service and country to country, and will depend on the specific deals your label, distributor, publisher and/or collecting society did.

Though it’s almost always the case that you will earn significantly higher royalties when your music is played on a paid-for streaming service versus a free streaming service.

The need for sustained listening
But in all cases, the money paid by the streaming service for each individual stream is very small (less than a penny), and that’s before a label, distributor, publisher or collecting society takes its cut!

Therefore, for streaming to work, artists need to make sure their music is streamed again and again and again and again. So whereas with CDs and downloads it was all about persuading as many fans as possible to buy your record as soon as it was released, now you need to persuade people to keep listening to your music repeatedly over a long period of time.

Everyone in the music industry is adapting to this new model where ‘sustained listening’ is key. The shift to streaming means artists need to market and talk about their music in a different way.

Playlists on the streaming platforms play a key role too – public playlists to get your music into people’s ears for the first time, then each user’s personal playlists in their personal library to get that repeat listening.


 

GETTING YOUR MUSIC STREAMED
As you can see, there is lots of information to digest – and these notes are the simple version! You can read a much more detailed explanation of how it all works in the Digital Dollar guides here.

But let’s finish with some action points…

1. Write some great songs and record some great tracks.

2. Get them onto YouTube and SoundCloud – and monetise your YouTube profile by becoming a content partner.

3. Get your music into all the other streaming services – work out which distributor type works for you.

4. Join PRS and MCPS to get your publishing royalties – though this costs money, so you need to think when it makes sense to get signed up.

5. Promote your music on the streaming platforms at your gigs, on your socials and website, etc.

6. Remember – premium services pay more. So, maybe use YouTube to promote Spotify content.

7. Set up playlists featuring your music and music that inspires you – making it easier for people to find you.

8. Find ways to encourage people to add your tracks to their personal libraries on their streaming platform of choice.

Reality check
Driving sustained listening is a challenge and your streaming income is likely to be nominal until you start securing significant numbers of streams. Though it quickly starts to mount up if and when you get some traction around one of your tracks. In the meantime – there are other benefits to having your music streaming – such as marketing, data and engaging the industry.


 

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