Open the Music Industry's Black Box

This is the titular plea of a Sunday Review column written by David Byrne. Byrne argues that these days should be a golden age for music, with more music being made and people growing used to paid services such as Spotify, which Byrne credits with "sav[ing] a record industry that piracy had gutted." But at the same time, tales of artists receiving paltry payouts from these services abounds.

A couple years ago, I raised just this issue: is the compensation that artists get from streaming services enough? Byrne's update is a variety of "not so fast there." He argues that:

...ways have been found to siphon off a greater percentage than ever of the money that customers and music fans pay for recorded music.

So if only a trickle of pennies is making its way back to the artists, maybe we ought to be pointing a finger at something other than the streaming services. Unfortunately, contracts and non-disclosure agreements are keeping all this shrouded in mystery from the general public.

No problem, you think, Byrne isn't the general public. He's a recording artist, producer, composer, and copyright holder. Surely someone who makes and owns the music ought to be able to get information on how revenue is distributed, right? Nope.

Byrne, having been told that royalty calculations were "...disclosed [] only to copyright owners" went to his own distributor, and hit a wall when they told him "You can’t see the deal, but you could have your lawyer call our lawyer and we might answer some questions.”

Byrne also reports on his frustrations trying to get simple answers to questions like "What's the general split of ad revenue on YouTube?" Byrne again credits Spotify for trying to make things clearer and notes that its data show that 70% of what listeners pay Spotify goes to the labels that hold the rights, and who often demand advance payments even before music starts to stream. What Sony, BMG, et al do with their 70% so that only pennies trickle into artists' bank accounts remains a mystery.

Certainly what they are not doing is managing the physical processes they used to manage. Disks, packaging, transport, distribution, inventory control, etc. are all valuable services when you're selling physical goods and in the days of vinyl and then CDs the labels handled these things and paid out money for each of them. In the era of electronic distribution all those things that previous were costs instead go into the labels' profit margins. In addition, the money that labels get from streaming services is mixed with all the other sources of profit (or loss) from the labels' other businesses, cranked through some arcane formula and only then will the label decide how much it gives to the artist. Your record might stream more on Spotify than mine but that's no guarantee you'll see more revenue at the end.

Recall that a few months ago we were just discussing how e-book sales calculations are a black art. Profits from streaming are even moreso, and it's not likely to change because it's in everyone's interest - except the artist of course - to keep it this way. So remember this next time you read a complaint about how meager the money is coming from streaming services. Not only is not the streaming service's fault, the service might even not be able (legally) to talk about why it's not their fault.