In the news today is a story about Jimmy Buffett taking the stand at the inaugural Vanity Fair New Establishment Summit. Daniel Ek, the founder of Spotify, one of the internet’s leading music streaming services, was speaking. Buffett wanted to know if his royalties were going to go up anytime soon.
Ek said no.
Buffett argued, and it was a good and legit argument, that newer musicians aren’t making enough from the service to play their music, and that’s one of the reasons they’re struggling.
The argument goes further than that. Of all the money that Spotify makes, most of it, up to $1 billion, will go to the rights holders to the music. 70% in fact, will go to those holders. If a newer musician is tied to a major label, chances are very good that that label is the rights holder, not the musician. So the label is going to get a big chunk of that $1 billion, while the artist is only going to get a fraction of a cent each time one of their songs is played via the service.
Now, here’s where the issues really start to show themselves.
First of all, newer musicians have to read those contracts. Instead they’re told about all of the fame and fortune that awaits them if they just sign the contract, and how the label is going to back them 100%, and how they’re going to be huge stars. They sign, and typically are given a bonus. Let’s say $1 million.
They are expected to do things with that $1 million. Get a nice car, nice bling, nice clothes, new tattoos… and when their album comes out, the money made from that album goes back to the label, to pay back that $1 million. If that album isn’t a hit or a huge hit, and the artist doesn’t make a ton of money from it, if they actually make back that $1 million but not much more, they’re left with the not much more. Suddenly they’re struggling again.