Streams are Ad Impressions... Welcome to Internet Advertising

Musicians (including myself), I hate to break it to you... it's time to stop crying and start playing by the different and new set of rules.  You're not going to get paid more for your streams, and even if companies pacify you by doubling the amount they pay you, that's still negligible.  Nobody is going to say "Yay, I'm getting two-one-hundreds of a penny instead of one!".

music on radio versus television versus internet

Understanding the Media Landscape

Back in the day things were very different.  Most FM radio stations were based entirely around you with commercial advertisements inserted between your songs.  You couldn't skip them, you couldn't fast-forward, and you couldn't ignore them without still enduring the passage of time.  That's not how it works online.

If your song is leased for usage on television shows and commercials, movies, or video games, they are going to be heard and are adding some form of creative necessity to the product in order to make it convert buyers for the advertisers.

The infrastructure for all of these mediums already existed and were paid for by someone else.  And the main difference was, they were coming to you and not the other way around.  They wanted your artistic influence to associate it with their product and stir up emotions psychologically manipulate the viewers into making a purchase.

Fast-forward to the present and the game has changed.  Musicians still are the kings of the CD format and even the MP3 download arena.  Sure, you have to give a cut to the online distributor but that's how it's always been in the physical realm too.  At least now you aren't paying for manufacturing too!  There's a little bit of whining about percentages here but that's nothing new and will never change as long as humans are involved.

musician learning to survive internet music streaming

Musician learning to survive the internet music "stream"

The 3 Reasons For The Low Value Of Your Streams

The main problem that's going around today is all of the musicians making a huge fuss about how much they are getting paid for streams of their songs.  It's fractions of a penny.  Guess how much an internet advertiser earns when they display a publisher's banner ad?  Generally, a fraction of a penny.

This is happening for a set of very specific reasons.

The Free Market of the Internet

lassiez-faire free market internet

1) You're now encountering the free market where prices become situated based on the value they provide.  The internet hasn't had ridiculous government agencies setting laws concerning prices (yet).

This is the main aspect that is influencing the value of streams that musicians don't seem to understand (or care to understand).  Advertisements on the old mediums were sold with two factors in mind: the time slots and the period for which it would be played.  So you might say "I need 7 PM and 9 PM nightly for a period of 4 weeks."  And then you paid up-front, and you paid a lot.

When your song is played on the radio, it was easy to track the number of plays and pay out the artist.  The entire show was built around the music and every artist generally got the same rate per play.  But you couldn't track the influence of the advertisements on the buyer's side.  They had to hope and pray that they weren't wasting money.  You had no clue if someone purchased your product because they heard your radio commercial or because they saw your billboard or because they saw your newspaper ad.

Advertisement slots were also very limited, so bidding for those slots ultimately reached absurd prices.

Today, advertisers finally have extremely sophisticated tracking for online advertising, and there's almost infinite opportunities to show your ad.  It's supply and demand.  There's infinite supply and tracking to determine if that supply is worthwhile.  That drives prices way down.

In addition to all of this, you don't have to buy specific time slots for a certain period of time.  You can pay per impression, just like musicians got paid per song rotation.

Now you're on a level playing field where the musicians don't have the upper hand over advertisers, and the market adjusted itself.

Musicians aren't suddenly being taken advantage of.  It's quite the opposite.  We are now being paid for what value we bring to the advertisers.  And while the value is high for the listener, it's low for the advertiser.

They Don't Need You.  You Need Them.

musician groveling

2) The internet isn't coming to you like radio and TV did.  You are coming to the internet asking for exposure and marketing instead of hiring a manager and marketing team.

Radio and Television were confined to the dimension of time, which means there were limited slots for everything as discussed above.  The value for the advertiser and the musician were high because there was such an enormous concentration of ears and eyeballs at any given time.  Not so with the internet.  There's no confinement to locality or time.

The key difference here that's changing the stream payouts is that the internet doesn't need us, we need the internet.  The current trend of musicians is to skip out on real marketing and upload their music to Soundcloud and YouTube, cross their fingers and pray it catches on.  That costs both of those services a lot of money in hosting and bandwidth, but they show display banners to earn a profit.  So the burden is off of the musician here, which is why there's no payment per stream but based on advertising impressions and clicks.  You're playing someone else's game.

Okay, but what about Spotify, Pandora, and those guys who exist entirely off of the backs of musicians?  Why are they paying such little money to the artists?  The answer goes back to the advanced tracking of conversions and value to the advertisers along with the supply of songs.  Every year that passes introduces a larger catalog of music to humanity and new musicians trying to gain exposure.

New artists are willing to play shows for free, place their music online for free, and do everything for free.  Free, free, free.  That right there lets you know the value of the music, when even the creator doesn't place a monetary value on it.  They know that their set of songs are a drop in the ocean of music available worldwide. There's infinite supply and therefore little demand.

So when Spotify sells an advertising slot to a Company #1, they are going to quickly find out that they are throwing money away, so they offer to pay even less for those impressions, whether they are banner ads or audio commercials in between songs.  Company #2 comes along and barely has to bid any higher than Company #1 to earn the slot, which is fine because Company #1 already ended their campaign.  Company #2 lowers their bid because they are losing money and eventually stops their campaign.  Repeat for forever.

If someone advertises their new model of vacuum cleaner in between a rap song and a rock song on Spotify, you know how many vacuum cleaners they are going to sell?  Zero.  That's why you get paid a fraction of a penny per play... only because Spotify needs your music to have a platform to sell non-converting advertisements.

So maybe you go on strike and stop uploading your music to Spotify.  That's fine, because Sony or whoever else will gladly upload their entire back-catalog of music from dead musicians.  In the meantime, you've already given your music away for free on YouTube and SoundCloud and then can't understand why you aren't getting iTunes and Amazon sales... who pays for something they already have access to for free from anywhere at any time?

The Nutritional Content of a Music Diet is Zero

music has zero calories

Music has zero calories

3) Times are hard financially.  When the economy tanks, the first thing people stop spending money on is entertainment.  It's not a necessity, it's a luxury.

Finally, entertainment is a luxury and not a necessity.  When times are hard, we don't buy music.  We listen to the music we already own or we listen to the radio where we can get it for free.  When the choice comes down to eating dinner or going to see a movie at the theater, we're going to go to Taco Bell (which is why you hear Taco Bell commercials on Spotify more than you hear advertisements for luxury items).

The more time that passes, the more music is available and worth less and less.  I can literally walk down to this used media store in town and buy entire albums on CD for anywhere from $0.01 to $0.25.  Same with books and movies.  If a family can't afford to watch a movie or read a book, someone can make up a story on the spot that'll be just as creative and entertaining.

Yes, art is extremely important to humanity and culture.  I'm just saying that luxuries are the first things that stop getting bought when your bank account gets low.

Ultimately I envision a world where we've invented enough technological advancements that electricity is free, food is abundant, and all menial labor is performed by automated A.I. robots.  All that's left for us to pursue at that point is the things that robots can't do, which is make certain judgement calls or be creative.  That is when art will flourish again in a big way.

So What's the Solution?

It doesn't matter if you're an established musician or an aspiring one... the answer is the same.  You need to build a fanbase and charge for live performances and merchandise (excluding your music).

play live shows and concerts for money

It may not be fair, but the majority of people agree that media-based entertainment should largely be free and accessible for everyone to enjoy, no matter their income levels.  That's why torrent downloads are such a huge problem right now and bootlegs were a problem back in the day.  It's not that people don't want to pay, it's that a large number of people can't pay.  And again, luxuries aren't necessities.

Wealthy people will always exist and always spend for experiences others can't have, and you can charge whatever you want for performance tickets.  Or you can keep it low and let everyone in and perform three or four times a night.  It's like releasing a new album every time you play, versus hoping to get $10 per album sale.

Most of us are creating authentic and genuine music that touches people's hearts and intellect.  But then you have the crap pop stars and horrible big-budget Hollywood movies coming out.  It sucks to shell out $15 for a CD or a movie ticket to walk away from it feeling like you wasted your cash.  And that's what happens 99% of the time.  People have lost faith.

The answer for real artists is to keep it grassroots, build a true fan base, and go make your impact.  Stop tying your income to your art.  Have a day job.  I can promise you 100x over and so can a thousand other artists who are meeting success... creating art as a way to make money sucks all the fun out of it.  Your art suffers, and then it's an endless cycle.  Of course nobody wants your sucky art that's no fun to listen to because it's all about how you can't make money from it and other angsty ideas.  Having a regular income means you don't have to worry and that unlocks the creative center.  Heck, you could even do this by becoming a music teacher!  Your art will improve because of it.  That's not even to mention that you'll have access to better gear so you can produce higher quality music too.  Heck, maybe then you could open a recording studio...

Here's your TL;DR to this entire scenario:

  • Your songs don't make money for vacuum salesmen.
  • The internet and world doesn't need your music.
  • Music is a luxury, not a necessity.  And there's tons of it already available.
  • Stop trying to make money from art sales and help produce necessities for living.
  • Try to make money from art performance, merchandising, and teaching instead of intangibles.  Learn some marketing principles!

Art is always going to be a hard racket.  Always.  If you're an artist and you're whining about money, you're not in it for the art, you're in it for the money just like the corporate people you claim to hate.  Every artist knows that they are going to struggle like every other starving artist, unless they have the sense to hold down a job as well.

personal responsibility

In the end, it's about being responsible for the decisions you make.  Don't act like you've transcended the desire and need for money, because that's not how it works for anyone walking the planet.  Even monks have to pick up their begging bowls and ask for food and cash.  But they don't whine about it, because they chose that life.  It shouldn't be any different for anyone else pursuing abstraction.

Basically, don't pursue art as a career.  Pursue art as art for the sake of art.  If you need money, go get a job, you bum.