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BILLBOARD TALLIES MUSIC INDUSTRY’S TOP EARNING ARTISTS

The Billboard story, “Music’s Top 40 Money Makers,” is here.

RAIN ANALYSIS: NET RADIO FAR MORE BENEFICIAL TO ARTISTS THAN THE ROYALTIES THEY EARN

Assessing the findings of the report, Reuters writes:

The results show that of the more than 100 artists examined to compile the Money Makers list, only 10 made more than $2,000 from noninteractive streams in 2009, with Beyonce topping the list with an underwhelming $5,000.

Here’s the problem
Generally speaking, Reuters misrepresents the role Internet radio plays in the music industry. The article begins “As the music business continues to watch traditional revenue streams slow or even evaporate, a good deal of faith often has been placed in what’s hailed as a panacea for the industry’s ills: online streaming.” But the power of Internet radio is not as a direct revenue generator for performing artists. It was never intended to be, nor portrayed as such. Non-interactive streaming, like traditional radio, has a historically-proved power of promotion, which drives artist revenue in other areas that weren’t counted or credited to Internet radio for this study (see below). Because radio (and Internet radio) give artists a free forum to expose their art, increase their profile, and build their brands, performers can book tours; sell concert tickets, merchandise, CDs and digital downloads. They win awards, get their music in commercials and movies, and secure opportunities for sponsorships and endorsements, because of the promotional power of (among other efforts, certainly) broadcasting (both on-air and online).

Internet radio drives music sales
Looking at the Beyonce example in particular, Billboard makes clear that the $5,000 she earned from Internet radio does not include “revenue from merchandise sales, sponsorships, synchronization deals and songwriter performance royalties” (this last would represent the ASCAP/BMI royalties Internet radio pays to compensate songwriters and publishers). Internet radio, with its direct links to online music sellers like Amazon and the iTunes Music Store, has repeatedly shown that it drives music sales. Billboard itself reported on an NPD Group finding that “free online radio leads to a 41% increase in paid downloads.” NPD analyst Russ Crupnick commented (from Digital Music News coverage), “The more time that I spend with free online radio — something like Pandora — it actually tends to have a discovery effect… It is having the discovery effect that we want, and I think part of the reason is that I can’t necessarily pick-and-choose what I want to listen to.” Pandora founder Tim Westergren points out, in the sames article, “We sell about $1MM/month directly through Pandora (i.e. iTunes/Amazon). And another survey tells us that’s about 30% of the actual number — i.e., if you include offline buying. So it’s something like $35MM incremental purchases annually, directly from Pandora.” Of course, how much or how little of that revenue goes to the artists is a matter for a different time, and not one in which Internet radio has a role.

But Internet radio pays royalties too
Unfortunately, it seems that the royalties performers received (not the total of what webcasters paid, but what performers ended up receiving) was all that was taken into account in Reuters’ assessment. Royalty income from Internet radio performances is not comparable to other revenue streams for performers, like touring, merchandise sales, and earnings from recording sales. A featured performer like Beyonce collects only 45% of the royalty Internet radio pays to play her music. Her record label gets 50%, her back-up performers share the remaining 5%. That’s the nature of the statutory license.

And keep in mind that $5,000 Beyonce made from Internet radio is exactly $5,000 more than she made from being played on terrestrial radio.

One final note on royalties and the nature of different types of streaming services: The study points out artists see higher revenues from on-demand streaming services. This is because those services pay significantly higher royalties than Internet radio. And that’s logical, as the evidence (and common sense) indicates that while non-interactive Internet radio is promotional in nature, “play-what-I-want-right-now” streaming services are “substitutional” in nature (see the NPD study coverage, as well as Eliot Van Buskirk’s “Of Course On-Demand Music Replaces Sales – It’s Supposed To,” from Wired.com) — people use these services instead of buying music, which is why they pay higher royalties — to offset the loss in music sales. So to compare the two services and not take Internet radio’s promotional power into consideration, as well as interactive streaming’s likely detrimental effect on music sales, is unfair. An “apples-to-apples” comparison of artist revenue from Internet radio versus on-demand streaming would need to involve not only the royalties those services pay, but how they affect sales (again, Internet radio helping sales while interactive streams are likely substituting for music purchases).

The Reuters article, “Performers see tiny returns from streaming music,” is online here. RAIN’s coverage of the NPD Group study (with a link to Billboard’s coverage) is here. Read Crupnick’s and Westergren’s comments on the study in Digital Music News here. Finally, Van Buskirk’s Wired article is in the Epicenter blog here. — PM with MS

BBC CONFIRMS LIKELY CLOSING OF TWO STATIONS, WEB SITES

News of the cuts leaked last week, and were confirmed by Director Mark Thompson today.

Comment

1. Paul, All your points are valid, but I’m also confident that Billboard’s estimated per artist streaming revenues, “based on SoundExchange’s rate settlement with webcasters,” is just plain wrong. I’ll eat my hat if Beyonce’s royalties were not significanly more than their estimate. Through our parcs service at SOUNDIES, we collect more than that annually for artists with much lower performance profiles. Kevin Parks

   — Kevin Parks · Mar 2, 10:40 AM · #

2. Kevin, exactly right you are! SX contacted us shortly after we published… they say Billboard is wildly wrong. We’ll follow up tomorrow.

   — Paul Maloney · Mar 2, 12:15 PM · #

Commenting is closed for this article.

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