Here’s Why You Don’t Need To Worry About Low Streaming Royalties

The most heavily debated topic in the music industry since Spotify launched in the US back in 2011 has been streaming royalties. Spotify claims they pay $.006 – $.0084 per stream. These payments include ALL streaming royalties like mechanical, performance and streaming revenue. Why most artists’ statements from their distributors fall below this range is because mechanical and performance royalties aren’t paid to the distributor. But that’s another topic. And quite complicated. And above all, so much less fun than screaming “look at how little I’m making on Spotify!”

However, artists make much less on YouTube. Ad revenue is a joke. Well, not for YouTube or digital rights management companies like Audiam, INDMusic or AdRev. They’re making out ok. But when that revenue gets filtered down to the actual artists, it’s pennies. Even superstars of YouTube have a hell of a time seeing much of that revenue. The reason Jack Conte of Pomplamoose (with over 100 million YouTube views) started Patreon was because he was tired of waiting for YouTube ad revenue checks that never added up to much.

+Time To Pay Attention. Creators On Patreon Now Receive Over $1M From Patrons

It’s clear we’re never going back to a sales only model. Taylor Swift can remove her music from Spotify because she’s Taylor Swift. No one else should do this. Unless they’d like to fall into obscurity. Recorded music is now a loss-leader for an artist’s career. Unfortunately. I’m not going to tell you how much I spent on my last record. But that’s the reality. Everyone needs to accept this. And get over the principle of fans “valuing art.”

Fans DO value art and their favorite artists. Except they value it in a way that makes sense to them (not you). They WILL pay for art in ways that make sense to them. You’re never going to get those who grew up believing music is free to pay for downloads or CDs. You have to provide an enjoyable experience that they’re willing to pay for. Spotify did that. Artists can too.

+Fans Aren’t Going To Pay For Music Anymore… And That’s Ok

BandPage just announced this morning that merch and “experiences” currently being offered across their partner sites like Spotify, Rhapsody, Shazam and LyricFind are selling very well.

They finally have the data (over 3,000,000 items for sale) to confidently state that this model works. I spoke with CEO, J Sider, about this new development and although he couldn’t offer comprehensive sales numbers (yet), he mentioned that these offers are getting a 5 times higher click through rate than other ad units across the internet (like Google or Facebook ads) and have up to 3 times higher conversion rate. He said some artists are actually selling up to $1,000 per day through these partner sites.

+Spotify No Longer Supports Merch Via ArtistLink

“The industry average click through rate for banner ads is .1%. We’re seeing between .5% and 1% of click through rates.” – J Sider, CEO, BandPage

Sider also mentioned that experiences sell better than just plain merch items. Ryan Beatty is offering a personal video message for $30. Daniel Ellsworth and The Great Lakes are offering a party bus experience for $1,500. Miranda Lambert is selling personalized Christmas gifts for $500 (yes she will shop for you), Nicki Minaj is offering VIP packages for $125, you can have a 15 minute phone chat with George Clinton and he’ll set your voicemail message for $250 and Parmalee is offering a sound check / Q&A for $50.

Fans crave these kinds of personal experiences.

A Nielsen study released in March 2013 revealed that 40% of US consumers are responsible for 75% of music spending. These fans, who spend between $20 billion and $26 billion a year, would spend an additional $450 million to $2.6 billion annually if ” they had the opportunity to snag behind-the-scenes access to the artists along with exclusive content.”

What does this mean? It means that you need to start offering experiences (and merch) on BandPage (to be displayed on Spotify, Rhapsody, Shazam and the other outlets that will be added soon).

+Why BandPage Is Going To Be The Most Powerful Player In Music

Neither Spotify nor BandPage take a commission from items sold through Spotify.

This is a step in the right direction. But it’s just the first step. What about tickets? Spotify has partnered with SongKick to offer show dates on the artist’s profile. Or, rather, I should say show date. For some completely absurd reason, only one show date is listed. That’s right, if you live in St. Louis and are listening to Noah Gundersen on Spotify, you’d have no idea he’s coming to town THE VERY NEXT DAY after his Louisville, KY show (which is the only show listed on his artist profile). It makes no sense. Why not list all tour cities and dates? Or at least the tour stop in your city? Spotify of course has this location tracking. Spotify shouldn’t display the huge calendar graphic that’s currently there. It takes up too much space. In the current amount of space that the one show date is being displayed, 10 dates and cities could be listed (and clickable). Or add a drop down section with complete dates. This should be updated immediately. Spotify, want to win over artists? Offer complete tour dates with ticket links. Boom. Sold.

And the merch offers on the mobile version of Spotify are all the way at the bottom of the artist page. I mean, thanks for including them at all, but the very bottom? Below the entire catalog? Really?

But, again, this is the first step. And the artist community is grateful that Spotify, Rhapsody, Shazam and the others have gone this far. But let’s go further!

YouTube has started experimenting with these kinds of offers on videos. This should be rolled out to every artist. I’m confused as to why it hasn’t yet. Instead of adding simple word annotations to iTunes, artists’s could lay annotations directly on top of their videos to a meet and greet or t-shirt. Paramore’s bracelet offer on their Still Into You video is completely sold out. Clearly, this model works.

Streaming is the future. Hell, streaming is the NOW. In 5 years no one is going to be buying CDs anymore. In 10 years no one is going to be downloading.

Fighting this progress is a losing battle. The music industry tried to fight progress with fire. Remember when the RIAA went door to door suing grandmas because their 14 year-old grandsons downloaded a few songs from Limewire? How’d that work out?

Music fans aren’t the enemy. There’s lots of money to be made. You just have to get creative about it. Those who join this movement will succeed in the new industry. Those who continue wishing they could sell $18.99 CDs and live behind a paywall will be left behind.

Where do you stand?

Ari Herstand is a Los Angeles based singer/songwriter and the creator of the music biz advice blog, Ari’s Take. Follow him on Twitter: @aristake