Long gone are the days when people bought albums, tapes and CDs and the proceeds were split between a few different entities with a decent portion going to the band. Even if a band does bring in a lot of money, the great divide of who is getting paid in the music industry doesn’t work in the artists favor. In fact, for every $1,000 sold in music, the average musician only makes about $23, and that statistic is even less when talking about online sales.
Because you virtually will never have to buy music again thanks to websites like Spotify, Pandora, SoundCloud, SlakerRadio and Grooveshark, it’s even harder to figure out how musicians make money.
Artists don’t just hand over music for free to online-streaming websites, and each service has a different way of paying for the music that the user gets for free. For example, Pandora and Spotify advertisers pay to play their ads on the free service and then users pay Pandora and Spotify to use the service advertisement-free. Pandora and Spotify pay the record companies for the use of their music and then app promotion companies pay their artists royalties. Seems like a solid business play where everyone comes out on top, right?
Well, maybe except that it was reported that online music streaming services pay a minimum of $0.85 per song to the record company. So even if a song plays 1 million times, the record label makes less than $1000 with the artist getting only a portion of that. It’s hard to believe that even the most popular artists make minimum wage from music streaming websites.
Exposure to a Large Audience
The positive attribute that music-streaming services bring to the music industry is that they help people discover new music with the hopes that people will buy music from services like iTunes. However, again, artists seem to get the short end of the stick after Apple takes a portion of the profit and the wholesale markup. According to an article, on Music Biz Academy, on average, an artist will only make .1092 cents for a song that cost $0.99 with wholesale mark up and .084 cents without a wholesale markup.
It’s quite obvious that musicians don’t make much money from royalties in the digital age. But for artists who have a large enough fan base, live performances are the last hope and luckily a lucrative way to make money. Artists like Sting make about 62% of their income from concert tickets. The average price of concert tickets has increased over the past 5 years. Country concerts are some of the most expensive concerts to go to. For example, the average ticket for an Alan Jackson concert costs $60.30 which is more than Alice Cooper ($32.02), Adele ($43.07), Avril Lavigne ($43.41) and Arcade Fire ($40.32).
The remaining ways that artists make money include advances, merchandise, licensing fees and ring tones. Music lovers have become spoiled, over the past decade, getting the music they want for free. In order to reverse the vicious cycle, music lovers should support artists by buying music directly from artists’ websites and support live music whenever they can.