But why is this so insanely complicated? Tunecore CEO Jeff Price is an expert in online artist compensation whose business revolves around the very subject. Yet the guy who brought you simple iTunes distribution and created one of the largest DIY distribution platforms in the world was totally perplexed by on-demand streaming payouts.
In fact, Price spent three full months trying to figure out what stores like Spotify, Rhapsody, and Rdio actually pay artists. And here's what he told Rolling Stone Magazine when they asked 'what exactly do these services
pay artists?'
"It is beyond complicated. It took me literally three months to understand this thing."
Generally speaking, record labels make about 10.5 percent of Spotify or MOG revenue, then split that with the artists according to their contracts. "However, each service has to run literally five formulas each month -- on calculation number one, they have Subsection Number One and Subsection Number Two," Price says. "They throw out the higher of those and then compare that one against the other three. After that, they have to run this formula five different times."
Laugh/cry. Any questions?
Comments Closed
Visitor Wednesday, October 26, 2011
im not sure where he gets his info, but its entirely inaccurate.
Visitor Wednesday, October 26, 2011
Visitor, we have no one else to believe. If you can't inform us anonymously about the details then we must assume your statement is the inaccurate one, therefore Jeff Price is telling the truth.
Sounds like they payout the lowest number of all 5 calculations. Imagine what independent artists and labels receive. Subscription companies retain at least 89.5% of revenues to fill their salaries. UNBELIEVABLE!
/yves villeneuve
walk the walk Wednesday, October 26, 2011
This is not a credible rebuttal. I'm not saying I know that Jeff Price is accurate, but if you know otherwise, say it. I come to Digital Music News to learn about Digital Music, not to anonymously flame. This isn't MySpace.
Tell us why Jeff Price is wrong. Or move on.
Visitor Wednesday, October 26, 2011
Me again.
Ok- 10.5% is what PUBLISHERS would traditionally receive from a streaming services total revenue. LABELS on the other hand will receive 60%, which is distributed amongst them pro rata.
However, that's not all. All these deals have minimum revenue guarantees- so regardless of how much money a service makes- they still have to a pay a minimum of $x million to each label on a quarterly basis. These guarantees tend to be staggeringly high.
Net result? There almost certainly isn't a licensed streaming service on earth who's content doesnt currently cost them more than 100 % of revenues.
The ones with a free or ad funded tier are in particular hot water- they have a per play rate to pay against every stream a 'free' user listens to- which advertising revenue alone doesn't come close to covering- so its all loss leading hoping the user will eventually start paying.
You have to admire them since it's undoubtably the future once they can achieve a critical mass of paying users but right now it's all uphill all the way.
Anon Wednesday, October 26, 2011
Ummm... Some publishers get more than that, so I wholy doubt that his 10.5% of revenues to labels is correct.
Yet another pointless attempt by someone 'knowledgeable' to try and get some press inches in relation to a hot topic.
Well done for fuelling the fire...!
@BenjiKRogers Wednesday, October 26, 2011
Benji Rogers
"It Took Tunecore's CEO Three Full Months to Figure Out What Subscription Services Pay Artists."
& he's really smart!
Steven Corn Wednesday, October 26, 2011
I don't get this. What's hard to figure out? Spotify pays 50% of Net Advertising and Subscription revenue to labels. Net is defined very precisely. It does not allow for Spotify to deduct ~90% for overhead costs (e.g., salaries, operations, etc.).
In addition, there are minimum payments for streaming.
If Jeff is describing doing an audit of Spotify, then that, perhaps, might have taken 3 months. But the formula is not that difficult to comprehend.
If he ended up with 10.5% paid to labels, then that sound more like an audit than a revenue calculation. But i find it very hard to believe this. If that was the case, then Jeff would have sued for breach of contract. I know that I would.
I don't believe that Jeff is a liar. So I have to conclude that he must be describing something else here. But what could it be?
musicservices4less Wednesday, October 26, 2011
Steve, you are right. But I think it is also important to discuss the bigger issue of Spotify, etc. which is streaming. Yes, the technology is here to stay, no doubt about it. But those streaming companies must be transparent not only with the percentage amount of payouts and computations but also the nature of their business models. What most if not all of these business models do is to allow the consumer to directly control what they listen to - let's call these companies "Streamers". But what is music really to the consumer? It is a listening experience. So for a extremely and redicously low price the consumer gets his music, in other words no need to buy a CD or download. Now the only business exposure to the Streamers is if they don't cover their overhead. Because if their sales team sucks and there is very little advertising, no big deal- they just pay less to the rights holders! If an artist, label (non-major) manager, lawyer (hi Steve :-) ) gets less they might be out of business. So what we have is the content creators bearing the risk of the Streamers business. This business model totally devaules music.
As we now have years of experience with the business model of the Streamers, we know this does not work for the content creators and those businesses that support them. The Streamers stay alive because of huge amounts of so-called start up investment capital that keeps the Streamers afloat (even though they continually loose money) until they can go public with stock, cash out and leave the content creators holding the bag.
Where am I wrong in this analysis?
steven corn Wednesday, October 26, 2011
If Jeff was referring to the HFA chart below, I completely agree that this is practically unintelligible. But that speaks to only a portion of Spotify's compensation. It's perfectly reasonable to take 3 months to figure out this chart. But if you are referring to the overall compensation structure, it's not hard math.
Visitor Wednesday, October 26, 2011
I think Steven's info seems reasonable.
In any event, 50%(streamers) of $5-$10 is lower than 70%(itunes) of $5-$10 while the itunes option has no revenue cap for artists/labels.
It's just common sense to says it makes no sense to accept a cap on revenues or, in other words, cap consumer expenditures but allow them unlimited access.
/yves villeneuve
noatno Wednesday, October 26, 2011
if he's getting 10% for his catalog, no wonder everyone is upset. this isn't even close to the standard. and to the other comment, its not the lesser of the calculations, its the "greater of." i'd be shocked if tunecore artists put up with this poor deal he "negotiated."
no, sub services aren't keeping 85%+ of revenues.
wild, wide-eyed speculation, literally no facts to be found anywhere in this article.
Food For Thought... Wednesday, October 26, 2011
Jeff is a smart guy. But smart guys can be wrong too.
The interactive streaming mechanical statutory royalty rate (paid just to songwriters/publishers) is 10.5% of revenues (http://futureofmusic.org/tags/interactive-streaming).
So, Jeff is making the common mistake of using the mechanical rate to calculate what labels and performing artists are getting. Wrong!
Spotify, Rdio, Rhapsody et al pay songwriters/publishers 10.5 of revenues. They pay master owners a wholly different royalty that is a negotiated direct license. Since each master owner negotiates his/her own deal (either directly or more likely through their distributor or through a collective like Merlin) and then each artist that is signed to a label (and therefore doesn't own or control his/her own masters) it is not that difficult to understand why the services are in a poor position to answer "how much does your service pay artists?". The answer to that depends upon whether the artist is signed, goes through a distributor (and if so, which distributor?), gets a standard 12%,14%, 16% royalty rate for streaming or 50% of revenues (which is more common but not universal for digital licensing).
For comparison purposes, we can no more expect Spotify, Rdio, Rhapsody to say how much they pay artists than we could expect Best Buy, FYE, or Wal-Mart to say how much they're paying artists for CD sales. It depends upon the deal each artist has.
visiting visitor Wednesday, October 26, 2011
did anyone even bother to read the rolling stone article that was cited here? jeebus.
"David Hyman, CEO of MOG, won't divulge his subscriber numbers, but he offers broad royalty estimates that apply to both Pandora-style radio and MOG-style subscriptions. "Let's say MOG has 1 million subscribers and everyone's paying $10 per month. And let's say the labels got 60 percent of that. Now, each label gets their piece of 60 percent based on frequency of plays. So if Warner [Music, a major label] was 30 percent of all plays in a given month, then Warner gets 30 percent of that 60 percent," he says. "Then they get a wad of money. Once they get that wad of money, how do they distribute it internally? I have no idea."
Visitor Wednesday, October 26, 2011
Yes... David might clarify something closer to the truth, but that doesn't negate the fact that Jeff's numbers are vastly wrong, nonetheless!
Visitor Wednesday, October 26, 2011
Check out the royalty breakdown on page two. The five different calculations that Jeff talks about refer to the 5 service delivery types.
http://www.harryfox.com/public/userfiles/file/Licensee/HFARoyaltyRatePR10-2-08.pdf
visitorrr Wednesday, October 26, 2011
yes, i'm sure jeff's running the 5 calculations on streaming stores. i wonder what spotify's CD payout is! plus you linked to harry fox? unreal. you must not be aware harry fox collects a different right than the record labels?
lets keep flailing our arms around with no facts!
@mikeerrico Wednesday, October 26, 2011
Mike Errico
Artists who feel dumb, take heart...
Jameson Wednesday, October 26, 2011
Look kids, it's easy!
visitorrr Wednesday, October 26, 2011
apparently the entire DMN audience is incapable of understanding that harry fox and what labels get paid are not the same thing.
Visitor Wednesday, October 26, 2011
this breakdown gives you an idea of what the mechanical, master and public performance royalties are. the mechanical and performance are statutory and the label royalties are negotiated.
the goal of this is not to say that harry collects all royalties but that the calculation is based on three types of royalties.
Visitor Wednesday, October 26, 2011
He is confusing Record Labels and Artists with Music Pubishers and Songwriters.
3YH Wednesday, October 26, 2011
If it helps to have an example of an unsigned artist...particularly referencing spotify, we get .0037 cents per stream.
@axxll Thursday, October 27, 2011
axxll
Show me the money!
oane Thursday, October 27, 2011
The question is what do labels get paid. This has NOTHING to do with Harry Fox, Mechanicals, songwriters or publishers. Publishers and labels are two different hats. they may be worn by the same party but they are separate entities. Same for songwriters and artists. Artists get paid based on their deals with the labels. Jeff is a smart guy and he has run a label but me thinks he may have it wrong. If the number as suggested by David Hyman is roughly 60% of revenue (acccording to his example it's on the gross not net) than the labels are splitting the 60% pie based on the amount of plays each label has contributed. So, first off is 60% the number? So I guess what it comes down to is regardless of the math equations, what is the standard revenue split?
Joe Thursday, October 27, 2011
Paul, either you are stupid or deliberately misinforming to stir the pot. You misquoted the article:
"Generally speaking, songwriters make about 10.5 percent of Spotify or MOG revenue."
Songwriters, not record labels. And by the way, Jeff Price is also stupid. That 10.5% is a statutory rate for interactive publishing rights. The songwriters only see part of that, usually split with the publishers. If it took him three months he needs to hire some better folks. And if it's complicated, it's the labels/publishers fault for pushing their ridiculous formulas.
Labels get 60% of revenue, which they typically split 50/50 with artists. And please let's stop whining about advances. Artists get those too, and believe me, most are unrecouped. Furthermore, I can tell you that not all digital services are paying advances.
All these whiners can go back to iTunes or vinyl and then watch everyone start pirating again.
paul Friday, October 28, 2011
@Joe
Yeah, I looked back at the article and there is a discrepancy, but there are also a lot of changes to that page. We cut n' pasted what was there when we published. Now, there are new paragraphs and updates. Jeff may have caught the error in RS, as the article clearly notes they had subsequent clarification discussions.
hth.
/paul
musicservices4less Friday, October 28, 2011
Joe,
"All these whiners can go back to iTunes or vinyl and then watch everyone start pirating again."
Start pirating again? When did it stop? The low end of most estimates is 85% of all music is pirated. Do you agree that music should not be pirated or illegally downloaded/uploaded/whatever? If you work in the industry either on the technology side or content side, don't you think more of an effort should be made to limit piracy? We all know that it can be easily done and quite frankly, we all know who and where the sites are coming from. They all hide behind the DMCA and that was not what that law was meant to do. Time to change the law.
Joe Friday, October 28, 2011
Of course we should be defending music against piracy, but my point is that making content LESS available will not accomplish that. Does no one remember Napster 1.0? If we don't make content available in as many formats and places as possible people will steal it. No, it's not right, but that's the reality.
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