For creatives trying to “make it” in today’s music industry, the struggle to earn a livable income are well-documented. Royalties rates have taken a plunge as a result of online streaming, with platforms like YouTube and Spotify divvying out a tiny fraction of their earnings to labels, who then give artists even lower payouts. On top it all, starving songwriters have only recently been given a slightly larger piece of the pie due to federal legislation.
So it should come as unsurprising that artists took home only 12% of the $43 billion in revenue that the music industry generated last year in the United States, according to a recent report published by Citigroup.
So where does it all go?
The study, which was conducted by Citigroup researchers and analysts, states that most of the revenue is gobbled up by middlemen, including tech companies, radio stations, and record labels. The cycle becomes hard to break for artists, too, since they rely heavily on these outlets for their music to reach the masses. But there is light for creatives living in the financial shadows.
The study also noted that the 12% figure is actually higher for artists than in previous years — with total earnings sitting at 7% in 2000. While the increase is only 5% over 17 years, it’s due to artists taking control of their wages; with more musicians breaking free of major record labels by creating their own independent labels in order to self-release their music and keep more revenue. Another factor in the increase may be due to the seismic strength of the concert business, which sees musicians on the road more often, with less time spent in the studio creating.
Revolutionizing or restructuring?
Finally, the study offers up three possible avenues for re-structuring the music industry that could create a more equal share of revenue for artists. After all, there wouldn’t even be a pie to share without the artist and their drive to create.
Restructuring could take three potential forms: (1) through vertical integration of existing businesses, for example concert promoters merging with distribution platforms like Spotify, (2) through horizontal integration, with distribution platforms merging together, and (3) through “organic” vertical integration, with distribution companies such as Apple and SoundCloud entering the record label space.
While a huge effort, with many potential roadblocks ahead, especially from corporate executives sitting at the top of the ladder at monopolizing companies like Live Nation, the Citigroup study offers some hefty solutions. Although it may take some heavy duty spring cleaning and we all know change doesn’t happen overnight.