Starving Musicians: The Financial Woes of the Electronic Music Industry

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With Forbes announcing the top earning DJs earlier last month, it's clear that musicians can make a large amount of money in the music industry. That of course is somewhat of a fallacy in the sense that not all musicians can make a living on producing music alone. Recently there has been a lot of talk about artists not being paid royalties, like what happened with Beatport and Soundcloud being sued, or just news about certain musicians having financial trouble. With that being said, we have decided to do some digging and reveal to you some insight about the current state of the music industry.

August 25th at 8:31PM, the prolific, Venetian Snares’ Aaron Funk, had boldly and publicly stated via Twitter that he was in “serious financial trouble” and wanted to call fans to action to purchase his records via his bandcamp account.

For those of you who are not familiar with Venetian Snares, he is a popularly known breakcore/glitch electronic producer. His career goes as far back as 1998 and he has been know to release an upwards of eight records a year, most often through Planet Mu Records. That is not to say that he is an overwhelmingly wealthy artist, but he makes his living on solely being a musician/artist.

The reasons for his financial situation have not been disclosed as of yet. There were those who obligingly supported the artist and then there were those who criticized the blunt manner in which he requested aid.

However, commentary aside on the personal matters of Venetian Snares, this tweet is a good segue into a discussion on what is fiscally happening within the music industry. The truth is, over the years the industry has been losing money due to various socioeconomic and technological factors. The world of streaming and downloads has exponentially shifted the amount of revenue an artist can possibly make off of sales alone.[1]

Unfortunately, if you want to live off of your music, you have to earn money through selling your art. That is just the economic reality. Another harsh reality is that the DJ/Producers we see selling out stadiums are only a mere 1% of the total artists living off their music. Only 42% of musicians are working full-time as musicians and they are only earning an average income of about $34,455 a year.[2] Add another $20,000 to that if they have given up and found themselves part-time work.

  • The Middle Class Artists

The “middle class” artist is tentatively defined as a musician/artist who makes a living off their work/art. Some do have secondary jobs to supplement an income but for the purpose of this article, we are referring to those solely living off their music. I would also like to note that the numbers and calculations referenced apply to DJs and acts that produce their own original work, not necessarily remixers and sample artists.

The difference is that a DJ, who does not produce their own work, generally only earns an income through live performances or gigs. A producer can earn income through sales of their original work and various licensing in music publishing on top of that.

  • State of the Music Industry in regards to Sales

In the last 15 years, the music industry has had a lot of changes as to what is standard operation of the business. In the 70s, when physical records were the dominate form of music consumption, it made sense for large labels to exist and incur a majority of the expenses that it took to record and produce an album. With the technological advancement we have today, the cost of production has gone down to almost zero. Anyone can buy the equipment, start producing and use the Internet to distribute their work.[3] The economic shift brought a lot of success to indie and individual labels. Many niche electronic artists we know today had gone off and started their own labels. Some examples are Mark Knight and Toolroom Records or Adam Beyer and Drumcode.

According to the IMS Business Report of Electronic Music in the North American market, EDM has been estimated at $6.9 billion in revenue in 2014[4]. That is a lot of chedda’ that is unfortunately not benefiting all the artists in the scene. However, with the increase in streaming/downloading services available to the consumer, it was reported that the U.S. digital track sales had gone down from 1.34 billion to 1.26 billion in 2013[5] and gradually lower in the coming years.

I can sit here and reference more numbers from the IMS Business Report and I can show you graphs and generalized charts of the successes in the EDM music industry as of lately. You’ve probably read articles slamming Spotify and Soundcloud on behalf of the music industry and how they are losing millions in revenue. Guess what, though? No one seems to mention the excruciating financial toll it has taken on artists within niche subgenres of the electronic music scene.

Streaming and downloading services are the future of music consumption. In 2013, streaming via Spotify, Rhapsody and YouTube increased by 32% to 118.1 billion.[6] That needs to be understood. A reason why the low paying royalty rates are such an issue, is because it now takes an artist an exponential amount of exposure and sales to make a sustainable income.

  • Payout Comparison

David McCandles, a data journalist and designer, published an infographic on his website (informationisbeautiful.net) that gave a realistic understanding of how much musicians earn online from sales and streams of their music[7]. The figures are assuming that the solo artist is releasing their own composition and the rates do not include broadcast/performing/mechanical royalties or other publishing income. All the calculations reflect on how much an artist can earn (for a single sale or stream) to make the U.S. minimum wage of $1260 a month.

  • CD Distribution

A self-distributed album from an unsigned artist that has a retail rate of $12, must sell 105 units to make the minimum wage ($1260/month). Because the artist is unsigned and self-distributing, they retain the full revenue of $12 (note that an unsigned artist is responsible for production, manufacturing and marketing costs).

A retail album from a signed artist that sells for the same rate of $12 must sell 457 units. The artist only retains $2.76 in revenue from the sale because they must pay a 30% distribution cut and a 47% label cut (these numbers are based on average deals made in the industry). However, the artist bears no costs for production, manufacturing and marketing.

  • Album Download

An album download for an unsigned artist through Bandcamp, which sells at a $10 rate would have to sell 148 downloads to make the minimum wage. The artist retains revenue of $8.50 per download because they pay a 15% distribution rate to use Bandcamp.

An album download for a signed artist through iTunes, which sells at a $9.99 rate would have to sell 547 downloads. The artist retains revenue of $2.30 per download because they pay a 30% distribution rate (to iTunes) and a 47% label cut.

  • Single Track Sales

A single track sold via iTunes by an unsigned artist at $0.99 needs to sell 1826 downloads. The artist pays out a 30% distributor cut and retains revenue of $0.69 per download.

A single track sold via Amazon, iTunes or Google, by a signed artist at $0.99 needs to sell 5478 downloads to make minimum wage. The artists pays out a 30% distributor cut and a 47% label cut and retains revenue of $0.23 per download.

  • Streaming

Streaming rates are categorized between signed artists and unsigned artists. An unsigned artist retains revenue of 60% of their per play rate and the other 40% is the distributor cut. Signed artists usually only retain revenue of 20%, with 25% going to the distributor and 55% to the label.

Via Google Play, a signed artist’s per play rate is $0.0073 and it would take 172,206 plays for the artist to earn the U.S. monthly minimum wage. An unsigned artist earns $0.0179 per play and it would take 70,391 plays to earn the minimum monthly wage.

Via Spotify, a signed artist’s per play rate is $0.0011 and it would take 1,117,021 (2% of the Spotify’s 60,000,000 users) for them to earn the minimum monthly wage. An unsigned artist earns $0.007 per play and it would take 180,000 plays (0.3% of the total users) to earn the monthly minimum wage.

Via YouTube, a signed artist earns $0.0003 per play and it would take 4,200,000 (0.5% of YouTube’s 1,000,000,000 users) to earn the minimum monthly wage. An unsigned artist earns per play rate of $0.0018 and it would take 700,000 (.07% of the total users) to earn the monthly minimum.

  • What Now?

When you have finally finished muddling through all the numbers and calculations, it should be clear that with downloads and streaming, you make a lot less for more work. The level of exposure you need to accumulate the necessary number of plays or downloads is steadily increasing however; the rate per play has been decreasing.

If you are an artist, making money in the millions then who cares, right? But, what about the middle class man? The one who works hard to make a mediocre living, but gets screwed over by the industry’s economics!

Caiwo Carvalho, is NY producer originally from Brazil. He has produced his own work as well as doing production for other artists. His original tracks have made it the Top 32 in Armada Downloads and have appeared on Top Mixes via Beatport. The likes of Maceo Plex, Shall Ocin and Digitaria have used his tracks in their performances.

Despite reaching this level of exposure as a producer, Caiwo still needs to have supplemental income from non-music related work to survive. Downloads and streaming are a mere 5% of income from music. He stated, “To make good money selling music you have to reach the top 10 overall on Beatport, for example. However, it is really hard to do that and it is really not the way to make money anymore, playing live is. I try to work on my music every day at least 5 hours….”

- All the collected information has left me with more questions than answers, especially in regards to the future of the industry.

- How will the industry re-monetize the payout of track/album downloads and stream plays? Is that even feasible in the near future?

-Will the music industry be able to retain, the “middle class” artists? Or will it just be the top 1% versus the starving musician?

-Is it worth it, for the artist to payout large cuts of their revenue just to have an aggregator for their work or retain revenue, but spend less time on their art and more time on their own business development?

- Will artists use Venetian Snares’ example and appeal to their fans for fiscal assistance? Or will they have to start finding more secure alternative means of income?

Venetian Snares unabashedly requested for assistance directly from the fans which could have been a by product of his own personal fiscal issues, or it can be a true reflection at the level of difficulty that making sales has become for artists in the digital age. In the end, the conclusion is the same, the sale of music in the industry is being immersed by digital downloads and streaming. There is a definite need for some serious re-monetizing of rates paid out to artists, but it's also important to remember that those in the top 1% are not the only ones being screwed out of a much deserved paycheck.

UPDATE: Venetian Snares thanks fans by dropping a new collection of tracks. Listen and Download Thank You For Your Consideration from Bandcamp.

[1] We are not including income going to the songwriter or publishing/copyrights

[2] http://www.digitalmusicnews.com/2014/09/02/music-industry-99-problems/

[3] http://www.littlewhiteearbuds.com/feature/everything-popular-is-wrong-making-it-in-electronic-music-despite-democratization/#.VePIv9NViko

[4] https://thump.vice.com/en_uk/article/the-electronic-music-industry-is-making-money-big-money

[5] http://business.time.com/2014/01/03/spotify-and-youtube-are-just-killing-digital-music-sales/

[6] http://business.time.com/2014/01/03/spotify-and-youtube-are-just-killing-digital-music-sales/

[7] http://www.informationisbeautiful.net/2010/how-much-do-music-artists-earn-online/