(Hypebot) – While streaming means less income than physical goods for middle-class musicians, it offers a larger and highly monetizable audience, writes Mark Mulligan of MIDiA.
Through Mark Mulligan of MIDIA
Streaming continues to grow strongly, as evidenced by 28% growth reported by the RIAA for the first half of 2021 in the United States. Everything looks perfect in preparation for the Universal Music Group (UMG) IPO.
But all is not well in the creator community, as many artists and songwriters continue to be unhappy with streaming revenue (seen more relevantly in the British Parliamentary Inquiry DCMS). However, the root of so many of their evils, even if they don’t realize it yet, is the mechanics of streaming itself rather than any part (labels, publishers, or streaming services) that don’t convey enough content. ‘money. Could these entities transfer more to their creators? Yes of course. But there’s no increase that could transform the outlook for most of these creators without potentially breaking the entire streaming economy. The crucial emerging dynamic is that most mid-level creators will never be big enough to get a proper streaming scale to use as a reliable source of income. In fact, they need the opposite of the scale – they need a niche.
“Stream Era Group is Likely to Generate More Live, Merch, and Branded Revenue Due to Increased Streaming Audience“
Streaming revenue will always be different from sales revenue
One of Daniel Ek’s ambitions on Spotify is to create and empower a new âmiddle classâ of artists, allowing a new wave of creators to build careers from their creativity. But the irony is that the âmiddle classâ (depending on how you define this amorphous group) is perhaps less well served by streaming. Here’s why: In the old world, a group of five “middle class” people could sell 50,000 copies of an album in a year, for, say, $ 10 each – thus receiving $ 35,000 each *. In streaming, this group could generate 10 million streams in a year, which would translate into $ 7,000 each. The old model offers a lot less fans but a lot more revenue. In isolation, the streaming model is less beneficial, however, in a larger context, the streaming age group is likely to generate more live performance, merch and branded revenue due to the larger audience. important streaming. That’s why streaming received much more critical attention from creators during the pandemic, as the halo effect on other revenue streams was cut to the knees.
This comparison is not meant to suggest that the streaming model is broken, but for the mid-tier of artists, the scale at which streaming is delivered is not sufficient on its own, and instead, it catalyzes the larger mix of creator income streams. At the other ends of the creator spectrum, superstars are getting scale enough to earn truly significant streaming income, and emerging independent artists are able to reach global audiences in ways they never could before. streaming. So the âmiddle classâ of creators is effectively becoming the âtight middleâ of the creator streaming economy.
Monetize niches, not scale
Even doubling the creator royalty rates, streaming revenue would still be 2.5 times lower than sales revenue, but that would break the streaming model in the process. Rather than interrupting streaming, another attempt at resolution would be to focus on finding an artist’s core fans – the ones who really care – and selling them products and experiences. With this approach, mid-level artists would be able to replicate the same type of income stream as the old sales model. Obviously, this theoretical group of five people would likely sell less than 50,000 copies of a product, as a large chunk of their audience would already get everything they need from streaming. But it’s not about replacing streaming – it’s about supplementing it, closing the income gap. So while some artists have chosen to opt out of streaming and focus only on platforms like Bandcamp, this approach is unnecessarily reductive and will actually hurt the artist’s earnings in the long run, as the funnel to acquire new fans has been drastically reduced. .
“Middle-class artists must start to think of streaming like radio, that is to say a tool to develop fan bases that they can then monetize elsewhere”
Celebrity and fandom
The concepts in this article are not particularly new, and I have already discussed some of them. But they are nonetheless of crucial relevance. âMiddle-classâ artists must start to think of streaming like radio, that is, a tool to develop fanbases that they can then monetize elsewhere. Streaming offers fame, while niche offers fandom. And this is the fandom where an artist and a fan get the most value, in all possible permutations of the word “value”. As long as, of course, the artist doesn’t get lazy and just tries to fleece their super fans!
* These calculations are simplified, do not include cost deductions (other than retailer margin), assume that group members each have an equal share of recording and publication rights, and assume that the distribution of rights is the same for both.