How Does the Recording Industry Still Make Money?

[Satchmo Distel]

Album sales are going down. 90% of so-called singles are Streams. So where is the revenue being generated?

[Levin]

From here, covering signed artists. There is a tab to switch to unsigned artists.

[Satchmo Distel]

Streaming still makes a loss for Spotify but eventually it will be the only mode of music that makes the charts so at some point profits will come

80% or so of Spotify costs are royalties

[Stumpy Pepys]

Apparently, the royalties on Spotify are fairly decent for independent acts; less so when a record company takes its cut.

[caja-dglh]

How the recording industry makes money is pretty simple - it is like shark tank and financing an idea for a perpetual payment.

You front up cash for an artist to produce a material you can sell. In turn you take ~80% of everything ever earned on that item.

The question has to be more - why should an artist engage with the recording industry? Production is getting ever more attainable on a tight budget, so the cost side (that was previously prohibitive) is manageable unless you simply can't not record at Abbey Road. This is why artists like Macklemore, Chance the Rapper and others are coming through to sell huge volume unsigned.

[Hot Pepsi]

How the recording industry makes money is pretty simple - it is like shark tank and financing an idea for a perpetual payment.

You front up cash for an artist to produce a material you can sell. In turn you take ~80% of everything ever earned on that item.

The question has to be more - why should an artist engage with the recording industry? Production is getting ever more attainable on a tight budget, so the cost side (that was previously prohibitive) is manageable unless you simply can't not record at Abbey Road. This is why artists like Macklemore, Chance the Rapper and others are coming through to sell huge volume unsigned.

Yeah, but how do records make money for anybody any more?

My monthly fee for Spotify, which I listen to for hours a day and can access almost everything I could ever imaginably want to hear, is about the same price as ONE CD used to cost. Or maybe two, given inflation. I'd pay a lot more for it if I had to, but I don't. Of course, most of what I listen to is from before 1995, so it was recorded under a different model. And a huge portion of the price of physical media in the old days went to the retailer and the producer of the physical media. So now there are no more Tower Records and I guess a lot of record and CD plants went out of business. RIP

But even with the royalties, it doesn't seem like there's much going to the artists. Especially the more niche ones. So I suspect that most of the artists just record to promote their tours. (That was often true in the old days because the record company took such a big cut.) But I don't see how they can even cover the cost of recording the music, in some cases, and wonder if more and more niche acts will just stop recording in studios altogether and just put out live "albums." That costs money too, but I suspect it's cheaper and maybe doesn't take as much of their time away from paying gigs. But I can't imagine too many artists will do like the Beatles did (or REM for long periods) and just make records and not tour.

I've also noticed that there no longer seems to be a stigma attached to licensing one's music for commercials, movies, and TV shows. It's one of the only ways artists get paid.

I certainly don't see the point of "record companies" per se any more. Distribution and getting "your record in stores" isn't a thing any more, so all a major label (is that still a term people use?) can do is help get your band a slot on the Conan O'Brien show or whatever. Which isn't nothing, but it seems like you could pay a publicist or some other much cheaper intermediary to do stuff like that. And if you're fairly established like Aimee Mann or somebody like that, I'd think you could get on TV just based on your own contacts and wouldn't need a company taking a big cut to pretend to market your record.

Other thoughts...
And, much to my surprise, there are still a lot of music videos being made. Obviously, these are mostly for YouTube and not at all for TV. Do the artists get a direct cut of whatever advertising YouTube slaps on them? For a popular artist, that might cover enough of the costs to make it worth it for promotional purposes and for Taylor Swift et al, it might actually make money. I'm not sure. I can imagine a time when bands don't really release music by itself at all. They'll just record the potential hits and make videos for them on YouTube and then put it on the streaming music services later.

Thus, I'm also surprised that artists are still releasing "albums." I figured by 2017, bands would just release songs one by one as they finished them and certainly wouldn't bother with "B-sides." There is some of that happening, but I still see a lot of artists releasing - sorry "dropping," as the kids say - 10-15 songs at a time and calling it an album. Of course, there is a bit of a market now for actual vinyl records, but that can't be much. What's the point of recording the filler any more? Maybe its just vanity because, I suspect most artists think it's all genius and don't believe in the hit-filler distinction. But, c'mon. It's ok to play that stuff live if you want, but nobody wants to pay for it.

I also don't understand people who still listen to the actual radio. Why put up with ads when you can listen to *anything* you want - NPR shows, sports, etc - whenever you want in perfectly clear sound from your phone and bluetooth that to speakers in the car, the shower, your head, anywhere?

I got a new car stereo a little while back and it plays whatever is on my phone via bluetooth. Turns out the radio doesn't actually work very well, but I'm not going to bother to try to fix it.

And yet I have friends who still listen to JAM 97 or whatever the fuck it is for the hits of the 80s, 90s, and today!! blah blah blah.

[Satchmo Distel]

I think many people are too lazy or busy to make their own playlists so they rely on a radio station or streaming service to do it for them. Record companies still have a lot of influence over what goes into those playlists so unsigned acts won't reach anone except people who seek out new acts specifically to avoid the labels.

[Hot Pepsi]

I don't understand that level of laziness when it comes to music.

[caja-dglh]

Funnily enough, my favorite part of Monday's is the spotify discover playlist. As I understand it there is no revenue generated for placement from that (it is all supposed to be derivatives of what you listened to in the past week and tracks taken from playlists on which those tracks featured). I have chanced upon some absolutely brilliant artists from that process. So I am not so averse to playlists - in fact, the discover weekly tracklist typically informs everything I listen to for that week.

[Hot Pepsi]

Funnily enough, my favorite part of Monday's is the spotify discover playlist. As I understand it there is no revenue generated for placement from that (it is all supposed to be derivatives of what you listened to in the past week and tracks taken from playlists on which those tracks featured). I have chanced upon some absolutely brilliant artists from that process. So I am not so averse to playlists - in fact, the discover weekly tracklist typically informs everything I listen to for that week.

I just have one massive playlist of about 3,000 songs and growing that's everything I like (mostly). Though I do look at Spotify's suggestions and occasionally find something new.

More often, if I like a song, I'll check out the artist's other most popular songs and then also check out the other artists that spotify thinks are similar. It's also an interesting game to follow those links and see how long it takes you to get from, say Molly Hatchet to Taylor Swift.

[delicatemoth]

why should an artist engage with the recording industry? Production is getting ever more attainable on a tight budget, so the cost side (that was previously prohibitive) is manageable unless you simply can't not record at Abbey Road. This is why artists like Macklemore, Chance the Rapper and others are coming through to sell huge volume unsigned.

This, this, this. The gatekeeping has gone, which is great for musicians. Steve Albini sums it up in this mostly wonderful talk (he makes a shitty joke about Prince near the end, just to remind everyone he's a bit of an asshole)

[Hot Pepsi]

I liked that.
Though I think musicians should have some rights over their music once released. It's not clear that he does.

[Stumpy Pepys]

This, this, this. The gatekeeping has gone, which is great for musicians. Steve Albini sums it up in this mostly wonderful talk (he makes a shitty joke about Prince near the end, just to remind everyone he's a bit of an asshole)

Yes, but how many unknowns have gotten big with absolutely no record company involvement? Or the endorsement of an established act? Macklemore got mentioned upthread, but he uses Warners for promotion. Not that many I imagine.

[anton pulisov]

From here, covering signed artists. There is a tab to switch to unsigned artists.

Hmmm I must be one of Spotify's loss leaders.

[Hot Pepsi]

Yes, but how many unknowns have gotten big with absolutely no record company involvement? Or the endorsement of an established act? Macklemore got mentioned upthread, but he uses Warners for promotion. Not that many I imagine.

Not that many acts are "big" regardless. There's a natural limit on bigness. But there are other ways - getting one's song in a movie or opening for a bigger band or getting onto a festival bill, etc.

He also mentioned how concert tickets are very expensive now, but doesn't seem to see the downside of that. I don't go to concerts very often now. Or ever. I just can't justify the expense unless I really really love the band and even then, I probably can't since for me travel is involved usually. Two of my favorite acts - Midnight Oil and Matthew Good are playing Toronto (one of my favorite cities) in August, but I'm going to skip it. I'm just too broke.

[Patrick Thistle]

I went to see Midnight Oil in London last weekend. They made some odd song choices but it was still great.

I was going to say touring is how bands make money. Ward Thomas visited Cardiff twice six months apart on the same Cartwheels tour. Bigger venue second time around. Bastille sold out the biggest indoor venue in Cardiff but will be playing stadia next time they come. A band like Green Day could fill every bowl in the country if they wanted.

[Patrick Thistle]

If, say, the Manics or Stereophonic are ever down to their last groat, a five night event series of concerts in Cardiff would set them right.

[Levin]

Will it? How much of the takings gets through to the performers once the venue, promoters and staff are paid for?

[Janik]

These days rather a lot. Well over half, often more, big acts like the Manics as much as 90%. A change Peter Grant/Led Zeppelin spearheaded.
That playing live is the most reliable revenue stream is why so many bands are reforming; their previously reliable retirement income through recording royalties has vanished, but a reunion tour provides instead.

[Hot Pepsi]

These days rather a lot. Well over half, often more, big acts like the Manics as much as 90%. A change Peter Grant/Led Zeppelin spearheaded.
That playing live is the most reliable revenue stream is why so many bands are reforming; their previously reliable retirement income through recording royalties has vanished, but a reunion tour provides instead.

Indeed. Live, the only band of note other than Poison to come out of the non-Philadephia part of Pennsylvania, fell out so badly that they were *suing* each other and accusing each other publicly of greed and what not, vowing to never reform. That was just a few years ago. But now they've magically managed to patch things up and are touring and, IIRC, recording again.

[caja-dglh]

There seems to be a fair amount of money kicking around for bands to play mid-size towns throwing summer street festivals. Checking out the local one here, Sugar Ray was the major band-of-note paying for retirement.

[Hot Pepsi]

We had Spin Doctors play here on the street on a bill that was mostly well-liked local acts.

[Lang Spoon]

Are these just normal city streets? Wouldn't a park be a less disruptive venue? If the Spin Doctors were playing below my gaff, I fear my reactions would get me the jail.

[Satchmo Distel]

It also leads to imaginative pairings such as Earth Wind & Fire with Chicago whom I saw in Fort Lauderdale.

[Jah Womble]

In agreement with the 'live' aspect of being a musician being a key point here: artists on major labels can make an absolute fortune from a tour - certainly far more than they might from sales/recording revenue. (The aspect of more-accessible DIY recording/production facilities is also a relevant point.)

I think many people are too lazy or busy to make their own playlists so they rely on a radio station or streaming service to do it for them.

Have to say that I really don't see what's 'lazy' about using the radio to source music - I'd be blissfully unaware of half the new/current acts that I now enjoy if it weren't for 6Music, CDNX or other online stations. (The fact that others on this thread talk of listening to little after the nineties suggests to me that one or two more should perhaps be doing this.)