Discussions about the music business almost always devolve into anecdotes and opinions, and I think it’s fair to say that most musicians make their moves based on some combination of conventional wisdom, gut feeling, impulse, and the stand-out successes and failures experienced by a few of their peers. In the midst of the constant hustle, few have the time think about why they’re doing what they’re doing and what they can reasonably expect to get in return. That may not be an important question for a person compelled to make music, but it is for a person trying to earn a living selling a product.
To clarify my own thinking and help us all see the landscape a little more clearly, I did some digging and compiled some data from my musician peers to analyze. If you want to skip to the findings, check out:
Like it or not, streaming platforms have become the dominant marketplace for recorded music, the last in a long line of technologies that served to unbundle songs from albums, drive down unit prices, render CDs obsolete, encourage subscriptions over purchases, and shrink the revenue pie substantially. Annual recorded music revenues in the U.S. peaked in 1999 at $22.4 billion (inflation adjusted 2019 dollars), with CDs representing 88% of sales. Then came Napster, the iPod, the iTunes store, Spotify, and a long list of well-funded tech giants competing for users by making it cheaper and more convenient access massive catalogs of music. By 2019, revenues were down more than 50% to $11.1 billion, with CDs only representing 5.5% of sales (source). Despite paying artists fractions of a penny per stream, streaming royalties accounted for 85% of U.S. music industry revenue in the first half of 2020 (source).
In the background of these tectonic shifts in distribution, the music industry experienced democratizing revolutions in production and education. Recording capability once confined to expensive studios became readily available for home use thanks to advances in computing power and retail recording software/hardware. Recording and instrumental expertise once attained through expensive apprenticeships and instruction began being shared freely on YouTube, blogs, and discussion boards. At the same time consumers were moving towards consumption patterns that net artists a fraction of CD and digital sales, the number of musicians and hobbyists releasing music was exploding. By mid- 2019, Spotify was adding 20,000 songs per day to its platform, a number that rose to 40,000 per day just a year later (source). The Spotify catalog now carries over 50 million tracks, including 700,000 podcasts (source). Competition among artists for attention and revenue is intense and increasing by the day.
So what does the typical professional musician earn in streaming royalties? Given these massive industry shifts, does spending a ton of money on mixing and mastering really make sense? What about on music videos, social media ads, and publicists? What separates the talented-and-popular from the talented-and-obscure on these platforms?
The Data Set
To explore these questions, I asked my musician peers to 1) fill out a survey outlining their production and promotion spending and 2) send me digital distribution reports providing a day-by-day account of where and how much their music was streamed during the first eight months of 2020. Excluding a couple of exceptional outliers (more on them later), the result was a snapshot of 40 artists/groups with 2.4 million streams that can be used to find any relationships between streaming popularity and their production and promotion spending.
Out of the 40 artists/groups in the set, 36 are comprised predominantly of professional, full-time musicians who earn the bulk of their income performing, teaching, and producing music. The rest have non-music day jobs but still performed regularly pre-pandemic. 22 of them identified as jazz performers, with the rest roughly evenly split among funk, pop, rock, folk, Americana, electronic, dance, R&B, soul, and rockabilly. Eight of them released music on a record label. The average artist/group in the set has three albums on Spotify, has been actively releasing music for seven years, spent $5k producing their most-streamed album, was at their most active five years ago, and toured 31 cities at their peak.