To rock stars like Peter Frampton, royalties on streaming seem 100x worse than they are.
In a tweet from 2018 he said,
“For 55 million streams of, ‘Baby I Love Your Way’, I got $1,700.”
This sounds bad, but it’s dead wrong. In fact, he makes it sound 100 times worse than it is.
Let’s look at what he’s leaving out.
Today, you’ll hear many artists blame music streaming for their difficulties with making a living. The ability of artists to live well is a real concern, so we need to work on real problems, not the misguided Peter Frampton royalties speal.
Here’s what you’ll learn about:
Although I can’t match Peter Frampton’s total royalties earned or his CV, I make my own music and hold all of the rights to it. Learning how this stuff works has been my top priority, and young music-makers need to clear it up as we launch our careers.
But first, I have to hand it to a reader who wrote this to me, not knowing yet the subject of today’s issue:
“All artists need to stop using Spotify as a platform ASAP. Their model is anti-artist!”
Okay, let’s dive into it:
The two types of rights in music, with examples for Peter Frampton
As we saw in last week’s issue, music has two types of rights that you can hold:
- The rights to the song itself, music and lyrics.
You get these rights if you wrote the song. You’ll earn royalty revenue when someone performs it live or when someone broadcasts a recording of it on the radio.
Peter Frampton and Universal Music Publishing Group hold the rights to the song “Baby I Love Your Way”. No matter who else makes recordings of the song, they continue holding the rights to it.
- The rights to each recording.
You get these rights if you made the recording. You earn royalty revenue when someone sells copies of it.
A&M Records holds the rights to Frampton’s recording of “Baby I Love Your Way” on the album Frampton Comes Alive!
However, Frampton and his publisher still hold the rights to the song featured on that recording.
If I recorded that song, I’d hold the rights to the recording but not the song.
How streaming stores pay rights-holders
Streaming platforms are stores, and their products are recordings.
Sure, they sell you a subscription instead of charging per product, but they’re still stores. When you stream a recording for 30 seconds or more, they have sold you one copy of that recording. They can sell infinite copies.
The streaming store pays royalty revenue to the rights-holders of the recordings it sells. To do that, here’s what it does:
- adds up all the revenue it earned from subscriptions etc.
- adds up the total streams (number of recordings that it has sold)
- divides the total revenue by the total streams to get a tiny amount of money
- pays the rights-holders that tiny amount per each sale of their recordings.
This method is called pro rata payment. For example, if the store earned $1 billion and had 100 billion streams, it would pay $0.01 per stream to each recording’s rights-holder(s).
We’re only talking about recordings here, so take my word for now that the rights-holders of the songs get their portion of this amount later.
Peter Frampton and his tiny slice of the pie
Let’s turn to Frampton and take him at his word that he received $1,700 for 55 million streams. Skipping to the punchline, Frampton only holds a tiny fraction of the rights, so he only gets a tiny fraction of the revenue.
First the pro rata payment. We’re going to pretend that all 55 million streams happened in 2018, the year of Frampton’s tweet, despite the fact that he’s probably stating the all-time total streams. The reason is that the pro rata rates change every year, so it’d be a mess to compute across many years.
Because each streaming store ends up paying different pro rata rates, we have to find out which stores those 55 million streams happened on. Fortunately, a blog called The Trichordist works to estimate historical pro rata rates and which streaming stores get the most streams. I worked with their 2018 figures for the top ten streaming stores, and I got roughly $119,000 of total royalty revenue earned by the recording from 55 million streams.
This result shocked me. If I had got the 55 million streams, I would get all $119,000, not $1,700 like Frampton did. That’s because I hold all the rights to my music, both recordings and songs. If you’re independent, you probably do too.
So, somehow Frampton signed away enough of his rights that he ended up with ($1,700 / $119,000) = about 1.4% of the total royalty revenue earned by the recording! I have no idea how that happened. It’s shocking because even songwriters with traditional publishing deals typically earn 4% to 6.75% of the total royalty revenue from these recording sales. Some combination of his record deal, publishing deal, and management has eaten his whole pie.
What on earth did he sign?
Why artists today are better-off
I often hear artists and music listeners complain about low pay on streaming. There’s a whole forum thread about Frampton’s tweet that’s full of these complaints. Here’s one of them:
“If it’s not economically feasible for the likes of Frampton […] to record new albums, how is it going to be feasible for up-and-coming musicians?”
This thinking is wrong and overly pessimistic. It’s going to be much more feasible for us, because we can take home almost 100 times more income per stream than Frampton apparently did. And when we do record new albums, we can distribute them digitally with no marginal cost.
If you still don’t like streaming stores, no problem. You can buy music directly from artists on Bandcamp, from their websites, etc. And the artists can also have that music out on streaming if they like! In the long run, they’ll earn from both channels in proportion to the rights that they hold.
The dollars we pay for music today can be sent straight to artists, and retained by them as sustainable income, like never before. And contrary to Frampton’s conceit, that’s as true on streaming as anywhere else.