To stream or not to stream: Are artists really not receiving their royalties?

By Katherine Hinkle, 2L Member

“Does anyone even buy CDs anymore?” is a comment I’m sure is overheard by many in bookstores, department stores or any retailer that carries the works of many artists we all love. The answer to that can be complicated, or you could just say “Streaming is where it’s at.”

Streaming giants such as Spotify and Apple Music have taken over the music scene within the last few years, so much so that it is hard to find individuals who do not have a streaming subscription from either platform.

This presents a different outlet for artists to share their works than what was available to them before the rise of streaming services. Streaming allows for a much more streamlined process for emerging artists to promote their music.

However, how much are artists actually making from their streams? Business Insider reported in February 2021 that Spotify streams are only worth about $.003 to $.005 per stream.

To calculate payout rates for artists, Spotify takes the money it makes overall from ads and subscriptions each month and pays that out in proportions to each artist on the platform. The proportional shares are based each artist’s share of total streams across the entire service for that particular month.

For example, an artist that has 10,000 streams out of a total of 1 million streams across the entire platform would receive one percent of Spotify’s overall revenue share. To put that into perspective, even the big-name artists of today would not make as much as many in the general public believe they do from their music alone.

This misconception of the entertainment industry leaves many artists asking “Where are my royalties?” or, “Why am I not getting paid?”

Unfortunately, aspiring artists and even emerging stars who have at least stuck their toes in the water are taken advantage of. Many sign extremely vague contracts or they have absolutely no understanding of the terms and conditions within their contracts.

An example of this situation is shown by the lawsuit rapper when Megan Thee Stallion filed against her label, 1501, for fraud, breach of contract, and negligent misrepresentation.

Artists are led to believe that they are guaranteed a running start to fame and stardom, but they may not even receive any of the money from their discography. Their streaming revenues could go straight back to their labels, manager or agent. Without legal representation, many artists do not understand this.

In Section 114 of Federal Copyright law, 45 percent of performance royalties are paid to the artists on the track being streamed, while five percent are paid to artists not featured on the track. Finally, the remaining 50 percent of the performance royalties are paid to the owner of the rights of the track.

Many artists have signed an agreement that subjects them to royalty deductions. Labels use the money gained from the mechanical royalties of each artist to pay for that artist’s upfront costs, such as production expenses.

Those artists sign deals without knowing they could never see the money gained from their streams. It’s a never-ending, hurtful cycle for artists. Some artists never see the fruit of their labor, simply because they have no idea how much their streams are really worth as that money is taken from them.

Overall, the glamor of the music industry casts a dangerous façade for emerging and aspiring talent. Streaming payouts are the harsh reality that go completely under the radar.

Works Cited:

Jon M. Garon, Entertainment Law and Practice 547 (3rd ed. 2020).

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