The Rolling Stone Blog

The New Economics of the Music Industry

The Rolling Stone Blog

In the old days, it was much easier for pop stars to keep up with how
much they were getting paid. Somebody would buy a CD at a Tower Records
for $15 and a few dollars would appear months later on the star's
royalty sheet. Then iTunes took over the record business, and it was
even easier (if not more profitable) - every time somebody bought a
99-cent track, a few pennies went into the artist's bank account.

Those were such simple times. Today, music fans play free music
videos on YouTube, stream songs for free on Spotify, MOG or Rdio,
customize Internet radio stations on Pandora or Slacker and consume
music a zillion different ways. The fractions of pennies artists make
for each of these services are nearly impossible to track - at least for
now. "People like to simplify this and say, 'There's no money in it,'"
says Jeff Price, founder of TuneCore, which charges artists to place
songs directly into iTunes, Spotify and others. "But it's complex, it's
complicated and it's still being worked out."

So you're Adele, the year's biggest pop star. Your songs stream on
Spotify - or MOG, Rdio, Pandora or YouTube. You still sell downloads
through iTunes and Amazon, and you still sell old-fashioned CDs in
old-fashioned record stores. How much do you get paid?

Rolling Stone talked to several sources in the music business and got several different answers.


Spotify, MOG, Rdio and other subscription services are either free
(with ads) or charge users monthly fees for unlimited streaming music.
The quick calculation, according to one band manager: If a song gets
streamed 60 times, the songwriter receives 9.1 cents in mechanical
royalty payments. And the performing artist gets 38 cents (or splits
that money, half and half, with a record label, per contract).

Maybe you don't want to know the non-quick formula. "It is beyond
complicated. It took me literally three months to understand this
thing," says Jeff Price, founder of TuneCore, which charges artists $10
(for a single) and $50 (album) to place music in online stores such as
iTunes and Amazon, as well as subscription services like Spotify and

Generally speaking, record labels make about 10.5 percent of Spotify
or MOG revenue, then split that with the artists according to their
contracts. "However, each service has to run literally five formulas
each month -- on calculation number one, they have Subsection Number One
and Subsection Number Two," Price says. "They throw out the higher of
those and then compare that one against the other three. After that,
they have to run this formula five different times."

Because the formulae are so byzantine, and the royalty payments that
show up on audit sheets are still so tiny, very few artist lawyers and
managers truly understand how much they could make - one day - from
Spotify, MOG, Rdio or the other relatively new streaming services.

But Price makes the point that Spotify and the others encourage music
fans to explore, listening to songs they might not have purchased. Even
if it's not a rock-star payday, it's something. "Is it big money? I
think it could be! I really do," says Jim Guerinot, manager of Nine Inch
Nails and No Doubt.

NEXT: iTunes



Photo by Kevin Mazur/WireImage

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