Mythbusting Part 3: Do Musicians Make Any Money from Selling Recordings?

Last week, we launched a series of blog posts that are using Artist Revenue Streams to examine some of the common assumptions about musicians and income.
In part 3, we’re looking at the assumption that, in a post-Napster world, musicians don’t make any money from selling music. As with the other perceptions, there’s a grain of truth in this, based on the simple fact that income from the sales of sound recordings in the traditional sense – sales of physical goods in retail stores – has changed drasticallly in the past ten years. There are fewer retail stores, more online ways to get music for free and, according to the RIAA’s data, a steady decline in the dollar amount of CDs shipped from 2004 to 2010.
But that’s not the entire picture.
Simultaneous to the decline in brick and mortar stores has been the development of legitimate digital services like iTunes, Amazon, Rhapsody and Spotify – services that pay royalties to rightsholders. There’s also been services like Bandcamp and CD Baby that make it possible for musicians to sell digitalldirect to fans. And, there’s also been rapid growth of a new revenue stream for sound recordings – the digital performance royalties that are generated when sound recordings are streamed on any webcast station like Pandora or played by a digital service like Sirius XM.
Top level industry data is instructive, but tells us nothing about what ends up in musicians’ pockets. That’s why we conducted the Artist Revenue Streams research; to learn about the revenue streams on which individual US-based musicians are relying, how they are changing, and why.
So, how important is income from sound recordings for individual artists, and how is it changing? (In this post, we’re focusing on the revenue generated from the sale or license of a master sound recording – the recording that is captured in the studio, then released in any format, whether vinyl, cassette, CD or as a digital file. We are not going to cover the money that’s generated by the composition (the song that’s recorded) when it’s licensed for reproduction. We have data about these composition-related revenue streams like mechanicals, but we will talk about them in future reports.)
Our qualitative and quantitative data suggests:
For many musicians, the income derived from sound recordings is a small part of their overall revenue pie, and it’s decreasing. In aggregate, 88% of survey respondents derived between 0% and 10% of their music-related income from sound recordings in the past 12 months. Respondents who identified themselves as composers and/or recording artists were making a bit more, as were rock and hip hop musicians, but even when examined through various lenses like role or genre, income from sound recordings hovered under 15% of music-related income. Though differences exist by role and/or genre, the survey data suggests that income from sound recordings is a modest slice of most musicians’ income pies – a sentiment also expressed by a number of interviewees.
The sources of income from sound recordings are shifting. In the Artist Revenue Streams project, we asked specific questions about a number of sound recording-related income streams. The data suggests that income from physical retail sales has been shifting down and that sales at shows holding steady, while income from digital sales, on-demand streaming, synchs and digital performance royalties have been shifting up. But it’s important to note that the survey data can only indicate the direction of change, not the dollar value of change. As one survey respondent so aptly noted, the fact that his income from digital sales was moving in a positive direction does not mean that the income derived from digital sales was greater than that previously earned from physical sales.
Technology has had a significant impact – both good and bad – on the sound recording landscape. Clearly, the traditional mechanisms for selling sound recordings have been severely impacted by unauthorized filesharing. Piracy has not only cut deeply into the retail sales marketplace, it has also impacted the value of music, and the prices that musicians can charge for recordings. But, technology has also led to growth in licensed digital platforms, and given individual musicians the ability to experiment with bundling options and variable pricing in ways that would have been nearly impossible 15 years ago. And, emerging technologies have led to the development of new revenue streams – digital performance royalties, in particular – which is steadily becoming a noticeable source of income for an increasing number of recording artists.
Sound recordings are valuable for many musicians, serving as an artifact of creativity that can not only earn money, but be used to leverage other income sources, from live performance money, to merchandise, radio airplay, and synchs. Sound recordings will remain an important part of the ecosystem for years to come; what will likely change is the delivery mechanisms, the licensing structures, and the pricing.
Check out the blog post for more charts and genre-specific details. And let us know what other assumptions we should try to examine with data.
Our final stop in the Mythbusting series, an examination of income from merchandise and branding.
Comments
2 comments postedA fantastic bit of research,
Submitted by Neil Cartwright (not verified) on December 19, 2012 - 3:33am.A fantastic bit of research, yet again. It's incredible to know the vast majority of musicians make less than 10% of their revenue from music sales. One questions - you mention "digital performance royalties". Do you mean like publishing performance royalties or pay-per-play royalties from sites like Spotify, YouTube etc?
Hi Neil. The digital
Submitted by Kristin on December 23, 2012 - 11:01am.Hi Neil. The digital performance royalties data is based on the use of the sound recording (not the composition). So we're asking about non-interactive services -- webcasting and satellite radio. This includes Pandora and Sirius XM. Royalties are paid to performers by SoundExchange.
But we asked separate questions about the interactive service payments, which includes Spotify, Rhapsody, Rdio, Deezer. MOG. The charts are here:
http://money.futureofmusic.org/mythbusting/4/
We also have data about the composition side for these services as well. It's not included in this report. We hope to publish some of it this spring.
RE: YouTube. We could only ask very basic questions about YouTube money -- like "have you ever received any money from YouTube Partner Program?" because frankly, it's very complex. (FYI, 1.3% of survey respondents had received money from YT's partner program. N=5371.)
Post new comment