On Monday, February 13, 2012, FMC’s Kristin Thomson participated in the tenth San Fran MusicTech Summit in San Fransisco, CA. Drawing upon Money from Music survey findings and artist interviews, we presented some data about the impact of music/technologies on musicians’ careers and their earning capacity.
We started the presentation by describing the project’s methodology. The research involves three data collection methods: in person interviews with about 80 different musicians and composers, financial case studies based on verifiable bookkeeping data, and a widely distributed online survey.
We also underscored that this study is not about label market share, or consumer spending, or measuring an artists’ social graph. It’s about individual musicians’ earning capacity. It’s about what they end up putting in their pocket, and how it’s changing over time.
Then we did a quick overview of the survey respondent demographics.
Then we focused on three key findings related to musicians’ relationships with music/tech. Note that this is just a tiny sliver of the information that we’ve been collecting through this benchmarking effort. View the range of revenue streams that we are studying here.
1. Emerging technologies have had a significant impact on musicians’ careers.
This might sound like we’re stating the obvious, but it’s an important point when you think about the range of technologies that musicians and composers have embraced in just 10 years.
Whether it’s being able to compose, zip and deliver recorded tracks to a filmmaker in Los Angeles, or sell music using Bandcamp, or keep in touch with fans via Twitter, our interviewees and survey findings suggest that emerging technologies have had a significant impact on the way they organize their careers, and how they make money.
A jazz manager told us how he thought technology had leveled the playing field:
– jazz manager
An indie rock sideman described how technology had given him the tools to be more self-sufficient:
– indie rock composer, performer, sideman
Our interviewees had many additional comments about the impact of technology on their careers, which we will include in future releases.
Technology use and awareness
On the survey, we tried to measure musicians’ awareness of and comfort using various technologies. On this slide you can see that 50 to 70 percent of respondents were “very comfortable” or “somewhat comfortable” using technologies for common musician-related activities.
There was the most consensus around using technology for “promotion” (69%), and for “connecting with fans” (68%). Clearly, there are many ways that musicians can easily use technology to do this, whether it’s a Tumblr account, or Twitter, or Facebook.
But it’s also worth noting that 31 percent of survey respondents said they were not using technologies to distribute or sell their music. This might sound counter-intuitive, but not when you think about the broad array of musicians and composers who participated in this survey.
There’s an army of musicians working in the US – from film and TV composers, to salaried orchestra players, to session musicians, to teachers – that have career structures that don’t involve them making a direct profitoff of recorded music sales. For example, a session violinist who was paid for her time in the recording studio would never see money from digital sales for the recorded work, nor would she be responsible for using technologies to make it available online.
This should in no way diminish their value as musicians, nor serve as a condemnation of any particular music/tech business model; we simply need to remember that the community of creators is large, diverse, and specialized and, for some musicians and composers, questions about how technologies have helped them connect with fans or sell music are simply “not applicable”.
We also asked survey takers about whether they used certain tools, services and technologies. We split it into two buckets: (1) tools and software used to record music and (2) tools and services that help musicians promote, distribute or sell their music.
Here’s what survey respondents said about technologies they use for recording. Note that this question listed about ten options, and included an open ended option at the end, in which survey respondents added in more tools. Below are the top five responses:
Interviewees also talked about the value of these studio technologies. They have made them more efficient, and able to produce top quality work in their own studios. A New Jersey based singer/songwriter told us:
– Kevin John Allen
For the question regarding technologies that help with marketing and sales, the survey listed about 30 different tools and services, plus the option of an open ended response. Here are the top ten results. For our survey respondents, Facebook, artists’ websites and YouTube are the most commonly used tools.
The musicians we interviewed mentioned the same technologies frequently: Facebook, websites and YouTube in particular. For this musician, Facebook connections have led to more collaboration, and more offers for her as a freelance player:
–freelance performer/recording artist
Emerging tech’s impact on their careers
We also asked survey respondents to rank the impact that emerging technologies have had on their careers as musicians.
We had them rank things on a 5 point Likert scale, from strongly agree to strongly disagree. There were ten options on the list. For readability, we have combined “strongly agree” + “agree”, and “strongly disagree” + “disagree” on the chart below, and have listed the five for which there was the greatest agreement.
Some of these are really empowering answers. 66 percent of survey respondents agreed that technology allows them to communicate directly with fans, while 54 percent said it helps them collaborate with others, often remotely. And 56 percent said it helps them self-manage their careers.
But, not all responses were positive. 37 percent said their “day-to-day job was more about promotion than creation”; we have heard similar complaints from interviewees and other musicians who feel like they are regularly juggling a dozen different duties and responsibilities.
And, 64 percent also agreed that “it’s more competitive than ever”. This is something we heard in the interviews as well. Technology has removed hurdles and bottlenecks and leveled the playing field, but it has also allowed a lot more musicians access to the marketplace. Naturally, that increases the noise, and the level of competition.
We heard this clearly from film and TV composers, who have benefited greatly from the ever-dropping price for technology, but who also face constant pressure from younger composers who will do similar work for a lower rate:
– film and TV composer
A final note on the chart above: about a fifth of respondents (20%) said that the questions about communicating with fans, or collaborating with others, or promotion were simply “not applicable”. This harkens back to a point made previously, and serves as a strong reminder that there are many creators in the US for whom using technology to “sell music” or “communicate directly with fans” does not apply to their career as a musician, performer or composer.
The survey questions and interview responses strongly suggest that emerging music/technology has had a measurable impact on their careers as musicians and composers. Revenue generation aside, technology has made them more self-sufficient, given them the ability to connect directly with fans and peers, and leveled the playing field in general.
2. Digital download sales seem to be having a positive impact on musicians’ earning capacity, but only for those who participate in sound recording revenue streams
The second point we made at SF Music Tech related more directly to technology’s impact on musicians’ earning capacity. Based on survey findings and interviewee feedback, income from digital download sales – especially from iTunes – seemed to be having a positive impact. But we say this with a large caveat; this only applies to musicians and composers that benefit directly from the sale of sound recordings.
Digital technologies and revenue
The survey also asked very specific questions about musicians’ and composers’ income related to about 20 significant revenue streams, everything from mechanical royalties to live performances. See the list of revenue streams examined in the survey here.
Below are charts related to three possible sources of income from the digital transmissions of sound recordings: (1) income from digital sales/downloads; (2) income from interactive streaming services; and (3) income from digital performance royalties paid to featured performers. We chose to focus on just these three at SF MusicTech Summit to match audience interest (which included lots of music/tech folks), and to keep within the 30 minute time slot. See the additional revenue streams that we’re studying here.
Revenue stream 1: digital sales
We began by presenting data about digital sales of sound recordings. This includes sales of downloaded tracks or albums from iTunes, CD Baby, eMusic, Amazon, or off an artists’ own website.
When asked whether they had ever earned any revenue from the digital sales of their sound recordings, 62 percent of survey respondents said, yes, they had earned something.
When we asked our interviewees about increases in revenue, digital sales – and iTunes in particular – was the most commonly mentioned source of increased revenue:
– jazz manager
For the 62 percent who said they had received some income from digital sales, we then asked them whether that income had increased or decreased over the past five years. For 58 percent, it has gone up over the past 5 years. For 20 percent, it has stayed the same. 17 percent have seen a decrease.
For those 58 percent who said it had gone up, we then asked them why. The top answer was that consumers’ purchasing habits have changed. This shouldn’t be a shock to anyone, but it’s helpful to hear this from musicians themselves. The other reasons are also obvious: if you have more releases out there, or more of your catalog is digitized, there’s an opportunity to make more money from digital sales. And, there has been an increase in the number of platforms to sell music digitally over the past five years.
What about those 17 percent who had said their income from digital sales had gone down? The most notable reason: more competition. This is the consequence of leveling the playing field; it is now so easy for musicians to participate in the digital marketplace that it’s flooded with content. Naturally, this means there’s more competition for consumer’s attention, and dollars.
To summarize, a majority of survey respondents (62%) have seen some income from digital sales and, even better, a majority of those people (58%) said that this revenue has increased over the past five years. They recognize that consumers’ behaviors are changing, and that making more of their work available via digital stores leads to more income. This was a trend echoed by our interviewees.
3. Streaming services are not a significant revenue stream for musicians….yet
We also presented data about two different types of music streaming services: on-demand, interactive services such as Rhapsody and Pandora, and non-interactive services that include Pandora, all other webcast stations, and Sirius XM airplay. We asked about these separately because composers and recording artists are paid differently for each service type. As we outline below, streaming services in general are not a significant revenue stream for many artists, but interview responses suggest this revenue stream is growing slowly as consumer use changes and more services come online.
Revenue stream 2: interactive streaming services
As this chart above indicates, only about 35 percent have seen income from this revenue stream…so far. There are a few likely reasons why this number is so much lower than the digital sales figures above.
1. Service adoption. Although Rhapsody has been active and paying royalties to sound recording copyright owners for over ten years, a number of these services – especially Spotify – are fairly new entrants in the marketplace, so perhaps the money hasn’t flowed through to musicians yet.
2. Limited awareness/knowledge gaps. This might also indicate a general lack of understanding about the differences among these services. For instance, musicians who use aggregators CD Baby or Tunecore to make their sound recordings available on the array of digital music platforms receive a monthly statement that itemizes all of the plays and downloads during that time period. But are musicians reading their Tunecore/CD Baby statements closely enough to know that they are receiving some of this income from interactive music services? Do they know the difference?
3. Service utility. Finally, there are a number of genres that are not served well by interactive streaming services — classical in particular. Those who are in a position to license their content to interactive music services may not be making it a priority. Given that classical was the most well-represented genre in this survey, this might be a reason as well.
When we asked interviewees about emerging technologies, very few musicians or managers even mentioned these services. But when they did, they had similar experiences as survey respondents. It’s a small but growing revenue stream:
– manager Dalton Sim
As with the prior question set, we also asked about changes in this revenue stream. Of the 35 percent who had seen some revenue from on-demand streaming, half (50%) said that it was increasing, and 28 percent said it had stayed the same:
Then we asked survey takers why they think this revenue stream had increased. The main reason? More outlets and platforms, which reflects reality of the marketplace. Note at the bottom of this list; increase is not commonly attributed to a higher price/rate, which also reflects marketplace conditions.
On the pie chart above, 11 percent of survey respondents (40 individuals) said they had seen their money from interactive services decrease. As with all revenue stream questions, we asked them to itemize the reasons for the decrease, but only 14 people did so, providing us with insufficient data to display.
Revenue stream 3: digital performance royalties
The third and final revenue stream we presented about at SF MusicTech was digital performance royalties. This is the money that featured artists receive when their sound recording is played on webcast stations (including Pandora), satellite radio, and on digital cable channels. This is, essentially, a new revenue stream that came into being in 1995 with the passage of the Digital Performance Right in Sound Recordings Act.
Despite impressive market penetration of Pandora and Sirius XM over the past five years (and enormous sums of digital performance royalties generated as a result), only 13 percent of respondents had seen any digital performance royalties. There are potentially two reasons that this number is lower than income from digital sales, but they are slightly different than the reasons given for on-demand streaming services.
1. Lack of awareness of SoundExchange: SoundExchange is the organization that is responsible for distributing digital performance royalties to featured artists. In order to receive their royalties, artists must sign up with SoundExchange (it’s free to join), so that SoundExchange knows where to send the check. SoundExchange has invested heavily in generating awareness, but it remains difficult to reach all the artists who have accrued royalties. It might be that survey respondents simply don’t know about SoundExchange, or its role in distributing this revenue stream.
2. SoundExchange not the payee: We should also point out a possible limitation based on how we asked the question; the survey question asked whether they had received from SoundExchange, which distributes royalties to featured artists. Many of our survey respondents were salaried players. Those musicians might be seeing these royalties, but in their case they are not distributed by SoundExchange, they are managed by the AFM/AFTRA Fund.
During our interviews, we often heard interviewees talk about webcasts, satellite radio, and the related revenue generated from plays. A hard rock band we talked to made it a point to talk about their SoundExchange royalties, which were generated by consistent airplay on specific Sirius XM channels and Pandora:
– Benjamin Weinman, The Dillinger Escape Plan
A music publisher we talked with echoed the growing value of this revenue stream:
– Dan Coleman, music publisher
As with the other revenue questions, we also asked survey respondents about changes in this revenue stream over the past five years. For those 13 percent who said, yes, they have received some money from SoundExchange, 46 percent said it had increased, and another 30 percent said it stayed the same.
This clearly matches expectations. SoundExchange’s royalty distributions continue to grow year by year. For instance, in 2010 the organization paid out $249 million. In 2011, it paid out $292 million to rightsholders. This reflects steady growth in the non-interactive streaming marketplace, and more plays means more royalties for artists and sound recording copyright owners.
For the 46 percent who said that their royalties had increased, we asked why.
The top reason: the survey respondents had registered with SoundExchange. This is obvious, but important; the royalties cannot flow to artists unless they sign up with SoundExchange. Survey respondents also noted that their recordings are getting more plays, which means more money.
For the 14 percent who said that their digital performance royalties had decreased, only 8 people responded to the survey question about the possible reasons why, so there is not enough data to present specific findings.
At SF MusicTech, we gave the audience three takeaways:
1. Emerging technologies have had a significant impact on their careers as musicians and composers.The survey questions and interview responses strongly suggest that emerging music/technology has had a measurable impact on their careers as musicians and composers. Revenue generation aside, technology has made them more self-sufficient, given them the ability to connect directly with fans and peers, and leveled the playing field in general. But technology also brings new challenges; some musicians and managers we spoke with found navigating this new landscape exhausting, and the new responsibilities and opportunities distracted them from their core work creating or performing.
2. Overall, digital technologies seem to be having a positive impact on musicians’ earning capacity.iTunes is the digital store that most musicians and managers that we interviewed mentioned as being the most impactful, and digital sales/downloads in general is the activity that is most acknowledged by our survey respondents. A strong caveat that this only impacts musicians who have the opportunity to make money off of sound recordings. We can’t forget that this digital transition, as great as it’s been for many musicians, is “not applicable” to others – the session musicians, the salaried players, the teachers, and composers who create works for broadcast and other non-sales options.
3. Streaming services are not a significant revenue stream for musicians….yet. Perhaps our timing is impeccable, and we are at the cusp of a new wave of revenue from millions of subscription service plays. There certainly was hope for that expressed by some of our interviewees. But many artists are either not seeing the money yet or, if they are, it’s not enough for it to make a dent in their pocketbook. This resonates closely with the ongoing discussions about artists’ payments for streaming plays, and a conversation that will certainly continue over the next months and years.
We encourage you to take a deeper look at our findings, and at our future releases where we will continue the conversation about how musicians and composers’ revenue streams are changing in the 21st century.