Apple iCloud Advances Major Labels $100-$150 Million, Indies Get $0 (Zero, Zip, Nothing)
Apple is advancing the major labels $100 – $150 million to allow the launch of its iCoud music locker next week, according to reports. Google had apparently offered the same big labels $100 million to let it launch a robust cloud music service, but got bogged down over efforts to fight piracy. What are independent labels being offered for advances?
According to Hypebot's sources, nothing. In fact, to add insult to injury, Apple apparently offered at least some indies a smaller share of revenue than the majors: 53% vs. 58%. Some independent labels and distributors are pushing back, but may be forced to give in if iCloud becomes popular. Is this fair?
Do you think indie labels and artists deserve the same deal as the majors?
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LA Times blog reporting vastly different percentage numbers:
http://latimesblogs.latimes.com/entertainmentnewsbuzz/2011/06/major-labels-music-publishers-apple-icloud.html
When you can pick up 60% to 70% of recorded history – including all the tracks major labels have acquired through the years from recorded music’s greatest independents (A&M, Island .. etc..) – with four agreements, you have a business …
Apple will rule this market segment … consequently today’s indies will have to become part of it and their deals will be based on their share of the market.
Its an advance so is recoupable which given its Apple will happen – yet again a story about nothing
Fair? You have to be joking. Most people don’t know the half of it.
Count up the licensing advances majors have received from digital companies over the last 5 years and it’s enormous, probably over $1 billion.
The majors know they will never have to pay artists nor indie labels they distribute. Why? Cause there is hardly any money to be made off streaming.
To answer the question: No, of course not.
“Fair” is a concept that does not exist or matter outside of a kindergarten classroom.
The irony is that, once streaming tips (when everyone who now uses itunes to buy, uses itunes to stream music for a monthly fee) The money will be huge. Similar to what DVD sales did for hollywood.
Jeff, you truly are not getting it.
Have you run the numbers on perhaps the biggest artist Lady Gaga? She makes shit from streaming.
You don’t understand the economics. The only people making money off of streams is the tech company and majors taking advances.
What I think is hilarious is how many people who claim giving music away for free or the increased numbers of indie musicians are devalueing music, but it’s really just the majors who are to blame. Shifting towards streaming rather then purchasing music is like entering a race to see how fast the music industry can bankrupt itself. The majors pretend thattheir doing their very best to not lose money and place the blame on others, but really they are circling in a downward spiral that they seem to continue to circle faster and faster.
Free album download at http://www.facebook.com/chancius
Artists get money from advances. An advance is just money upfront so they take that money and Lady GAGA will get hers once she sells units, streams music or has files hosted in the cloud.. Whatever the business may be. This just means the label has money at the start of it that it can breakout over time.
Thats not true at all. If you look at the numbers now streaming is only based on 1.5 Million people and Rhapsody is already a top 5 account for labels. There are 170 Million accounts on itunes, 500 million people on facebook and 2 billion people with access to the internet. If you go by the general understanding that roughly 90% of music consumption on the web is via illegal downloading, thats a large potential base of people to monetize.
Say we get 10% of people downloading illegally to switch so we’re monetizing 20%… Say that number is 340 Million based on doubling itunes and say those users are using streaming services at 10 dollars a month (Standard Rate Card). Thats 40,800,000,000 a year in money to break out among the tech companies, artists, labels, pub etc. Thats about 34 BILLION more than currently in the entire music industry, and thats with a conversion of the entire PAID base to subscription and only 10% of illegal downloads. 80% of people can continue to steal music under that math.
Yes this is a tough number to hit. Very tough. But imagine the possibilities? Subscription is MUCH easier than illegal downloading especially as mobile technology continues to expand. If you look at illegal downloading as a format the same as CD’s and subscription a future format thats really only in the last 12 months coming to a point that can work on a mass-scale (leveling of mobile etc), then you cant judge by current profitably of the model but off of potential.
We need to allow new formats the chance to evolve as long as the deal is potentially profitable with scale which the subscription model is.
“Oh Jason, people can come up with statistics to prove anything. 14% of people know that.” — Homer Simpson
You are living in a fantasy world and you obviously don’t understand how artists get paid.
actually I do, I’m paid to understand this. I know exactly what I’m talking about.
Jason’s math makes sense to me.
Your math is…oh wait, right.
Streaming takes a customer who may buy 2 or 3 or more CDs a month and turns them into a customer who will spend the equivalent of one CD a month.
That’s not a winning formula.
Jase mate, I don’t know you or what you do, but if you are paid to understand this well, how come you missed this point?
And the thing about illegal downloads is probably less to do with ease and more likely to do with compulsion or sticking up 2 fingers to the industry or wanting little files in little folders to offer a sense of ownership and of being a collector… so the conversion of these P2P people to streaming is going to be harder than you think.
The conversion is going to come in the form of customers who shell out cash for CDs/mp3s into customers who buy streaming subscriptions… and as I have suggested above, that will equal less income.
Obviously neither of us can prove we are right at the moment, but my money most definitely isn’t on streaming saving the Major’s from the current crisis.
Is Spotify just another nail in the coffin?
exactly. a Nothing story. I cannot believe any “artist” making an “album” with a laptop and a mic would expect an advance. It is so naively unrealistic it is painful.
I am 100% with Jason. The key to more music revenue is not more money per fan but more fans each giving some money. That’s what many think streaming can do.
The only way to find out is to experiment with these services and see. I also don’t think that “buying” will go away – as a souvenier, a way to support the band or some non-just-music physical product.
The comobined revenue can be greater than the current revenue. It’s our best chance.
Indie labels produce what is 100% of ambitious music made by real musicians and not that bunch of pseudo ‘artists’ behind computers or other people doing it for them, stealing, remixing, covering and copycating. So yes, Indie labels should be offered the same money what major or even more because of above. Besides, no worries, all that ‘music cloud’ business is a ‘legal’ excuse for music piracy. That should have never happend to get approved by world intellectual law. Companies like Google or Apple will earn money, labels probably too and artists may get shit as usually and they are the only who should be paid for their mind work, skills, nights spent on writing, paying for mastering etc.
It’s possible that the streaming scenario may evolve into being a better payday for major labels and the larger independent labels. Through having numerous artists on their books they can perhaps make a profit.
But for the artists themselves? It’s hard to see how they could be better off … unless they receive millions of plays.
In these days of niche content and fragmented audiences very few artists are likely to do that.
So I reckon this will be brilliant for tech companies, good for major labels, OK for large indie labels, pretty bad for small indie labels, and disastrous for all but the biggest artists.
Cathrine: Its exactly the same for album- or downloadsale so theres no difference… And millions of streams isnt actually that much (and not impossible for even niche-artists).
You’re basically saying that small artists wont get much and big artist will…
Most new (and good) labels pay our a procentage… So streaming wont change any of that. Less money for label means less money for the artist and visa versa. HOw can that be changed with streaming?
??? How many people do actually buy 2-3 albums a month!!?
Way under 1 procentage. Most people only buy 2-4 albums A YEAR! Thats why streaming has this big potential…
Sweden who is te most progressive country with streaming services has already many doubled the digital income of music…
True… and what you’re saying is something many people cannot see… Thats why they start talking about greedy labels and all those who want to hurt their music…
If people are so scared why not just remove if form a subscriptionservice? No one is forced into it. Thats whats great about the internet…
Streamingservices is a huge step forward for all the musiclovers and has the potential of getting economics into the industry once again…
And so dont you… I work on a bigger (not major) label and knows a lot of people on major labels. I DO KNOW how things are and Jason is right… Maybe not in your world but in all other peoples world…
It’s not really a matter of indiie’s DESERVING the same deal. This is just how business works- the majors are going to need more “bribing” because of their clout and legacy alone- and the indie’s will have to swallow their pride and hop on board or choose not to be a part of it.
The reason why the major and indie labels are treated differently lies in the value of the content, and there’s nothing to do with the” major” or “indie”. If any one who could produce any content fascinated by the audience, the target or potential subscribers of the i-cloud service ,Google music, I’m convinced that you will gain as much as what the content deserved in the digital music market…
FOR THE FACTS – READ THIS:
The best way to prove the problem with streaming is by example:
Spotify currently pays a fixed rate of $0.00029 per play to artists
Tracks on iTunes still sells for on average 99c and major label artists typically make 10% so that’s $0.09
Therefore with the streaming model an artist’s track needs to be played 3413.79 times to make the full 99c and 310.34 times to make the 9c
To make $10,000 an artist’s track needs to be played 34,482,758.62 times
To put these figures in perspective and since everyone is quoting Lady Gaga facts on here – she currently has 121,926,988 plays on last FM (AFTER 3/4 YEARS) and 471,253 plays on rdio (after close to a year)
To be fair to streaming (fair?) last FM pays a little more – $0.00075 per play to artists
So that’s $91,445 to Lady Gaga from last FM over 3/4 years. At the most that’s $30,000 a year. A starting salary for most professionals. And rdio? Not even close to that
To put THAT in perspective here’s the figures for U2 who share the money between 4 members – 90,238,065 plays on last FM, so that’s $67,679.29 in 9 years since last FM started in 2002. Granted the service has grown dramatically in the last 5 years or so given the introduction of MP3.
That’s $16,919.82 to each member of U2 in 9 years!
These small profits up until now have been seen as OK because these streaming services generally encourage listeners to want to hear more and hence create …SALES! Sales, where 99c is put down by 1 person for 1 item. Imagine that?
Last FM is a good example because they’re among the largest and mostly widely listened whereas Spotify is still a European service.
But Spotify is being talked of as the new music portal for Facebook users with other services such as Simfy vying for placement. Remember Spotify pays roughly 1/3 of what Last FM pays as a fixed rate to artists per stream.
To answer your question: No, Streaming is not fair. It will make Apple and other corporations lots of money because people will want the access to all the albums, but it won’t make artists any money until we’re all listening to songs at least a few hundred times over which is unlikely. The most played song in my collection currently has 23 plays on it in over 2 years.
Now perhaps people can understand why The Red Hot Chili Peppers and others are staying out of streaming as much as possible and demanding pay for their albums before they can be streamed on a subscription. Take a look at their rdio page.
You’ve hit on the biggest issue. A song needs to get played multiple times in a streaming environment to think about profitability. Most songs simply are not made to get more than one token listen. The gap between the haves and have-nots becomes wider.
But while your math is headed down the right path to take into account modest streaming payments, it focuses on individual sites vs. the business as a whole. Adding all the sites up together will result in meaningful revenue that becomes a part (not the whole) of a song’s revenue pie. Also, based on what I know your royalty figures are incorrect at least by a decimal point. Statutory rate for internet radio is $0.0019 and the pureplay rate (Pandora) is $0.00102. If labels are getting less money per play than that from the on-demand services, then they are the only ones to blame. But knowing labels, they did not allow a lower figure than mandated by the US government, making your figures likely inaccurate.
Am I missing something? I’m pretty sure Apple is charging $24.99 annually for their ‘iTunes Match’ service. But I keep seeing people here talking about streaming music from iTunes for a monthly fee.
Yes on the charge – no on the streaming
Apple’s iCloud is not a subscription service, nor a streaming service, nor quite a locker service. (it’s some of each, but likely won’t generate any royalties at all, since it simply stores/syncs music that customers already own) Many folks in this thread are confusing the various models. The music side of iCloud comes in two flavors; a synchronization service for music from the iTunes store, and “scan and match” for music that doesn’t. iTunes users will pay nothing for sync service, at least initially. $25/year for scan and match of all the non-iTunes stuff.I see the $150M as more in the nature of a bribe to the majors for looking the other way while people scan and match their pirated major-label material.If there are no royalties, I don’t see how anything can be recouped.
To make $10,000 an artist’s track needs to be played 34,482,758.62 times
If you’re getting even a smallish fraction of that number, you should be making a lot more than $10K in the form of merch, touring and licensing.
The scenario where a musician gets to stay home and pull down a living wage from nothing but music sales is a fantasy.
Is lastFM paying the statutory rate for compulsory licensing, or interactive streaming rate individually licensed with each label?
This might not make a huge difference but could be slightly higher depending on which license.