Like everything else, the music industry has had to adapt to keep up with social media taking over. Labels and publishing companies must constantly negotiate rights and royalties to ensure their artists are compensated fairly for their work, whether it be from tracks being streamed on Spotify and Apple Music or a viral video on TikTok or Instagram.
Royalties from Streaming: A Brief Recap
The iTunes Store first changed the way music was consumed by selling digital single tracks for $1.29, which earned the artist just about $0.09 per single track purchased. Spotify and Pandora released free streaming services that profited off of ads, or users could pay for a subscription without ads. Apple jumped on the streaming bandwagon, changing iTunes to Apple Music.
As the platforms evolved in the last decade, so did royalty payments. Record labels have deals with music distribution companies which are responsible for pushing tracks onto these streaming services. Record labels then sign artists, providing them copyright protection and enabling the artist to earn profit off their work. Both the label and distributor take a cut of the profit, and royalties are meant to be paid from any streaming services or social media sites they show up on.
As of 2021, artists are paid varying royalties depending on each platform. Pandora offers different types of streaming to its users, but on average, artists get paid approximately $0.0011 per stream, while Spotify pays approximately $0.004, and iTunes about $0.012.
Advocating for Copyright
It is standard practice for all streaming sites that utilize copyrighted material to have intellectual property laws written into company policies. These laws are defined to protect “all intangible assets, like music, owned by a person or company and protected against use without consent,” and labels and distribution sites can go to bat for artists if copyright is infringed upon.
“One thing we can thank publishers for is their commitment to advocate for copyright,” said Lucas Keller, founder of Milk & Honey Music. “I tell my clients they make money in their sleep. They go to sleep, they wake up in the morning and all around the world their copyrights and songs are being used… this is the value of owning intellectual property.”
TikTok, for example, has deals in place with music distributors so it can provide its users a music library directly from the app — users don’t have to import sounds from elsewhere and risk their videos being taken down for copyright problems, because the distributor deal already extends copyright usage to the platform, to begin with.
You might think that a single video that goes viral and receives millions of views would translate into a larger paycheck for an artist. But that isn’t how it works — TikTok’s current policy pays the artist based on the total number of videos created with a certain sound. So 10 videos with a million views each will make less money than a sound that has 160k videos made with it. Each video made with a verified song makes approximately $0.03, so a song with 160k videos under it will shape up to about $4,800 for the artist.
The flip side of this is that because distribution sites already have deals with labels (which already have deals with the individual artists) if an artist uploads their music directly from their own account, royalties cannot be made.
As the most prominent newer social media platform, TikTok’s royalties policy could be set as a gold standard for sites like YouTube. Currently, YouTube does not pay artists royalties each time their tracks are used, but it does try to remove videos where copyright laws are infringed upon.
“Generally publishers make deals and they make the best deal they can,” said Keller. “I think one of the things we’re going to see — we’re seeing it already — but we’re going to see record deals change. We’re going to see [royalties] start to rise. My dream was for the managers and artists’ staff to control more, and in the last five years that’s totally become the case.”
More and more artists are utilizing social media platforms to promote their work, interact with fans and reinvent their brands to keep up with the times, and TikTok has proven useful with its upward trend in popularity.
Where are NFTs heading?
“Every head of business affairs for a label and publisher has a different view of what NFTs should be,” Keller said. “There’s going to be a big debate there but it’ll get worked out.”
NFTs, or non-fungible tokens, utilize cryptocurrency like Bitcoin or Ethereum. People can buy units of cryptocurrency that will then be kept in secure digital “wallets,” then utilized at a later time for a transaction of their choosing. Cryptocurrency uses a “blockchain” technology that tracks transactions between digital wallets, but it is untraceable outside of the wallet.
Reining in the Platforms
The National Music Publishers’ Association (NMPA), which was founded “to protect and advance the interests of music publishers and songwriters in matters relating to the domestic and global protection of music copyrights” recently struck a deal with Roblox to “set the foundation for future partnerships and global publishers that will unlock new creative and commercial opportunities on its platform.”
The deal comes after a $200 million lawsuit against Roblox alleging widespread copyright infringement. The settlement includes an “industry-wide opt-in” policy for all NMPA publishers for “new go-forward licensing deals” with Roblox’s platform. The goal is to open doors for new, creative ways to create and share music without worrying about copyright.
While not all change is good, it is necessary to improve conditions and to figure out what works and what doesn’t. With management companies and the NMPA looking out on artists’ behalf, royalties will likely improve and set a standard for future platforms to follow.