Why Now Is The Best Time to Be An Artist

Powered by RedCircle

This memo is presented by State Farm.

When you start a new business, your first reaction might be to say things like “Woohoo!” or “Yessss! or “boo-yah!” But one thing to say that could be a huge help is:

Like a good neighbor, State Farm is there.

And just like that, State Farm will be there with the coverage that fits your needs, whether your business is growing, or just opened its doors.

State Farm agents are small business owners too, so they know what it takes. They can help you create an insurance plan that fits your small business needs and budget. With State Farm, you can worry less about the unexpected and focus more on your business. With a State Farm agent you know someone is helping you achieve your goals.

Just say…Like a good neighbor, State Farm is there.

The best of times or the worst of times?

For today’s episode and memo, we broke down some common talking points in the music business. Who’s the real villain of the industry, and is that fair? Is this the best time to be an artist? Should artists ever pay for features? I was joined by beatBread’s CEO Peter Sinclair. He always kept it real, so he was the perfect person to have on.

You can listen to us here or read below for a few takeaways.

“What are your thoughts on Spotify?” is the ultimate Rorschach test. It’s the company that both saved and ruined the industry, depending on who you ask. I do believe that Spotify should be paying songwriters more, but when I take a step back, I always go back to this:

The number of global artists making a living from their music continues to grow.

In 2023, there were over 20,000 artist catalogs that generated over $50,000 on Spotify, which accounts for roughly 20 – 25% of recorded music revenue according to the company’s Loud & Clear report. That far exceeds the number of artists who made a living in the top-heavy, gate-kept era where only a few thousand artists made that much money (adjusted for inflation).

That doesn’t mean today’s era is easy though. It’s tough to break through the algorithm, influx of songs, and all the media that compete for your attention.

But is it harder for a talented musician to break through Spotify and TikTok today than it was to break through terrestrial radio and MTV decades ago?

The reality is that it’s the best time to make a living from a music career (including touring, merch, etc), but it’s arguably the hardest time to become the biggest star in the world.

SZA, Billie Eilish, and Olivia Rodrigo are some of the biggest artists to rise up since streaming took off. But in a prior era, they would each have had their moment as THE biggest stars in the world.

In that prior era, there was limited album inventory available in Tower Records. There was limited screen time on MTV and BET. Shows like TRL and 106 & Park retired music videos on their countdown shows after 65 appearances! New releases were incentivized. Music’s business model relied on one-time album purchases, regardless of consumption. The rising artists often reaped the rewards.

Today, artists like Taylor Swift, Beyonce, and Adele are the biggest stars, just like they were a decade ago. Sure, there are exceptions who have broken through, like Bad Bunny, but this trend is not a coincidence. The industry dynamics and timing worked in the favor of artists who were on top when streaming took off.

It’s relatively easier than ever to make a living. But it may take decades, not years, for artists from the streaming era to build a career that can match a year like 2023 Beyonce or 2023 Taylor Swift.

You can listen to the episode here or read below for highlights.

The DSPs that “pay the most”

I often cringe when I hear someone say that a certain DSP pays rightsholders more or less. First, it assumes that rightsholders and artists distribute payments “per stream.” They do not. Regardless of the payment model (pro rata or user centric), that’s not how it works.

Sure services like Apple Music and Amazon may lead to higher payouts than Spotify when looked at on a per-stream basis, but there are two reasons for that:

– Spotify (and YouTube) have free ad-supported tiers, where payouts are lower
– Spotify’s users, even on paid tiers, stream music more often

Each DSP is an all-you-can-eat service. Most charge the same price for a borderline identical product.

Spotify’s users treat that buffet like a high school track team at Golden Corral for pasta night. They load up on carbs and hang out together before the big meet. Meanwhile, Apple and Amazon’s users treat their buffet like a hotel continental breakfast. They are glad enough options exist for the whole family, but no need to get stuffed. They want to get on with their day.

A service that “pays more per stream” may also have users that are less active on that service. That’s not necessarily a flex. However, those services may generate a higher average revenue per user, which is a much stronger flex, especially if controlled for pricing across different markets.

The YouTube factor

Sony Music chief Rob Stringer wants DSPs to charge a “modest fee” for their free ad-supported tiers. Those comments may draw a lot of attention to Spotify’s free tier, which accounts for a majority of its monthly active users. But the bigger focus may be on YouTube, which is still the most popular platform worldwide for listening to music.

The price increase comparisons between Spotify and Netflix are made often since Netflix has nearly tripled its initial pricing in select markets. But Netflix has plenty of content that can only be consumed on Netflix or another paid SVOD service. Sure you may be able to watch clips of Stranger Things on YouTube, but it’s not the same as watching the full series.

That’s not the case in music. Every DSP competes with the consumer’s ability to quickly go to youtube.com, type in the song or artist they want to hear, skip the ad after 5 seconds and listen to the music. It’s a low-friction alternative.

The distinction makes the lower-cost, ad-supported tiers on Max and Netflix an easier sell than a DSP doing the same.

It reminds me of The Atlantic’s Derek Thomspon’s concept of the millennial lifestyle subsidy. The 2010s were full of venture-backed companies that suppressed their prices to grow at all costs, then raised those prices over time as their products became a habit with consumers.

Uber, Airbnb, Netflix, and DoorDash, are all examples. They all raised prices and became more expensive over time. Spotify and other DSPs are among the last ones to still offer the lifestyle subsidy.

As the price hikes continue and become even more frequent, it will continue to grow the pie for the entire industry.

Listen to the rest of our episode myths busted, like:

– why artist features don’t matter
– the Metro Boomin multiplier: how producers can boost an artist
– predicting success with quant and qualitative analysis

Chartmetric stat of the week

Ariana Grande had the less-than-ideal timing of releasing an album in the middle of UMG and TikTok’s three-month spat. Despite the timing, her TikTok Followers still grew by around 900k (2.63%) from February 27 to May 26.