#2. Online Radio Is Set Up to Fail if It Gets Too Popular, So Don't Tell Your Friends About Your New Favorite Station
For everyone who's moved on from the angry thug fart that is YouTube, there are the real music streaming services, such as Spotify, Pandora, and Beats Music. Spotify is the biggest of all, currently claiming 10 million subscribed users all listening to the same computer-generated iPod shuffle as you. So what's the problem? Well, these independent online radio stations can only go so far until they collapse under their own streaming weight.
Let's take East Village Radio, or EVR, as an example. Since 2003, EVR has been slowly gaining in popularity as the premier place for upcoming artists to be discovered, playing decent music you've never heard while broadcasting interviews with the artists of said music, instead of playing Katy Perry's latest bubblegum-pop breast exercise or the soundtrack to whatever animal Lady Gaga decided to wear this month. As an online radio station that began with two guys in a stuffy room and grew to over a million listeners, it's the prototypical Internet success story.
Except online radio stations aren't like iPhone apps or even regular websites -- for every added listener comes an increase in the royalty fees they have to pay to each record label whose artists they play on their station. You see, Internet radio has to pay more fees than regular radio stations, for reasons that no one has yet to adequately explain. Entities like SoundExchange (an organization that exists entirely for the purpose of collecting royalties on behalf of artists and their labels) require 23 cents for every 100 listeners. Despite making more money in 2014 than in any year previous, EVR simply couldn't afford the royalty fees incurred by their massive audience. In an industry that depends on music reaching the maximum number of listeners possible, they were too successful.
The FCC has been looking into the issue (despite being an organization that randomly declared that they owned the air 100 years ago and have been dictating how we consume content ever since), but EVR was so pessimistic about the FCC's progress that they decided to give up. It's the American dream at work.
Erica Berger/Fast Company
"Hopefully, this whole FCC-siding-with-corporations-on-Internet-issues thing is a one-off."
#1. Musicians Are Making the Worst Money They've Ever Made Thanks to Music Streaming
It's no secret that most musicians are as broke as a yard sale Game Gear. Justin Bieber and Kanye West represent the insurmountably tiny 1 percent of the recording industry -- virtually every other recording artist out there is struggling to pay their rent and is routinely expected to play shows in terrible dive bars for absolutely free, because the knowledge that you're getting your music out into the world should be more than enough to tide you over until your student loan deferment kicks in and allows you to purchase food. Keeping that in mind, consider this hard truth: Music streaming, while ostensibly fantastic for the listener, makes earning a living as a musician a thousand times more impossible.
Maria Pavlova/iStock/Getty Images
"Pop-pop is expecting a 77th birthday call ... he's getting a birthday card made from an old McDonald's bag."
Over the first few months of this year, digital downloads from services like iTunes have been dying almost as quickly as Tom Cruise's exceptional spy team in the first Mission: Impossible movie, with a 13 percent drop in digital sales from last year. Streaming, on the other hand, has gone from 25.44 billion streams in the first quarter of 2013 to nearly 35 billion streams in the first quarter of 2014. And the problem with everyone moving to music streaming is that while billions of people may be listening to their music, artists are now enjoying the fruits of billions of people not paying to listen to their music.
For example, Grammy-nominated artist Armen Chakmakian demonstrated in a recent article that 14,227 streams of his music have generated him a sum total of $4.20, which isn't even enough to purchase a single issue of Electronic Gaming Monthly. That's less than a fraction of a fraction of a cent apiece. To truly understand the difference in revenue between digital sales and streaming, take a look at these two graphs:
Basically, you could earn more with a hat and a street corner.
Here's the most mind-blowing part -- Spotify, despite paying each artist a measly 0.6 cents per stream, has reportedly lost $200 million since it was founded, because Spotify has to pay 70 percent of their revenue to the record labels. "So how can Spotify stay alive while smaller stations like EVR have to close down?" you might be asking. Well, because Spotify is owned by the exact same record labels they pay three-quarters of their revenue to. After all, it's not really a loss when your biggest expense is your own salary, is it?
And who gets screwed in all of this? The musicians spending all of the time (and usually most of the money) making those songs we love to listen to, because for some reason the entertainment industry is the only industry in the world where we expect people to work for free. Hooray, capitalism!
The third part of XJ's epic science-fiction novel is out now on Amazon. The first $0.99 novella can be found here, with Part 2 out here. Or leave a review and get a free copy! Poke him on Twitter and follow him on Facebook.