The Boats Don't Rise And The Tide Won't Come
From the shitty payout models at Spotify to the five decade experiment of supply side economics, we must finally learn that a rising tide doesn't lift all boats and the wealth will never trickle down.
The podcast will appear on Wednesday again this week, while we make our way back to the normal schedule.
Trent Reznor, the man behind Nine Inch Nails turned film composer, recently made news by excoriating the economics of the music industry. In an interview with GQ, Reznor railed against Spotify and the paltry payments coming from digital streaming. He also hints at the inherent unfairness of the system and how it benefits larger artists, Drake in the example that Reznor cites, and everyone else making music not at the level of Drake or Beyonce or Taylor Swift.
“I think the terrible payout of streaming services has mortally wounded a whole tier of artists that make being an artist unsustainable. And it’s great if you’re Drake, and it’s not great if you’re Grizzly Bear. And the reality is: Take a look around. We’ve had enough time for the whole ‘All the boats rise’ argument to see they don’t all rise. Those boats rise. These boats don’t. They can’t make money in any means. And I think that’s bad for art. And I thought maybe at Apple there could be influence to pay in a more fair or significant way, because a lot of these services are just a rounding error compared to what comes in elsewhere, unlike Spotify where their whole business is that. But that’s tied to a lot of other political things and label issues, and everyone’s trying to hold onto their little piece of the pie and it is what it is. I also realize, I think that people just want to turn the faucet on and have music come in. They’re not really concerned about all the romantic shit I thought mattered.”
Spotify pays a notoriously low rate per stream to its artists. On average, a band can expect to make something like one third of a cent when a song is played for more than twenty seconds. The rates of pay for big artists is markedly higher, but still relatively small for the actual value of the music compared to what Spotify pays for it.
Beginning in early 2024, Spotify made it even harder for smaller and independent artists to get paid. Now, to begin receiving payment, a song must have 1,000 streams in a one year period to qualify for payouts. For many artists, this means they will see their songs streamed hundreds of times but never receive any payment for them. Instead, that revenue will stay within the coffers of Spotify.
This system would be awful enough with these conditions alone, but Spotify have tools to further game the system in their advantage. By tweaking algorithms to avoid artists below the 1,000 stream threshold, Spotify can set up an ecosystem in which it becomes all the more difficult for small and independent artists to receive even the smallest payouts for their work.
After reading the GQ interview with Reznor, and ruminating for days on the issue, I began to realize that the music industry is simply mirroring the greater economy of the last forty years and the lie upon which it was built; trickle down economics.
The concept of trickle down is complicated and much debated, but in essence the theory is based on the idea that if you provide funding and assets to the wealthiest Americans, they will reinvest in businesses that will create good jobs and economic growth to benefit the working class. It’s a novel idea that we have employed in this country with religious adherence for more than four decades. There is just one problem, it doesn't actually work.
In the years since Ronald Reagan first made this economic model a household term, wealth has not trickled to the masses, but has been hoarded more and more by fewer and fewer people. The average American family is economically worse off than they have been for most of the last century, and the wealthy are richer than they have ever been. Trickle down is a lie. We have almost fifty years of experimentation to see it with our own eyes and feel it with our own wallets.
As Spotify trots out a model built almost exactly on the model of trickle down economics, we can see the economic impact already being made on smaller artists. Now, that squeeze is likely to become even tighter.
For their part, Spotify claim that this new payment model will help to weed out phony accounts and noise records designed to game the system for artificially inflated payouts. These are nothing more than weak excuses designed to obfuscate the doubling down of punitive payouts to artists without a massive following.The truth is that there is no incentive for Spotify to do anything other than continue to create policies that enrich and benefit its own interest, artists be damned.
The inherent idea behind trickle down, whether from Spotify or the Chicago School of Economics, is that the wealthy are the only ones capable of making good decisions with money. In that system, wealth comes not only with the power of money, but also adds an element of control as a vaunted few get to distribute dribs and drabs to the masses.
Meanwhile, Spotify is wreaking cultural havoc while still being unable to regularly turn a profit. Even when they severely underpay their talent, and now refuse to pay artists until they meet an arbitrary threshold, they are still unable to make money. It’s clear that we cannot go back to the old days of music delivered solely through physical media, but this decade long digital experiment doesn't seem to be working for anybody.
It’s time for us to reinvent the system with the artist as an engaged, and compensated participant. It’s also time for us to abandon economic systems that are only designed to benefit those who need the least amount of help. As we begin to forge the new economic structure of the music industry, it needs to ensure that artists have agency, while the audience retains its access.
This will be a long haul and there will be no easy answers, but one thing is obvious, the best solution is never going to just trickle down and appear one day.
Cheers,
Matty C
They're keeping the artists' money to save themselves from going bankrupt.
IRL streaming is an unprofitable shit-show of bad business models best described as "what we lose per unit we'll make up in volume." that has been the sales pitch to investors from day one, combined with some vague notion that eventually "technology" will "advance" enough that unit costs will come down. So the idea was, at the point it finally becomes profitable per unit, the bigger your platform the more profits you'll reap, and thanks to "the network effect," the biggest platform will grow fastest until it eats the whole market. So the more cash you burn early in the game the more you make later.
Unfortunately exponential technological advancement is not a real thing, and to the extent that it does improve so do customer expectations about quality. So streaming has remained a money pit for a decade longer than VCs expected.
It will never be like broadcast, which is radically more cost effective. Streaming audio will never fit to the business model of radio, and streaming video will never fit the business model of television. Advertising and data mining will never produce enough value to offset the costs. And therefore they'll never be able to pay artists royalty rates comparable to broadcast. If you lobby for that successfully, the result will be bankrupting streaming services. That's not a bad thing, but it still doesn't get artists paid.
If you want to make a living doing art, start by abandoning the notion that someday you'll make it big wage slaving in the in the content mills. Look for other ways to make that happen. Patronage, limited edition physical media sales, and crowdfunding all work marginally better than spotify and youtube. But it may also be the case that some artists are just not good enough, or are too niche, to ever do art as their day jobs.