Jackie Perman is a recent graduate of Macalester College, where this report was originally written as a class paper. It’s republished here with the permission of the writer and her sources.
In 2015, rapper Kanye West released the song “All Day,” which was nominated in two categories at the 58th Grammy Awards. The song has now been played over 70 million times on the streaming service Spotify. Featured on the track is St. Paul rapper Allan Kingdom, who is not signed to any record label.
Although Kingdom’s most recent self-released mixtape, titled Northern Lights, is up for sale on iTunes — along with the rest of his discography — all of his music is also available to listen to on multiple music streaming services, including Spotify and SoundCloud. A visit to Kingdom’s website allows one to download Northern Lights with just one click. He now boasts over 13,000 Facebook fans and millions of plays on various music streaming sites. At 22 years old, Kingdom is a child of the internet.
Since the rise of the internet, consumers have had increasingly unlimited access at their fingertips. While this is great for them, musicians, recording labels and other industry professionals have struggled to reap the same benefits. The move towards streaming and online listening has changed how musicians make a living on their music. Money is often scarce.
In 2008, streaming service Spotify was launched and broke ground for the future of the music business. Spotify now boasts 20 million paid users and more than 40 million active customers as of 2015. Though sites for downloading music for free (often illegally), such as Pirate Bay, have been prevalent for some time, a new wave of free streaming sites with optional paid versions have taken over the industry. The question is, can the industry adapt?
A history of streaming
According to Spotify, in June 2015, it reached over 75 million active users, including 20 million paid subscribers — and that’s just one of the many streaming services available to consumers. Spotify, launched in the U.S. in 2011, is relatively new to the streaming world. Radio-inspired streaming site Pandora, which launched in 2005, provides curated radio playlists and reported 81.1 million active users at the end of 2015.
Today, streaming services such as Apple Music, Tidal, iHeartRadio, and Last.fm also boast high numbers of listeners. People who used to pay $15-$20 for a new CD with maybe 10 or 12 songs can now have access to over 30 million songs on Spotify for free, with the catch of listening to advertisements interspersed with their music. To remove those ads, they can pay $9.99 a month for a subscription to Spotify.
With millions of people paying little to nothing for music, artists are feeling the effects. Spotify’s statistics are broken down on its website, with 70% of its revenue going back to artists and labels. While this number sounds high, that translates to between $0.006 and $0.0084 per play of one song.
Streaming has a long history. Personal curation of recorded music goes back to the early 1920s, when the automatic record changer was introduced, allowing owners of phonographs to curate their own playlists. People could put a few coins into a slot and create their own world of music on a jukebox. According to music historian Elijah Wald, an estimated 50 to 60 percent of all recorded music was going into roughly 400,000 jukeboxes throughout the country by the late 1930s. Through mechanized play meters within the jukeboxes, owners could identify what music was popular where, bringing individually focused musical tastes to the forefront. This had a strong influence on the creation of Top 40 stations, which emerged in the 1950s.
While Top 40 stations have their place in the airwaves, they are not within the sprawling glass office building of Minnesota Public Radio (MPR), which sits in downtown St. Paul, Minn. The fourth floor of MPR houses alternative rock station The Current’s booth: a small room plastered with band posters, a control desk with countless tiny buttons that beg to be pressed, and microphones hanging in the air on black metal booms. Windows on two sides allow those walking through the hallways to peek into the chambers and observe whichever DJ is on air, a small button giving them the option to hear the broadcast live. Across from this booth is the office of The Current’s program director, Jim McGuinn. McGuinn is a tall, blonde man, often seen around MPR’s offices sporting jeans, hoodies and sneakers. McGuinn has played in bands, interned with labels, been a club promoter, and taught music business at Drexel University in Philadelphia.
The Current is a non-commercial station that plays new music, from local to international, in a mix with some older songs. Most popular music stations are privately owned and rely on commercial revenues to survive. As McGuinn points out, “At the very instant when the internet is making content customizations and experiences easier than ever for consumers, radio is almost driving in the opposite direction.” According to McGuinn, Top 40 stations repeat the top hits about 100 times a week, a number that has been on the rise in the last 20 years. Part of the reason these generic stations have taken hold has to do with the Telecommunications Act of 1996.
In 1996, Congress enacted the Telecommunications Act, enforced by the Federal Communications Commission, an independent agency of the U.S. government that regulates media. This effectively eliminated the limitations on ownership of radio stations. Prior to this law, there were limitations on how many stations one entity could posess, as well as cross-ownership rules in which one organization could not own a newspaper and a broadcast station in the same market to prevent one voice from overpowering all the others.
The legislation covered many types of media, but in regards to radio, increasing the number of stations one party could own paved the way for companies like Clear Channel, now known as iHeartMedia, which now owns more than 1,000 stations of about 10,000 stations in the U.S. Fewer owners creates less variability in programming and messages. But as McGuinn describes it, if tracks aren’t played often, nothing sticks. With the excess of options, something needs to be constant. With the ability to operate on smaller profit margins, public radio doesn’t need to worry about appealing to the largest possible audience. Stations like The Current can have an innate attention to detail and localized content that sets them apart from the Top 40 stations we hear every day.
Many musicians and music industry people have a strong sense of nostalgia when it comes to public radio. Music industry veteran Ellen Stanley is no exception. Stanley is the executive director of the Minnesota Music Coalition, a nonprofit organization focused on helping independent artists make a living, as well as a public radio DJ and musician.
Classically trained in piano, oboe, and voice, Stanley spent her childhood in New Haven, Conn., engrossed by radio stations. With no access to a computer, she spent hours listening to local radio shows, such as Wild Woman Radio on WNHU, a music show that explored new sides of sexuality and highlighted female musical talent. Stanley was introduced to the world of bluegrass through a show called Profiles in Folk on WSHU. Both of these shows are still on air after over 20 years. Stanley did not have internet in her house, so her only way to access music was through the radio. “I still really believe in the magic of radio,” she says. She currently has a show on KFAI radio in Minneapolis, called Womenfolk.
Stanley is a petite woman with straight brown hair, an inviting smile, and a pair of blue-rimmed glasses. Sitting in her suite on the fourth floor of Landmark Center in downtown St. Paul, she usually wears a pair of jeans, a t-shirt, and a hoodie. Stanley has a large voice that projects in any room and a laugh that quickly catches on with whomever she is talking to. Many nights, Stanley throws on a pair of cowboy boots and can be found at music venues, such as the Aster Café in Minneapolis or the Turf Club in St. Paul, either performing on stage or cheering fellow musician friends. Stanley is a magnet for musicians. She even married one: local artist Ben Cook-Feltz.
Back to the history of streaming: in a 1994 book by Stanford Law professor Paul Goldstein, the expression “celestial jukebox” emerged. Around that time, entertainment companies and government officials began to realize that the monetization of back catalogs could fuel a new medium (potentially online). All that needed to happen were some minor changes to copyright laws.
What ended up happening, however, was the passage of the Digital Millennium Copyright Act, or DMCA, in 1998. This act made copyright laws stricter, as companies were afraid of the repercussions of digital music circulation. With these new laws in place and digital music services on the horizon, two important players came into the streaming world. These are MusicNet, launched by RealNetworks, a company that creates software and services for digital media access; and major labels Sony and Universal’s Pressplay.
MusicNet, starting in 2001, made deals with major labels EMI, Time Warner, and BMG (merged with Sony in 2004 and now separately Sony Music Entertainment and BMG Rights Mangement). These services had a monthly subscription rate of between $9.95 and $24.95 and, along with limited availability in catalogs, gave users restrictions on how many songs they could download per month. According to Pitchfork, “MusicNet limited listeners to 100 songs per month — they were streamable once each, or if downloaded, they were rendered unplayable after a month. Only Pressplay’s premium subscription allowed 20 tracks per month to be burned to disc, with no expiring downloads.”
At the same time as these services were working through their kinks, other music-sharing and streaming websites came about, such as Napster in 1999 and Rhapsody in 2001. Napster, one of the most controversial music sites since the beginning of online music, was created by Shawn Fanning and Sean Parker. It allowed for users to share their MP3 files with anyone using the site: a peer-to-peer model of music sharing. It grew at an unprecedented rate. According to Fortune, at its peak, Napster had 70 million active users — and that was only in the two years it was live, since after those two years, it was shut down due to copyright violations.
In 2002, Napster was reincarnated as a music subscription service that, after some changes in ownership, was ultimately bought by Rhapsody in 2011. Rhapsody was created by Listen.com, then bought by RealNetworks before becoming an independent entity in 2010. Rhapsody acquired deals from all five major labels to fill its catalog with copyrighted material. According to the San Francisco Chronicle, Rhapsody was the first streaming music subscription service to offer unlimited access to a large library of digital music for a flat monthly fee — making way for platforms like Spotify, Apple Music, and Tidal, which are prominent services today.
Copyright laws have always been a hurdle for online music distributors, and some have taken it into their own hands to skip over this step. In 2003, the creation of the Pirate Bay opened the door for free peer-to-peer filesharing and torrenting (which is a type of downloading that takes small bits of data from multiple sources at a time) of almost any music. It was founded by the Swedish pro-culture and anti-copyright organization Piratbyrån, which wanted to simply promote the sharing of information, according to Tech Times writer Christian de Looper. Pirate Bay has been raided multiple times by police on grounds of copyright infringement but continues to find ways to provide an outlet for pirated content.
While these sources for illegal downloads will most likely continue, other streaming services struggle with bringing music to consumers while being fair to labels, artists and the industry as a whole.
Access: Too much of a good thing?
Today, of the 93% of Americans who listen to music, 67% of them use streaming services, a 2014 Nielsen study reports. This number is only increasing. According to an article in Forbes, 317.2 billion songs were streamed in 2015, up from 164.5 billion in 2014. Now more than ever, music is extremely accessible. All anyone needs is a computer and an internet connection. Artists and industry professionals have mixed thoughts about this fact, but the benefits of increased access are undeniable.
In a cluttered hallway in the basement of St. Paul’s Turf Club, Sean Tillmann sat at a standard black table. Tillmann, known by his stage name Har Mar Superstar, grew up in Owatonna, Minn. and joined his first band at the age of 12. A friendly, somewhat reserved guy, he talked about his experiences with music streaming and touring. Later that night, he took the stage and morphed into what many local fans know him as: a true performer.
Tillmann, a seasoned veteran of the industry, says he has seen the effects of streaming at his own live shows. People have come to his shows after hearing his music on Spotify or other streaming services through suggestions or placement, he says. “I think it’s really useful,” he adds. He is enthralled by its viral nature. “You can go put out a couple songs and a hundred thousand people can hear it that day,” Tillmann explains of the internet.
While viral artists can make an impression, their impact is not always sustainable. Jim McGuinn has seen a lot of artists come and go through The Current. “To me it’s [the internet] just another tool as an artist,” he says. He explains how only 20 years ago, it was almost impossible to have your music heard. Outlets were limited to radio, live shows, or going to a record store. Now, there is less of an emphasis on selling records and more on just getting music out to listeners. McGuinn explains that before, a musician really needed to be signed to a label and be in the major label system to have a career. This boundary can now be bypassed, says McGuinn. The entry-level barriers are less prominent, but getting past that first step can be more challenging.
This concept is further explained by Wired Magazine editor-in-chief Chris Anderson’s theory of “the long tail.” Anderson argues that while previously, only major artists who were well-connected could sell records, now smaller artists can tap into the “long tail.” The sum of low-demand products can collectively create a stronger market than the total of those in high demand. Anderson takes it a step farther by saying, “Long Tail business can treat consumers as individuals, offering mass customization as an alternative to mass-market fare.” This customization is what many of the streaming services today really profit on. People want to be treated as individuals.
There isn’t much disagreement around the fact that increased access leads to more exposure. It’s much easier for artists to get their music out and make waves in the industry — but that doesn’t always lead to money and success.
McGuinn observes that there are more channels for music distribution today, but the audience is more fractured. “It’s great that there’s the opportunity to get your music exposed in other places. It’s terrible because it’s hard to get momentum,” he says. Anyone can put things online.
Ellen Stanley of the Minnesota Music Coalition (MMC) argues that due to this, the quality of what is being heard on the internet isn’t the same as in the past, when music was more record-based. “There’s more noise out there,” she says. “So everyone is like, ‘Oh, I can do it.’” Anyone can record something and put it up on YouTube or SoundCloud without having a real investment in the enterprise. She explains that while smaller bands can scrape by on their touring earnings, there isn’t much profit involved. Stanley explains that one of the biggest issues with streaming and reduced profits is that musicians are undervaluing their music by charging less for it and consumers are not putting as much value on music as something that is bought.
One of the reasons Stanley chose to live in Minneapolis is that it’s not a city known for being a center of the music industry (“You have to be heard over a really mighty roar,” she says of those cities, such as New York or Los Angeles). She wanted to be somewhere she could make an impact.
That’s where MMC comes in. Its programming ranges from hosting workshops that advise musicians on tax deductions to curating a statewide traveling showcase that gives smaller artists larger platforms opening for bigger acts. Many of the things that musicians overlook, such as tips on keeping the band together, are covered at MMC. The MMC network of musicians is growing since the organization began offering memberships about a year ago. Resources and advice are available, but it really comes down to personal connections. Stanley argues that it’s not just about connections with labels and other media, but among other artists as well. Through these networks, musicians can have a community surrounding their shared experiences and, of course, expand their contacts.
Even with a strong list of contacts, the question still comes down to money. How can artists make a living in this new environment?
Credit where credit is due: Copyright and compensation
For many artists, the concept of “making it” in the industry is relative. For some, it is to get on stage and be heard. For others, it is to make a living being a working musician. For another group, it is to be famous.
Sean Tillmann (Har Mar Superstar) wants to be able to make a living off touring and music, which he has been pretty successful doing so far. He explains that people usually set goals for themselves. People will think, “Oh, if I do this, I’ll have made it,” he says, but it becomes a cycle where many are never satisfied. Tillmann believes you should always be striving for more, though. “Once you don’t have any more goals or aspirations, that’s when it gets weird,” he says. But at the same time, Tillmann has moments where he wonders whether he can manage until the next bit of money comes through.
For many, it ultimately comes down to money. Some artists have specific monetary goals that they see as “making it.” John Munson, previously of Semisonic and Trip Shakespeare, explains his childhood self as “a kid with a rock band and a dream.” Later in life, when he played bass for Semisonic, he considered everyone in the band bringing in $400 a month as “making it.” Now, Munson’s more consistent idea of success is having the option to try again. He wants to be able to be creative, but if something doesn’t work, to know that he can give it another try. Concepts of success change over time for a good number of musicians as they learn more about the industry and develop their craft.
Born in Minneapolis, Munson spent the bulk of the ’80s inspired by musical legends such as Prince and Hüsker Dü. A graduate of the University of Minnesota, Munson’s musical career began with the band E Brown, followed by Trip Shakespeare in the ’80s and ’90s, and then Semisonic. He has played at countless music festivals, released records and toured internationally. Today, he plays in a handful of bands, produces music for himself and others, and is a strong presence in the local Twin Cities music scene. A tall, burly man in his late ’40s, Munson can be found sporting a thick mustache and working in his cluttered but spacious studio in the Grain Belt complex of Northeast Minneapolis.
Growing up and creating music before the days of streaming, Munson is not an avid user of streaming technology today. He admits he and his wife are now paying for streaming service Pandora (“I feel somewhat better about that”), but his main platform is YouTube, which he uses frequently for work. “It’s unbelievable to have everything that you could possibly want accessible and on-demand. It’s a beautiful, beautiful thing,” he says. “But, I want the people who are on those services to be rewarded just the way I want to be rewarded when my stuff is on those services.”
Less and less of the money from new streaming services is ending up with the artists and labels themselves. Since their conception, questions of copyright have been at the forefront. With Napster being shut down for copyright infringement in 2001, lawsuits have filed against services like Spotify and SoundCloud.
One lawsuit against Spotify was championed by musician and writer David Lowery. Known for his work with rock bands Cracker and Camper Van Beethoven, Lowery has been an advocate for musicians worldwide in regards to shrinking paychecks in the digital age. In 2015, Lowery sued Spotify for copyright infringement in regards to mechanical rights, which refer to a copyright holder’s control over musical reproduction. Lowery argued that copies of his songs were distributed without his permission.
More specifically, the New York Times explains that Lowery “applied for class-action status, arguing that Spotify has failed to handle the mechanical licensing for a huge but unspecified number of songs by many songwriters. [The suit cites] statutory damages for copyright infringement, which range from $750 to $30,000 — or $150,000 for each instance of willful infringement.” In total, the damages Lowery cites could add up to $150 million. The suit is still pending. Many other artists and songwriters have also complained about the royalty rates being slim to none.
The streaming service SoundCloud has also faced lawsuits. SoundCloud, a Berlin-based company, began in 2008 and allows artists and music geeks to post their own music, create playlists, and follow other musicians. Many artists create remixes of songs, as well as posting uncopyrighted versions of songs on the site. SoundCloud has had multiple run-ins with the law, but most recently was sued in 2015 by the British company PRS, which represents more than 100,000 songwriters and publishers. The New York Times describes the lawsuit in depth and states that PRS claims SoundCloud was “infringing on PRS members’ copyrights by not obtaining licenses or paying royalties.”
Chris Frymire, executive vice president of St. Paul indie label Red House Records, attributes the current generation’s resistance to paying for music to the fact that they haven’t grown up doing so and aren’t used to it. Frymire explains that with SoundCloud and other services, when it comes to copyright infringement, there is a mentality that “we can’t pay because nobody else does.”
Frymire was born in New York and, after much moving around with his family, ended up in Minnesota. He grew up singing in choirs and always loved music. He attended the University of Minnesota for theater, soon realizing that his passion was in sound. After going on tour with a few bands and then spending six years in the Air Force, Frymire ended up at Red House Records as their EVP. He also serves as the technical director for the Minneapolis music venue the Cedar Cultural Center. A small, soft-spoken but passionate man with a thick head of curly hair, Frymire has a strong sense of the label side of life in the digital age.
University of Minnesota Professor of Economics Joel Waldfogel conducted a study in 2015 researching just how much Spotify is affecting record sales. Waldfogel and colleague Luis Aguiar looked at growth in Spotify use between 2013 and 2015 to identify how the streaming service is affecting sales of recorded music. They found that Spotify displaces both permanent downloads and piracy. In regards to individual track sales, 137 Spotify streams reduce them by one unit. Waldfogel and Aguiar concluded that these displacements in revenue are roughly outweighed by the gains from streaming and that streaming appears to be revenue-neutral for the record industry. While these statistics tell a different side, it’s hard to argue with the first-hand experiences of musicians and labels. Frymire’s discomfort with Waldfogel and Aguiar’s conclusion stems from the fact that this study only looks at Spotify, excluding other revenue streaming services, such as YouTube.
Frymire gets up from his desk at Red House and walks over to a bulletin board. He points to a check that has been tacked up haphazardly. “I got one of my first checks from Google for a penny,” he says as he gazes at it. “It’s for two years of sales.” Frymire explains that one of the major changes many labels have had to deal with is reconfiguring their accounting systems to accommodate micropennies, or values of less than one cent.
In the past, labels served as a sort of filter for music consumers to help them decide which artists should succeed. While this is still the case, along with radio stations, blogs and friends, the focus on labels has decreased since the infinite options of streaming services have taken over. As a recent tweet from St. Paul Rapper Allan Kingdom claims, “Produced songs on Northern Lights [Kingdom’s most recent album] in my mama living room, u can do whatever u want.” Kingdom’s comment highlights the sentiment that many budding musicians are feeling today: if we can make music on our own, do we even need a recording contract or studio time?
Many wonder if there is a movement away from labels, or if they are sustainable businesses anymore. Frymire explains that most artists’ careers benefit from professional help, whether that is from an artist’s hand-picked team or one that has been put together by a label. The opportunities a musician can obtain from signing with a label can be very beneficial, such as connections to prominent producers, studio time, promotional campaigns and other investment capital that does not come out of their own pocket. While that is true for many, some artists, such as Chicago rapper Chance the Rapper, have distanced themselves from the label world and built a career without a label — making the bulk of their revenue in merchandise, touring and features.
Artists are having to find other ways to make money. Throughout his show at the Turf Club, Har Mar Superstar was not subtle in promoting all the merchandise he had at his table, including a vinyl edition of his 2009 record Dark Touches (“Only a few left!”) and a hand-printed poster by a local artist. “If you make cool, weird products, people will buy them and support you,” he says. And it’s true. Someone in the crowd proudly held up a vinyl copy of Dark Touches.
Many people don’t pay for music today, or pay only a modest monthly fee. If this continues, artists and labels may not be able to receive the compensation required to create the product for the consumers. Will the industry die? It doesn’t appear that this is so, as musicians continue to aspire and create every day. But there is no argument that the industry — specifically streaming services — needs to figure out how to fairly compensate creators in order to continue.
The future of music is unpredictable. Will artists and industry professionals create technologically advanced packages in which consumers pay a fee to “experience” an album from different angles? Recording artist Beyoncé has now released two “visual” albums that come with videos to accompany the music. Will people start buying music again? Recently there has been a resurgence in sales of vinyl records. A study done by Nielsen found that vinyl records experienced their ninth consecutive year of sales growth in 2014 with 9.2 million units sold, up from 6.1 million units sold in 2013. Vinyl now accounts for 6% of physical album sales.
On the corner of Franklin and 4th Avenue in Minneapolis sits the Electric Fetus. Opened in 1968, Electric Fetus has become an institution in the Twin Cities; a go-to for all things music. The building takes up about half a block, windows displaying cacti, vintage chairs, and records. Walking into the store, the first thing one notices is the sheer magnitude of the place. A large gift show first greets customers, filled with a range of items from promotional glasses and tote bags to jewelry, to incense to clothes. Walking farther in, there are rows and rows of vinyls, CDs, cassettes, and record players. Sifting through the artists, green labels with an outline of the state of Minnesota indicate local acts. In a small room in the basement of the store plastered with band posters and countless CDs piled on his wooden desk sits Bob Fuchs, store manager, wearing a Black Sabbath t-shirt.
With 28 years at the store, Fuchs has seen it all. When it comes to streaming, Fuchs says that record stores have felt the blow. Beginning around 2000, Electric Fetus saw nearly a 50% drop in sales over a ten-year period, says Fuchs. According to the New York Times, between 2003 and 2006, about 900 independent record stores closed their doors. The Electric Fetus had to close their wholesale operation because they didn’t have enough stores to sell to anymore. Fuchs explains that the years between 2005 and 2010 were the hardest for the Fetus. The store had to adapt, quickly. “There wasn’t any stone that wasn’t unturned,” Fuchs says. Along with closing their wholesale, Electric Fetus shut down one of their other locations, cut staff, added events, reduced pay, and removed a few rows of albums to expand the gifts section.
Fuchs admits that he himself is still a collector at heart, but occasionally he listens to music on iTunes’ radio feature as well as Pandora. With boxes of CDs and LPs on the floor of his office, one can assume that he listens to plenty of music at work. While sales have certainly dropped at the Electric Fetus, Fuchs says, “We have many people who have come out of the woodworks to tell us that streaming isn’t killing our business, it’s helping our business.” He says people have told him they use streaming services to find new music they want to buy.
Although Fuchs doesn’t believe record sales will ever be like they were at their peak in the ’80s, he has hope for a return to the physical. Over the last three years, Electric Fetus has seen a 4-6% increase in sales — spurred in part by the start of Record Store Day, an international event that promotes independent record stores. “We’re seeing all kinds of people, across all demographics, coming back to vinyl,” Fuchs says. And they’re passionate about it. If he had been asked 10 years ago if this was possible, he would have said no. Today, many artists are releasing vinyl versions of their records, along with CDs and sometimes even cassettes.
What people in the digital age are missing is the physical component, he explains. “The LP is the ultimate cultural artifact,” he says. CDs and LPs give a glimpse into what the world was like at that time. Fuchs compares the record to the slow-food movement. “It’s about the joy of having a better experience,” he says. “When people listen to records, they often stop and they slow down, they sit down on the couch.” For Fuchs, records cause him to stay close to the music. “When a record is on, I am present,” he says. With changing times and better technology, Fuchs acknowledges that some people may never come back to records. For now, however, the future is looking stable for the Electric Fetus.
Whether it’s on a computer, through a smartphone, or by sifting through the racks of a record store, people will always turn to music; fans may be the only ones with the power to keep it alive.