« Back to Blog

Making money online: Nobody wins with digital music

The proceeds for debuting a hit album were forever changed as soon as the CD became obsolete and people started downloading and streaming music online. Even then, musicians managed to make money with services like iTunes, which charged around $1 per download. However, free online services - while they may not have been the norm yet - still took a big chunk out of the revenue stream.

Now, free services like Spotify, Pandora and YouTube are, for all intents and purposes, the primary way for listeners to tune into their favorite artists, but what does that mean for the professionals? Who's making money in the digital music game?

Short answer: Nobody is making money
Compared to the golden age of records, cassettes and CDs, there's a lot less money to be made when music doesn't have to be stored on something physical. At least, that's what Paul Resnikoff, editor of the Digital Music News website, told USA Today. According to Resnikoff, the songwriters, performers and even the popular Web services are making very little money in digital music. Here's how it breaks down.

Pandora
Despite growing in popularity, Pandora is consistently losing money due to higher royalty charges. They clocked a record 81.5 million monthly listeners recently and a 44 percent jump in revenue to $920.8 million, yet the company still lost over $30 million in total in its fourth quarter, according to USA Today.

Spotify
The most popular Web music service isn't fairing much better either. The news source noted that Spotify lost $80 million in revenue of around $1 billion according to filings from 2013.

And the popularity of paid music downloads is slowly but surely decreasing as well. Listeners are shifting toward cloud subscription services like Spotify and Pandora instead of paying on iTunes, and the paid download service likely will meet the same fate CDs did.

But what about the artists?
So the services aren't reeling in that much cash, but what about the artists that charge all those royalty fees? They have to be making out well still, right? Information from Daily Infographic would suggest differently. According to the organization's artistic representation, artists would have to garner a whopping 4 million plays on Spotify just to earn the U.S. monthly minimum wage, and that's only if it's a solo artist.

In comparison, that artist would only have to sell around 1,100 CDs at retail stores to make the same amount - that is, if they got a high-end royalty deal. 

This may not be the only way artists make a living, but it severely limits their ability to earn money online. In the modern age of music streaming, artists are likely relying on selling tickets during tours, earning royalties from movies and commercials that feature their songs, and even pushing further into merchandising campaigns to make money. It's unlikely the superstars of today are struggling, but the changing digital music landscape may be wreaking havoc for mid-level artists.


« Back to Blog
Join for free!

Why sign up?

Nobody's voice is as powerful as yours. As a consumer, you are uniquely positioned to share your perspective with businesses, telling them what you expect in order for them to receive your money in a transaction. So, why not make money online by taking surveys that provide information to your favorite company?