Part 1
Introduction

Over the past three decades, much controversy has surrounded the digitalization of music and the growth of music streaming services that are now central to music industries internationally. The vast amount of criticism surrounds the amount of compensation artists receive from these platforms, and many argue that music streaming platforms rarely compensate artists fairly or transparently for their labor, and that it is harder to earn money from recorded music than ever before. Indeed, this is true, and today artists only receive 18% on average of all recorded music revenue, less than at any other point in history.
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Since the early days of digital music that began with Napster, MP3.com, and other early peer-to-peer file sharing sites, streaming has replaced traditional physical media formats such as vinyl and CD as the predominant form of recorded music, resulting in a fundamental market shift from a physical economy into a digital access economy. Under the new streaming market, consumers pay for access to all-encompassing digital music repositories as opposed to paying for individual physical commodities. In general, streaming has significantly assisted the cultural expansion of music itself. Fans are able to access music and discover new artists more easily than ever before, and musicians have an unprecedented ability to release new music and build an audience independent of record label assistance.
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Although streaming technologies have certainly increased music’s accessibility and popularity within society and led to some positive new opportunities for musicians, these largely positive cultural benefits have not resulted in similar economic benefits for the vast majority of working artists (including musicians, songwriters, producers, and all those involved with the making of a song), independent stakeholders, or local music communities as a whole. The most profound impact of the shift to music streaming is that it has resulted in increased market localization and domination among a few major labels and tech corporations, who have been able to utilize the centralization of wealth production presented by music streaming for their own profit. This is always at the expense of artists, whose music generates streaming revenues in the first place; music begins with culture workers who originate content, but streaming economics ends with these very same workers, who are the last to receive any financial return.
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The issue, however, is not simply that artists are the tail end of the royalty distribution or that streaming platforms don’t pay artists a fair and consistent income, it’s that the record industry has not adopted a system of music streaming that facilitates the equitable and transparent compensation of artists for their work and allows them to rely on streaming as a consistent and sustainable form of revenue.  Although many aspects of the adoption of digital streaming infrastructures have been positive, it is clear that working artists can no longer be expected to rely on their recorded music as a sustainable stream of revenue under this new system. Because music laborers are not able to depend on what, historically, has been their primary source of income, this means they must rely on multiple different revenue streams (most notably, touring revenue, although this too has become an unreliable source of income, especially in recent years), shouldering more risk, and being tasked with more career-management duties – often for lower rates – than ever before. Such increasing demands of laborers, in conjunction with a decrease in financial compensation from major streaming services and major record labels for their labor, “points to how the new musical system continues the precariousness and insecurity that have long been features of musical labor markets.”

However, the new system of streaming has not only continued patterns of precariousness and labor insecurity; it has  worsened them. For example, major streaming services, on average, take a 30 percent cut of all user-subscription revenue before distributing it to rights-holders, a relatively substantial percentage that was non-existent in the previous physical market economy. This cut is taken from the artists’ share, not from record labels (who still receive the same percentage of recorded music royalties as they did in the physical market economy, despite their services of record pressing, distribution, and promotion being made more and more obsolete by the shift to music streaming).
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Stepping back, the entire process of streaming can be viewed as a new form of digital-economic exchange between music companies, content producers, and consumers, that, instead of democratizing music’s infrastructure, has reorganized power structures and hierarchies and localized market control to only a few companies at the center of musical culture production. It has made the historically fraught relationship between music laborers and those who control their product more and more exploitative, with a larger portion of profits going to those in control, and a smaller portion going to artists, than ever before.
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The rise of digital music streaming would not have been possible without technological advancement, particularly the emergence of the MP3 file as a viable form of recording and distributing music. The invention of the MP3 is largely credited to Karlheinz Brandenburg and his research team at the Fraunhofer Society, a German technological research institute, who in 1993 released the first edition of the MPEG-1 Audio Layer III (MP3) to the internet. Initially, the audio format was met with little consumer success until 1995, when an unknown hacker by the name of SoloH discovered Brandenburg’s source code for the MP3, developed a higher-quality version of the format, and distributed it freely on the internet. SoloH’s version of the MP3 quickly rose in popularity among internet users, largely because it allowed for users to convert (a.k.a. rip) music from their personal CD collection to MP3 files on their personal computers, a hugely popular concept among digital music fans. Now, internet users could share digital music files with their friends, and suddenly, social networks of digital music sharing began to develop. By 1999, the socio-digital phenomenon of peer-to-peer MP3 file sharing had spread rapidly and spawned the creation of the first digital music platforms, most notably Napster, MP3.com, and Winamp, who gave users free access to their site’s content. These platforms attracted tens of millions of music fans, an impressive feat which signifies one of digital music streaming’s fundamental truths: it’s an attractive way to listen to music that consumers generally enjoy. Compared to physical music consumption, these digital music platforms provided a much easier, cheaper, and more accessible user listening experience that could never have been possible previously.
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In hindsight, we can see that the first peer-to-peer file sharing platforms were the beginnings of the digitization of music, very suddenly opening a door into what the format was capable of in terms of distribution potential and consumer reception. At its peak, Napster had 80 million users, and in contrast with Spotify’s 172 million monthly subscribers, such a user-base seems remarkably ahead of its time. These platforms marked the early days of the industry’s digital infrastructure, but their short lifespans should not necessarily come as a surprise due to their lack of a working royalty system; peer-to-peer file-sharing platforms existed largely outside of the industry’s existing structure and were not connected to music publishers, record labels, musicians’ unions, or any sort of institutional organization for that matter, contributing no revenue to the broader music economy while distributing music for free. They were platforms built by music fans, not music professionals, focused on giving users a role in the production process by ripping their CDs into MP3s. Unsurprisingly, this was very illegal under U.S. copyright law and posed a massive threat to the profits of music companies, so there was little trouble shutting the platforms down.
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The record industry’s failure to work with these platforms and figure out a sustainable form of music streaming that served the interests of artists is a missed opportunity that has led to today’s labor insecurity crisis across the working music industry. In short, as Meredith Rose from Public Knowledge states: “Music streaming is a messy, broken, anticompetitive and inequitable time bomb. The market actively incentivizes anticompetitive behavior, and so far, it’s been allowed to go on unchecked. This status quo poses a substantial threat to innovation, choice, and quality for music listeners and musicians alike.”
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This isn’t a question of a few bad actors. This is a systemic problem created by the combination of copyright law and economics. If left unchecked, any music-like market (with its micro-monopolies, non-fungible goods, and free market negotiating power) will inevitably collapse into anticompetitive behavior. It’s as close to a law of nature as you can find in economics.

Part II
Money and power

The shift from physical music products towards major streaming services implies a substantial decrease in the value of artists’ musical productions. But exactly how much less are musicians making from streaming? Well, according to economist Harald Edquist, the shift towards digital music infrastructure has generated a price decrease of 85 percent (!) per song compared to twenty years ago. This substantial price difference is largely a result of the changing structure of revenue distribution under an MSS-lead industry and the increasing number of steps that happen before artists see any compensation for their work.
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For example, MSS, on average, take a 30 percent cut of all user-subscription revenue before distributing it to rights-holders, a relatively substantial percentage that was non-existent in the previous physical market economy. After taking a cut for themselves, MSS must then pay copyright holders—including major and independent record labels—for every stream of every track. Reports suggest that on average, record labels (both major and independent) are paid 52 percent of all subscription revenue.

So, by the time subscription revenue reaches creators, music companies have already taken 82 percent of it, leaving only 18 percent for the actual creators of the songs (musicians, producers, song-writers, etc.). This signifies a huge disproportion in the amount of wealth generated by digital streaming relative to what finds its way back to the originator’s of the actual music people pay to listen to, and the primary problem of our industry, both researchers and musicians agree, is that music begins with culture workers who originate content, but institutional economics ends with these same workers, who are the last to receive any financial return.
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Furthermore, the revenue musicians do get from MSS is distributed in a manner that further reinforces economic inequality within the music ecosystem through what is known as the ‘pro-rata’ system, where rights-holders of a song get a small stipend every time it’s streamed (in 2020 these per-steam payouts averaged between $0.00040 and $0.01196 across all platforms). However, MSS do not pay out a flat rate for each song; instead, the per-stream payout is different for each artist, decided by their market share and the proportion of their streams to all of the songs streamed on the platform. Therefore, bigger artists with a bigger market share get a higher per-stream rate than smaller artists with few listeners.
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The adoption of this pro-rata system of revenue distribution has resulted in an increasingly disproportionate and precarious streaming market: in 2019, 90 percent of revenue for the entire year went to just 10 percent of all artists on the platform, while in 2020, 90 percent of all revenue went to just 1 percent of all artists on the platform. It’s clear that more-popular artists make more money than smaller artists, and in combination with the large percentages of revenue music companies take before sharing with musicians, this has resulted in a substantial decrease in the average amount of compensation received by artists for their labor; in 2020, the bottom 98 percent of Spotify musicians averaged just $144-$180 (!) in streaming revenue for the entire year. This resembles nothing even close to a viable living wage, and if the largest streaming platform pays the vast majority of its creators this little, then we should not expect the current structure of digital music streaming to create wide-spread economic and creative sustainability.
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In today’s digital economy, musicians now get only 12 percent of the total revenue produced by the music industry. The rise of music streaming has rebounded the industry’s profits over the past ten years and increased the value of its top companies (the ‘big three’ and the ‘big four’), but the problem is that the structure of music streaming does not promote a fair labor environment for music workers, with a majority of industry revenue rooted in economic equality, stifling economic success for any given individual musician. The direction of the music industry is now increasingly controlled by just a few share-holder corporations, who, because of their powerful market-share, get to decide the economic value of musicians’ creations, a privilege they exploit for personal profit.
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There exists so much value created by digital music, however, artists rarely see the majority of it; in 2019, the global quality adjusted value from streamed music was $76 billion compared to current revenues of $11.4 billion. Thus, the shift from consuming music in physical form towards subscribing to music services creates an enormous consumer surplus that is not recorded in GDP. Not only do music companies get a majority of the $11.4 billion in annual recorded profits, but they are also sitting on $64.6 billion dollars not indicated in annual revenue reports, as the worth of music is ‘hidden’ in the total shareholder value of MSS and major record labels. Currently, Spotify is worth $67 billion, Apple Music nearly $20 billion, and Amazon Music nearly $4 billion, high values almost entirely  generated from music streaming consumption but not returned to the musicians’ whose music makes such consumption possible in the first place.

Here, I will apply Aram Sinnreich’s metaphor of a proverbial music pie, in which there is only so much revenue available, and each portion of revenue must be accounted for. The proverbial music pie metaphor makes it easier to visualize where exactly revenue is going, as tracking the money flow in a linear line, rather than a proportional one, muddies where money is going. He writes: “The proverbial pie may actually start to grow, now that on-demand streaming has emerged, allowing supply to meet demand more fluidly. But the pie can never be infinite, and the number of slices is growing, as the old cartels give way and admit a larger, more diverse group of voices into the mix.” Furthermore, a study from the Music Policy Forum found that while under today’s music streaming market, more musicians have access to the pie, yet the total amount of pie each musician receives is considerably smaller.”

Let’s look at the pie again: for every dollar earned through music streaming, 30 cents go directly to the streaming platform. The remaining 70 cents is then split between the record label, distributor, publisher, and artist. The record label typically takes the largest cut, with an average of 52% of the revenue going to them. Distributors and publishers take around 5-10% each, leaving the artist with only 10-15% of the revenue, and sometimes less. This revenue split is problematic for several reasons. Firstly, it places a disproportionate burden on the artist to generate income from their music.
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While the streaming platform and record label can make significant profits from the music, the artist is often left with very little to show for their creative output. This creates a situation where artists must constantly tour and perform live to make a living, which can be particularly challenging for independent artists who lack the resources and support of major record labels. Another issue with the current revenue flow in the music streaming industry is that it allows large corporations to extract more money from musicians. The dominance of major record labels and streaming platforms means that they have significant bargaining power when negotiating contracts with artists. As a result, artists are often forced to sign contracts that heavily favor the record label and streaming platform, leaving them with very little control over their music and income. This will be examined further in the next section.

Part III
Patterns of labor insecurity

As we have seen, the shift to music streaming as the primary system for the sale and consumption of music has resulted in a monopolization of the music industry, with independent musicians and labels seeing a smaller portion of the industry’s overall annual revenue than at any other point in history. In 2022, the big three major record labels, Sony, Universal, and Warner, controlled eighty five percent of the entire pot of revenue generated by music streaming. Independent labels and self-releasing artists, on the other hand, received only fifteen percent. These numbers reveal that the economics of the music industry highly favors the positions of just a few players, yet how exactly has this impacted the careers of working musicians?

Well, as a result of large-scale digitization within the industry, 21st-century musicians are now playing multiple roles and gathering income from an increasing variety of sources, some old (i.e. vinyl), but mostly new (i.e MSS, social media endorsements). From a labor perspective, the digital revolution has caused a dispersion of both opportunity and income and nowadays musicians are juggling more work, shouldering more risk, and are tasked with more career-management duties—often for lower rates—than ever before.

Drawing on Stahl, such increasing demands of laborers, in conjunction with a decrease in financial compensation from MSS and major record labels for their labor, “points to how the new musical system continues the precariousness and insecurity that have long been features of musical labor markets.” That’s not to say the digital revolution has been strictly ‘bad’ for musicians (such simple classifications tend to be unproductive), but it is to highlight how being a successful musician in the digital economy requires more individual effort outside of the traditional roles associated with musicians, such as performance and studio recording. Recent dispersions of labor caused by the streaming revolution has resulted in an increase in musicians’ access to the marketplace particularly within promotion and distribution avenues, but has also had the unintended effect of decreasing the revenues they do get. The overall revenue pie is smaller for each artist, but more artists have access to revenue.

Clearly, the rise of digital music streaming has had unintended consequences on the value of music and how much of it is distributed to cultural content creators. Streamed music is a double-edged sword, increasing global music consumption and interest in music while simultaneously decreasing the economic compensation of artists. The little revenues distributed by MSS pose huge concern on their own, but in the context of today’s pandemic-centric world, they are contributing to a large-scale economic crisis for the industry’s musicians. Despite streamed music being artists’ primary source of recorded revenue, it’s no longer the primary source of revenue for musicians in general; live performance is, producing nearly $30 billion dollars in annual income for artists worldwide. However, with the Covid-19 pandemic closing the world’s music venues and increasing market control by live music conglomerates such as Ticketmaster and Live Nation, touring, too, is increasingly hard to rely on as a sustainable revenue stream. This, in combination with the low royalties paid out by MSS, has made it increasingly difficult for musicians to earn any sort of revenue large enough to make a healthy living, and many musicians are struggling to make ends meet, resulting in lots questioning their very career choice in the first place: as of early 2021, 64 percent of professional musicians were considering leaving the music profession for good. Another large issue is that some streaming platforms may require exclusive distribution rights, meaning that the artist cannot release their music on other platforms. This can limit the artist’s reach and potential revenue streams, while benefiting the streaming platform and the record label. Additionally, some record labels may include “recoupable expenses” in contracts, which can include everything from recording costs to promotional expenses. This means that the artist is responsible for covering these expenses out of their own revenue share, further reducing their income. However, artists haven’t remained silent.

Negative sentiment among working musicians towards music streaming and economic inequality has increased exponentially over the past twenty years. Yet despite such public discussion, musicians shouldn’t be expected to be labor activists, and there is a clear need for the development of digital music infrastructure that gives regard to the interests, needs, and economic well-being of musicians as a collective.

Part IV
Patterns of labor insecurity

Unless the streaming industry changes, the structure of commercial music will only continue to be more exploitative and unsustainable. There’s little chance these companies will stop perpetuating financial exploitation at the expense of their musicians, so we must ask ourselves: to what end? What’s the goal for our industry? What will it look like in ten years if these problems aren’t addressed? Do we want the future of music to be dominated by a few shareholder corporations that don’t act in the interests of anyone besides themselves?  The issue of digital music streaming is paradoxical: despite all it’s wonders, creative and commercial prosperity, large-scale accessibility, and consumer happiness, musicians still can’t get paid for their own music.

The reality of our music industry is that it’s structure is set up in such a manner allowing for the value of music to be decided by a few powerful companies at the direct expense of its own artists and working professionals. In essence, this is a problem that comes down to corporations controlling and exploiting their industry, creating vast economic inequality limiting societal opportunity. The music industry is certainly not alone in this matter of for-profit violence which has affected much of our world, but it does present an interesting case of a creative industry where the needs and requests of its members coincide directly with the growth and development needs of the system itself. Our industry is worth so much money, but why does that matter if most musicians are struggling to make a living? There are countless amazing things in music, but wouldn’t paying musicians fairly only foster more creativity, commercial success, and general well-being within the industry? The industry’s unchecked pursuit of profit is blocking the commercial and creative development of itself, its blocking a better future for music.

Music could benefit from large-scale cultural and institutional change, and fortunately, the current music-loving landscape of our society presents the opportunity for that change to genuinely occur through collective organization. The industry has transformed immensely since a century ago, and the way people listen to music has developed in parallel to the growth of the American record industry. The last one hundred years of American history has expanded networks of culture and media under an increasingly exploitative capitalist institution, creating a civilization where music is socially valuable and consumer-friendly, but not necessarily artist-friendly.
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The music industry’s historical success, combined with the recent success of the social media industry and the countless benefits of streaming in general, has resulted in a global society where musical knowledge is not confined to just musicians, industry professionals, and academics. This makes sense given that “music is socially meaningful not entirely but largely because it provides means by which people recognize identities and places, and the boundaries which separate them”. A lot of creators, industry professionals, and music fans already have some sort of understanding that the industry isn’t great for it’s artists. Therefore, if we can capitalize on this cultural understanding of music to inspire collective action, then we could change the structures of our industry and provide a realistic path forward in alignment with the industry’s needs. It starts with paying artists more. It starts by building an organization capable of out-competing the largest music companies and the largest streaming platforms in order to change the fundamental structures of our music ecosystem. It starts by building a cultural movement which inspires creativity, success, and sustainability at every level of our industry. There is an urgent need for changing our industry to be one that institutionally supports the economic and creative well-being of its own creators and working professionals. As corporations that exist specifically for profit, Spotify and others certainly won’t change their practices soon because doing so would go against their own interests as a business.

They are too powerful to effectively regulate, so instead we should directly compete with them using a more sustainable and successful business model. The general system of musical exchange is broken, but the way to fix it is by addressing the individual problems that create real-world consequences. These problems need to be addressed at full-scale, and it starts with an academic examination into the industry’s socioeconomic and sociotechnical structures and sub-structures. Music serves so many different functions in our world, and it’s important for the industry to have a powerful leading organization aware of that. Furthermore, the system needs to understand that the mode through which music labor is organized has real-world impacts on musicians, their music, its cultural exchange, and society in general. The fundamental problem of our industry is that a majority of its musicians do not earn enough to make a living. While the industry is seemingly financially successful, its monetary worth does not accurately represent its overall success because so little of that revenue goes to its musicians. If music creators are not supported in some way by the industry, we cannot expect economic sustainability or wide-spread musical success.

There have been many collective efforts among musicians and independent stakeholders in recent years, most notably the Union of Musicians and Allied Workers and the Save our Stage Campaign, but without a new platform that provides musicians with an alternative to earn revenue from their recorded music, these issues will not get better.  It starts with paying artists more. It starts by building an organization capable of out-competing the largest music companies and the largest streaming platforms in order to change the fundamental structures of our music ecosystem. It starts by building a cultural movement which inspires creativity, success, and sustainability at every level of our industry. There is an urgent need for changing our industry to be one that institutionally supports the economic and creative well-being of its own creators and working professionals. As corporations that exist specifically for profit, Spotify and others certainly won’t change their practices soon because doing so would go against their own interests as a business. They are too powerful to effectively regulate, so instead we should directly compete with them using a more sustainable and successful business model that organizes musicians and music stakeholders at the grassroots level. Let's create a new model of streaming.