After learning she had close to three million streams on Spotify of “Wings,” its co-writer Michelle Lewis expected more than the $17.72 royalty check she received. Billboard explained that the “peanuts” earned by songwriters was because of “digital deflation.”
Yes, you can see below that music is still big business.
But the flow of music industry revenue has changed.
Radio
Traditionally, songwriters had gotten a mechanical royalty based on records sold and a performance royalty when the song is played by a commercial venue like a theater or radio station. Radio was the golden goose. Paid each time a song is played on the radio, songwriters have earned millions of dollars for one top hit.
No more…
Streaming
Now more than 70 percent of the industry’s recorded music revenue is from digital sources with streaming leading the change.
While the value of downloads is the biggest slice of the revenue pie…
Still the trend is toward streaming:
Our Bottom Line: Productivity
Music consumption is up but industry revenue is down. What is happening?
The switch to digital from CDs and other physical formats meant consumers could spend less and get more. With digital downloads they could unbundle albums and buy the tracks they really wanted–an option that a physical format prevented. Increasingly confirmed by statistics, streaming could be continuing the same lower revenue/higher consumption trends.
One way to explain the trend and the “peanuts” earned by songwriters is productivity. Defined as getting more out of the same inputs, productivity leads to lower prices. For the music industry we could just say that digital deflation is all about productivity.
