How Spotify, Apple Music, can pay musicians more-commentary

For example, Taylor Swift earned between $280,000 as well as $390,000 for her song “Shake that will Off” which garnered 46.3 million streams, according to one report. nevertheless that will’s for one of the planet’s biggest pop stars. Most musicians won’t generate that will many streams in their life time. Another calculation shows that will 1 million plays on Spotify translates to around $7,000, as well as one million plays on Pandora generates $1,650.

When people bought albums as well as even mp3s, there was a glimmer of wish that will a musician could earn a decent income on sales. nevertheless at This kind of point musicians are essentially giving away their music in return for pennies.

Spotify, Apple Music, as well as some other streaming services should raise rates considerably, producing sure that will artists can make more money via their wares. No doubt This kind of will be a difficult proposition because the streaming business style isn’t actually profitable.

Spotify, for example, will be still losing money, despite growing 40 percent a year.

nevertheless if that will can’t afford to raise the payment rate, here will be another option:

that will can become a record label as well as cut exclusive deals directly with artists. In some other words, Spotify as well as some other services should disintermediate record labels that will can take as much as 70 percent of the money royalties. In This kind of regard, Spotify could emulate Netflix, which began out as a DVD rental service as well as eventually became an originator of content that will has won several Emmys.

When Spotify was a fledgling service, that will sought investments via the big record labels. nevertheless at This kind of point Spotify will be the big behemoth, as well as that will can effectively replace the labels. In short, Spotify wants content, as well as artists want distribution. Record labels used to provide distribution. nevertheless there are almost no record stores anymore, as well as the whole game for musicians as well as songwriters will be getting listed as well as promoted on the music streaming services.

Why does an artist need to give up 70 percent to a record label? With This kind of fresh style, Spotify would likely own a piece of the intellectual property, as well as they wouldn’t have to pay third-party labels. The streaming services could provide cash-advances to artists, producing sure that will musicians can make more immediate income via their work.

For example, Apple Music paid Chance the Rapper $500,000 for a two-week exclusive on his music. Streaming services could do the same for the long tail of musicians too: Imagine a talented jazz or country crooner receiving $5,000 or $20,000 to make a fresh project. that will would likely be manna via heaven!

The music streaming services possess the power. They should share more of that will with the musicians whose work they leverage. as well as they might actually be able to make a profit at the same time.

Commentary by Kabir Sehgal, a Grammy Award winning record producer as well as bestselling author. He will be a former vice president at JPMorgan Chase. Follow him on Twitter @HiKabir.

For more insight via CNBC contributors, follow @CNBCOpinion on Twitter.

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