Ask HN: What are the economics of a streaming based record label?
I have been looking at starting a record label as a side business. But it would be designed mostly to make money from Music Streaming services like Apple Music, Spotify, YouTube and others.
I am thinking of using CD Baby for distribution of the music.
Streaming services are not explicitly open about how much they pay per stream.
I understand that the failure rate is high just like startups and movies.
But I also realised that a hit song can accrue 500 million streams or even 1 Billion streams of its a big hit.
My question is, how much interms of range should one expect to make incase they make such numbers.
Is anyone here making money through streaming music? What's your estimated earning per stream across Spotify, Apple Music, & YouTube?
Also, any other tips of how to run the project or improve odds of success or learning/reading resources would be very much appreciated.
65 comments
[ 3.0 ms ] story [ 149 ms ] threadI think the question is what are you going to offer the artist that they can't do themselves, in order that you can take a cut of their streaming? Marketing? Promotion? Guaranteed playlisting? Do you have connections I don't? Arrange my tour? Etc etc.
If you can't those we're back to a world with artists saying they get paid 'nothing' for streaming when the reality is the label is gobbling up most of it.
I don't expect huge money from streaming, but I do like people to be able to find my music on their preferred service if they search for it.
Record labels aren't quite what they used to be now that we have distrokid, tunecore, soundcloud, etc as independent artists can get their music on streaming services themselves. You say you want to be a label, what are you bringing to the table? Do you have any connections in the music industry? These days the only way to make money off a song streaming is if it gets picked up by the big playlists, but guess what? Those are mostly curated by the big labels and you have to have connections to get on them. You can try and get your music on smaller curated lists by blasting out to popular blogs and reading lists as well. Use social media, hope you get lucky on tiktok. Google how to get your music viral as a social media influencer. The real answer here is there is no actual formula but by putting yourself out there on a ton of platforms and hopefully something sticks and it goes viral. At the end of the day is the music has to actually be good (read: something sticky even if its pop drivel) for people to spread it. As a musician and independent producer, this post irks me a little bit as you're basically signaling you want to simply make money from music rather than doing it for the love of the art. If that's not the case I wish you the best.
To above: you knocked it out of the park with “what do you bring to the table?”. This is what labels do. This is what labels are for. Calling out the questionable motives - only the bold and determined survive the music business. If you aren’t in it for the passion, you will fail.
Instead of another label being created, I would love to see a service for bands (similar to a digital or marketing agency) that helps to create activations. Some of the most memorable bands out there have come up with creative ways to sell albums.
Years ago a rap group called the Get Busy Committee bought a bunch of uzi shaped thumb drives for $1 each. They unpacked them, loaded their album onto them, and sold them for like $20 each. They pocketed the profits and walked away with more than what they would have done if they did streaming alone. We need more of this style of engagement.
He created a record label to make copyright free music for people to stream on places like Twitch.
He distributes his music through Spotify, Apple, etc.
The key thing here is that his music is used on streams, which tend to last many hours. Imagine a bunch of streamers playing his music for hours a day (he created themed playlists/albums). He gets payed by play time.
Last I remember he was making at least 5 figures a month through that: https://www.youtube.com/watch?v=Ek6p_NmYb44
In a way he was at the right place at the right time. He focused on lo-fi music and released that for a very targeted audience.
The money she made off music was pitiful though. She didn't just own her own label, she toured and wrote music every weekday. She gave it everything, more than most people have to offer, and in the end she got a salary most people would call "unlivable". The recent recession and COVID situation pushed her into a Starbucks job to pay rent.
So... do what you want. I just want people to know that you could be one of the most talented self-made musicians in the world, and still go destitute despite owning your own label.
I have one album of my music on Bandcamp. From that album I've received a total of US$50.
On spotify that represents 15k streams. On apple music, 5k streams (*) These are numbers totally out of reach. But because 7 people liked the album enough, I still made enough for a modest meal out with my wife.
Fuck this streaming shit. So tired of young musicians telling me that streaming is where the audience is. If you really believe that somehow you're going to become a superstar, by all means keep playing that game. But if you want to make money without becoming a superstar, focusing on people who actually pay for music is where it's at.
(*) https://producerhive.com/music-marketing-tips/streaming-roya...
I’m only a music consumer, not a producer, but I found some of my favorite artists (small, less than 20k monthly listeners) via streaming and bought their merch and tickets to live shows. So these young artists aren’t exactly wrong in my opinion.
The question is where is the paying audience ? The answer to that is a bit less clear.
Also, given how many musicians and music fans appear to NOT know about Bandcamp, it's tricky to gauge the extent to which that model is an alternative or not.
Also, notice that the usual line about "it's the merch, touring, etc that really makes money" is only true because of streaming. It's precisely because you make essentially nothing from "the music" anymore that the revenue stream from other things now matters more than ever. But with systems like Bandcamp, where the artist is collecting 85% of the gross per digital album download (which could be on the order of $4.50-$11.00 per sale) the balance between these things can shift quite a bit.
Of course, if you've got dedicated merch buyers, cooking up new merch is generally easier and faster than another album (though for some, maybe not).
Given that "bands make all their money from merch and touring" has been true since at least 1970, I don't think you can blame it on streaming, no.
Before Spotify was paying out fractions of a penny per stream, you just had record labels taking $11.99 out of every $12 CD sale instead.
But you're right that label robbery of artists played a big role in the significance of merchandise. It just wasn't true to the same extent in (say) the 70s, because revenue from actual music sales was larger. That was particularly true for musicians who had significant merch sales - they also had really significant music sales revenue.
As I noted elsewhere here, the one upside of label thievery was their ability to cross-subsidize artists. Even tiny (in terms of general sales) labels like ECM got a huge hit every once in a while (e.g. Jarrett's Koeln Concert) that enabled them to keep working with artists whose albums barely broke even. That model has essentially ended now.
My point is this: most people who want to be musicians will NEVER make a living from sales of anything related to their music. Not from streaming. Not from touring. Not from merchandise.
So why settle for an absolute pittance from streaming sales, when you could instead adopt a strategy that accepts the (likely) limits of your success, but maybe gets you a couple of hundred dollars a month extra, at least some of the time ?
Success would be nice, but if, instead, people have heard my music and appreciate it? Listen to it over and over again? I'd take that over beer money. Beer money would be nice though.
So, if I understand correctly, your point is that people shouldn't try to make a living off music, period. That's fine, but art has always been a difficult road for a career; the advent of streaming has little to do with this.
> So why settle for an absolute pittance from streaming sales, when you could instead adopt a strategy that accepts the (likely) limits of your success, but maybe gets you a couple of hundred dollars a month extra, at least some of the time ?
That's not unlike asking, "Why start a business when you could instead work a 9-5 and probably make more money?"
Oh, in the realm of recorded music, it absolutely has a LOT to do with it.
From the early 1950s until the advent of streaming, record labels played an important role as cross-subsidy systems. You might not like Brittney Spears, but the cut of her album sales that went to her record company allowed her label to continue to work with many artists who were barely profitable (if at all).
Streaming (and to a lesser extent, megastars forming their own vertically integrated corporations) has ended that model entirely. If you make "niche genre" music, you're going to be operating without any potential cross-subsidy from more popular music, which translates to either working without a record label at all, or working with a "niche genre" label that helps with marketing but also has extremely low cash flow.
> That's not unlike asking, "Why start a business when you could instead work a 9-5 and probably make more money?"
I see it as a very different question. I'm acknowledging the appeal of pursuing your artistic inclinations, and I think we should encourage as many folks as possible to do that. But I'm also saying "if you think you're going to make a living from this, you're almost certainly mistaken". There are plenty of things people keep doing in their lives without the prospect of making money from it. I'm suggesting that it would be better if more people understood that in 2023, music probably ought to be one of those things, rather than the basis of a dream way of making a living.
It's more like "should you start a business based on your hobby, that almost certainly will not make enough to live on and stands a good chance of destroying your interest in the hobby, or should you accept that it's a side-gig that bring s you joy and occasionally a little bit of extra income?"
Alas its not really possible to make a living from music. Sure some rounding error of people can, working terrible hours, always on the road, grinding away. It's a pretty bad lifestyle for pretty bad money.
Yes there are successes, but the fact you can -name them- is a bad bad sign for an industry.
If you like to play music, then do it got fun, not money. If you accumulate enough for a meal out, then great. Get a job, pay the bills, and enjoy making the music, even if no-one listens.
Stream if you like, sell albums if you like, either way it's gonna be a pittence. Arguing over which is better is meaningless in the sense that they're both bad. Focus on the fun. Don't let the money rob you of the joy.
Oh, and starting a record label? Good luck with that... but it's a daft idea.
Really?
I used to play in genre bands 20 years ago. No one made a living doing it. There are a lot of rose colored glasses being worn here.
The reason musicians made money in the past is because there were so few of them. The barrier to entry - buying synths and studio time, distributing music, whatever - was so high that only a fraction of the people who wanted to make music, could afford make music. A lot of us just dreamed about having the money to even get started.
The result was that the demand for music far outstripped the supply of people who had the means to produce it. Which is profoundly unfair.
Now everyone can make great sounding music and distribute it globally for free. The result is a gazillion genre musicians.
Sure, none of them can make a living selling songs (how quaint) but in the past they would have been completely denied the opportunity to make music at all, even for themselves.
The current situation is much, much better: everyone has the opportunity to make music, and listeners have more music available than they could have ever imagined, and it's all essentially free.
Entirely agreed, and a point I often find myself making in conversations about this stuff.
However:
> I used to play in genre bands 20 years ago. No one made a living doing it. There are a lot of rose colored glasses being worn here.
I've never been a fan of spectacularly popular music. I used to have a collection of about 3000 vinyl albums, and of that, about 2/3 were by musicians I would characterize as "genre". Of that, I would guesstimate at least half of them used to make some sort of living from their recorded music (based on a quick mental survey of the musicians and what I knew/know about their lives).
This is (was) particularly true of jazz, improvised music, electronic music.
> The current situation is much, much better: everyone has the opportunity to make music, and listeners have more music available than they could have ever imagined, and it's all essentially free.
I mostly agree with this, with the proviso that I'm not sure we really understand what the long term impact will be of "even less people than before can making a living from selling recordings of their music".
I’d be surprised if the absolute number is lower. Sure, the percentage is way lower but that’s because more people are making music.
But like, are there more say, punk rock bands making a living with their music today than there were 20 years ago? Probably.
As odd as it sounds, in music-as-a-business, the mentality needs to be that the music you're putting out is marketing for the actual product, which is the musician themselves. Because it's fans of the musician who do things like buy physical records, go to shows when they're on tour, or buy merchandise, which are the things that actually generate revenue.
No idea. Should I care?
> As odd as it sounds, in music-as-a-business, the mentality needs to be that the music you're putting out is marketing for the actual product
I fundamentally disagree with this.
If you actually want more sales you probably want to know a bit about where they came from. To know which efforts are bringing in customers. Basic marketing.
It really depends if you want to go to a second meal with your wife or not. But if you are selling something, knowing who your customers are and how you can reach them to let them know about your product is the absolute basic you need to get right before thinking about promoting it.
Certainly if I wanted to sell more, I'd need to think about that sort of thing. But I'm already way out ahead of anyone in my position who had opted to rely on streaming for income.
Every musician I've spoken to who does both uniformly reports 10-1000x more income from bandcamp than from streaming. I could be talking to a too-small or unrepresentative group.
This is a good question. Should you know how you made money? Do you need or want money? What even is a “sale” other than somebody giving you money for your music?
“Should I know what led to the situation wherein people paid me money?” is a question bordering on mystical best left to the music philosophers and academics.
1. streaming is bad because musicians get paid a pittance for it. This remains true whether musicians could make more elsewhere or not.
2. there are other ways for musicians to get paid for their music (but many contemporary musicians do not bother to explore them, believing that streaming is the only answer).
Yes, I agree with you that I would love to support more artists directly through things like Bandcamp or a similar platform rather than streaming platforms. I actually did look into doing it. Many of the artists I enjoy don't have any way for me to easily purchase their music directly. And I can only enjoy them through streaming.
I would assume they found it through Bandcamp's discovery services if the user is not putting their music on streaming services.
It’s actually the other way around. The music is the product. The musicians are replaceable.
Every “music-as-a-business” has shaken up lineups and replaced musicians, front men, dancers, roadies, publicists, managers, everyone.
Do you think record labels could replace Taylor Swift or Nicki Minaj with someone off the street and have them sing the same songs and be as successful? No, they could not, because all of the marketing and branding has surrounded those two individuals.
Even the most amazing song in the world isn't really going to have value if you call it "UNKNOWN ARTIST - UNKNOWN TITLE".
The band is the “company” at the execution level. The label is the private equity or accelerator/VC. The music is the product. It may be freely available, but it’s not free. It’s a business of land and expand before you see a dime so you need to establish the scale first.
Taylor swift is an interesting choice since her whole music catalog was bought out from under her (she still owns the song but not the masters) and now she’s recording it all again. Just being Taylor swift isn’t enough, she needs her music, in order to be “Taylor Swift - The Band”. Yes, you can’t replace Taylor and still have her music. Just like you can’t replace Atari and still have Atari. There are companies that exist as an extension of the founder (cough X cough) but most don’t operate this way.
If you answer that question correctly, you'll understand what I mean when I say the band and the brand/marketing behind it is the product, not the music.
A lot of people talk about tiny payments from streaming, comparing it to the "old model" where a CD would be sold for $20/€20/£20. However, the actual economics of those album sales are not as straightforward as they seem. The label would get nowhere near $20 for the sale. In fact, the label often got well under half of the retail price, with significant chunks of the retail price going to the retailer and the wholesaler - with another non-significant cost going on manufacture.
This began to crumble with digital downloads - suddenly people realised that they didn't need to stump up for a whole album's worth of tracks, some of which - to a greater or lesser extent may have been "filler". So where before a label could press albums and be relatively certain on the return, with digital downloads a lot of people started cherry picking the tracks they wanted to buy, rather than buying the whole album, and although manufacture and shipping records around the country was no longer required - saving a bunch of cash - it meant labels took a significant dip.
In a software context, the music business simply moved from up front licensing to a subscription model.
That's definitely had impact on the wider economics of how revenues stack in the recorded music business, but it's not as catastrophic as some people might pictured it from the outside.
If you want to run a label, though, looking at streaming payments means you're going to fail, because this isn't the challenge. And it's also not the whole of the business, there are other revenue streams for labels, like synchronisation, public performance revenues, and physical music products which, although a tiny proportion of music revenues overall, can be a significant revenue stream for strong independent labels with an engaged audience/customer base.
The challenge is signing artists who are going to create recordings that people like - and then finding audiences for that music, engaging them, creating content and campaigns to keep them interested, and building long term revenue streams, and selling them stuff. A&R and marketing are more important today than they have ever been - if you don't have great talent, and you don't know how to market that talent, then it doesn't matter if streaming pays a cent a stream or a dollar a stream - you're not going to have a business model.
(My credentials: one of my businesses advises a large number of independent record labels on copyright, digital revenue streams and strategy)
> Maison Kitsuné was founded in 2002 as a record label by Gildas Loaëc and Masaya Kuroki in Paris. The founders first met in Loaëc's record shop in Paris where house music lovers, including Kuroki, Daft Punk, and others, frequented. After a trip to Japan for a music video together, they came up with the idea of launching a lifestyle brand not confined to one discipline. The result was Maison Kitsuné, which blends music and fashion as a multi-faceted Paris-meets-Tokyo brand. The pair promoted the brand by performing DJ sets, which was followed by the release of the first t-shirt, shirt, dress, and eventually a full fledged ready-to-wear collection in 2005 that represents 90 percent of its revenue today.
The lesson here is: whatever niche interest or community you are involved in, try to combine it with your record label project. This is more unique and has a better chance of success than just a generic label.
And how would they differentiate themselves from the fifty million other people who are doing the same thing on YouTube?
Labels have historically provided assistance with recording and marketing, in exchange for the lion's share of the bounty. Recording may have gotten easier, but the gap between the skills of a musician, and a marketer is still here.
I'm not saying the economics of the past were great, but the economics of the present aren't, either.
Releasing music onto YouTube or Tiktok is not marketing - it's distribution. Distribution is trivial, it's a commodity service. Because anyone can distribute music, there's lots of it. Getting much heard requires specialist expertise - and that's why there's probably more value in good labels today than there was ten years ago.
Also: Please correct me if I’m wrong but I would guess that quite a few owners of indie labels also have other sources of income in order to make a living…? I.e. a dayjob.
I'd suggest that startups and movies have a much higher probability of 'success' than minting a hit song that can generate 1 billion streams. While there are a few stories of hit songs that organically break through, the vast majority are promoted _hard_ by the labels using resources (both money and connections) that are hard to amass outside the major labels.
It is an axiom that today, artists make all of their money touring. But even live performance (particularly at the largest venues) is dominated by monopolistic players. Without having a large number of headliner artists, you won't have the negotiating power to get favorable rates, and they'll eat you for breakfast too.
As for new music; I don't see what a "side business" label could offer an artist that they couldn't do themselves with distrokid. Unless you had the capital to develop, build, and market artists I think it would be very difficult to generate a return.
But I could imagine there is a fairly large number of people who would love to record and press their own album, and one or two of them might actually be able to sell their stuff to strangers.
If I wanted to start a record label, that's probably the value I might be able to bring - vinyl presses, maybe studio recording and self publishing.
"where is the added value" >> For example if you own a recording studio with lots of very high-end equipment, and you ask for bands to sign with your label in exchange for a reduced rate. Or have new technology (for example, I am one of the first studio in the city to have Dolby Atmos). Etc...
"funding model" >> Rather than trying to make money from streaming only, the value of the band is generally in the community it can gather. Community which can be asked for money with Patreon. Or merchandising sold in concerts. Etc...