Photo: Brian Rasic/Rex Features
Jay-Z seemed to hit the nail on the head over 16-years-ago in his 2001 hit “Izzo.” In two lines, the rapper successfully highlighted an issue that’s almost as old as the music industry itself: music royalties. Whenever a musician or songwriter produces a song, how do they get paid for it? And how much exactly are they making?

INDUSTRY RULE #4080: Most major record labels have left a legacy, a reputation with artists that precedes them. Jay-Z‘s lyric above references when Sugarhill Gang famously stole lyrics from Cold Crush Brothers‘ member Grandmaster Caz to use in the song “Rapper’s Delight.” After the wave of success that came with “Rapper’s Delight,” Grandmaster Caz received no credit or royalties for the plagiarized lyrics. To this day, Caz has still not been compensated for this work. Even still, the compensation that Sugarhill Gang, got was arguably low.

The challenges faced by Grandmaster Caz mirrors that of so many artists across the history of music. Record label executives are famous for their skill in making fast deals that often leave the artist on the short end of the bargain; confused as to how their number one hit only got them a couple of dollars in the end, struggling to make a living.

In 2000, Courtney Love of “Hole” wrote an article for Salon, which gave a synopsis of what occurred in most record deals. She uses a hypothetical record deal to illuminate industry realities. She wrote:

“This story is about a bidding-war band that gets a huge deal with a 20 percent royalty rate and a million-dollar advance. (No bidding-war band ever got a 20 percent royalty, but whatever.) This is my “funny” math based on some reality and I just want to qualify it by saying I’m positive it’s better math than what Edgar Bronfman Jr. [the president and CEO of Seagram, which owns Polygram] would provide.

What happens to that million dollars?

They spend half a million to record their album. That leaves the band with $500,000. They pay $100,000 to their manager for 20 percent commission. They pay $25,000 each to their lawyer and business manager.

That leaves $350,000 for the four band members to split. After $170,000 in taxes, there’s $180,000 left. That comes out to $45,000 per person.

That’s $45,000 to live on for a year until the record gets released.”

Given the state of how artists are typically paid today, a hypothetical $45,000 per person doesn’t sound far from the truth. Adjusted to current industry standards, artists are typically paid royalties anywhere between 8-percent and 25-percent of their album price. The percentage increases or decreases in relation to the artist’s popularity. Additionally, this “$45,000” doesn’t include the cost of marketing and promoting the album; a price which comes out of the artist’s pocket.

Courtney Love is one of the many artists that have raised complaints against the current state of the music industry. Among the countless others who have taken a stand are Taylor Swift, who last year successfully pressured Apple Music to pay artists for their attempted “Freemium” in her open letter “To Apple, Love Taylor.” However, perhaps the most vocal artist against the music industry was Prince Rogers Nelson, who recently passed last April at 57. In his dispute with his former label Warner Bros, Prince once wrote “SLAVE” on his face to protest the status of his music ownership. Prince later left the label, and continued to be outspoken about the importance of artist independence and compensation in record contracts; leading the way for artists after him.

To give a quick recap: The artist produces content which the label depends on to operate, the artist markets and promotes their own content, and the artist tours extensively to perform for millions. The label gives the artist a platform to produce their music. From most recording contracts, the label gets 80% of artist royalties, and the artist gets 20%? A highly questionable figure. To add to the math, big changes in technology have made royalties and artist proceeds even more complicated.

In the early 2000s, the digital age brought with it a chance for musicians to reach a larger audience with greater ease. However, it also brought with it large waves of piracy and copyright issues. Napster, the MP3 music platform, was home to multiple music leaks. Works from the likes Dr. Dre, Madonna, and Metallica were sold on Napster before securing permission or royalties from the artists.

Label owners hate me; I’m raisin’ the status quo up.

I’m overchargin’ n—as for what they did to the Cold Crush.

Pay us like you owe us for all the years that you hoe’d us.

Multiple lawsuits led to the closure of Napster in 2001, and a $26 million settlement to music creators and copyright owners for copyright infringement. An app that was of particular concern was Limewire, along with many other P2P file sharing networks. Piracy was at an all time high, as users could simply search for almost any artist’s song and download it for free, not to mention they could continue to share the pirated music file.

The start of streaming music has helped to squash a great deal of piracy issues associated with P2P’s and MP3 sites. But the ages old problem of paying artists their due still persists. Perhaps even worse than before.

The man himself, Jay-Z, seems to have lived up to his 2001 lyrics after founding TIDAL; the music platform that supposedly pays artists their fair due. He’s in the ring with a host of competitors like Pandora, Rhapsody, Spotify, and the Apple Music giant. Their race to dominate the music experience in the modern era has been dubbed by many as: The Streaming Wars.

Almost every artist has picked a side on the turf. Big names like Drake, Beyonce, and Future are for Apple Music. Spotify holds a wide variety of names, having the most diverse catalog. TIDAL has virtually all of Jay-Z’s super music celebrity friends, and also, interestingly enough, Beyonce.

But still, even with these changes, do artists get their fair share?  Has anything really changed?

Royalties Partner, Rafi Saville sheds light on the matter:

“While listeners find Spotify, Tidal and Apple Music convenient, it does always not bode well for artists to have their songs featured on these platforms. This is because artists have usually handed over the ownership of their songs to the record labels which sign them early on in their careers. The labels then sell the songs to terrestrial and digital distributors like Spotify and Tidal. These online services are legally required to pay the labels, who are the owners of the songs, and they do. The artist who is at the bottom of this financial food chain sees little of the profit though, particularly as revenues have been squeezed by fiercely competitive digital distribution platforms.”

Here Seville notes an important distinction. In the transaction between record labels and streaming music platforms, the labels are the owners of the songs. Seville says “artists have usually handed over the ownership of their songs to the record labels which sign them early on in their careers.”

Royalty calculations from most music platforms will denote a percentage of payments that go specifically to the label or publishing owner. While streaming services can calculate approximately how much an artist is payed, they are not directly paying the artist. They’re only paying the label.

Take Spotify’s artist payout calculation for example. (You can actually find this on their site.)

Spotify Monthly Revenue * (Artist Spotify Streams/Total Spotify Streams) * 70% to master & publishing owners * Artist royalty payment=  Artist Payout.

Spotify pays out over 70% to the record label. The record label gets the artist’s streaming profits, and then artist payment continues along the traditional 80/20 payment structure. Courtney Love’s hypothetical payment model starts to make more sense here.

Labels are still taking more than their fair share in the bargain. Given that the 80/20 model shifts according to popularity, labels can capitalize even more on an emerging artist.

The core argument here isn’t to make the rich even richer. The focus is more so on the long history of intellectual theft and lack of compensation for works of art. On the aspiring musician who ends up losing everything because they couldn’t read the fine print. On the unaccredited contributions to our culture which have helped us form our identity today. It’s time to regulate unchecked industry greed, and give artists that which they deserve: fair compensation and credit.

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