Follow the Money: Why Musicians Only Received 12% of the Industry's $43 Billion in Revenue

As bleak as it sounds, musicians are actually making a larger proportion of revenue than they have in the past.

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Follow the Money: Why Musicians Only Received 12% of the Industry's $43 Billion in Revenue

Citigroup published an 88-page report last night on the state of the U.S. music industry according to figures from last year. The report’s highly-publicized bombshell was that musicians (who are responsible for the entire existence of the industry) only received a measly 12% of the industry’s $43 billion in revenue in 2017.

While this may sound shocking, and rightfully so, it’s important to contextualize this figure before showing up to the headquarters of Spotify or major record labels with pitchforks and torches — and to be honest, which music fans weren’t already aware and furious that musicians are regularly bamboozled by these corporations?

In fact, what’s even more surpising than that 12% figure is that musicians’ proportion of the industry’s revenue is actually on the rise. In 2000, musicians made just 7% of the industry’s revenue. Over the past 20 years, this figure has fluctuated between 7 to 12%, but this figure has been on the upswing since 2011. So what’s the driving force behind this percentage increase?

Paid music subscriptions and concert tickets are up while physical album sales are down. Because people are largely streaming their music instead of owning it, musicians are left with pocket change earnings from streaming services, meaning that they are forced to tour longer to make a living. As a result, concerts and festivals have seen a significant amount of growth, which might be seen as a silver lining for some artists because, while record labels reap most of the rewards from streaming services, labels are often excluded from touring revenue.

The biggest piece of the $43 billion generated in revenue went to music platform costs for companies like Spotify, YouTube, Sirius XM and FM radio. The next largest piece went to record label costs and EBITDA (earnings before interest, taxes, depreciation and amortization) for publishing and recorded music. Those first two chunks account for roughly half of the total revenue while the third and last sizable chunk was devoted to EBITDA for those previously mentioned music platforms.

These three areas account for around three quarters of the total revenue with the subsequent pieces of the pie being fairly small. Fourth is artist revenue (12%) and from largest to smallest, the rest of the pie includes concert costs, managers, concert agents, retail margins, collection fees, concert promotion and record producers.

So while the artist share of revenue is on the rise, the level of value is particularly small when compared to other entertainment industries. The reason that earnings don’t trickle down to musicians like they do in these other industries is because the music industry has so many middlemen. Also, because music consumption is divvied up between many different platforms, artists receive a tiny amount of the aggregate revenues.

It’s hard to concisely state how to fix all of the problems in the industry, but even if it was easy, it’s difficult to envision it happening, given the few, large corporations that own the industry and dictate its fate. In the meantime, why not take an occasional break from streaming and buy a physical album (maybe on vinyl?), go to a show and buy some merch because at the end of the day, whatever you can muster is paying for gas, meals, rent and other crucial costs for artists.