To help musicians hurt by the pandemic, start with fair pay for streaming

When COVID-19 crashed into Canada, it brought entire industries to a sudden and complete halt. It left workers, their dependents and others with no means of income or support for several months on end.

One industry that felt the pandemic’s brunt was the music industry. Being unable to play gigs, concerts or tours left many upcoming musicians hanging by a thread and unable to support themselves financially.

A-list performers, luckily for them, had other strategies to earn income. They have been able to ride out the crisis thanks to endorsements, merchandise sales and paid features. Lesser-known artists don’t have this luxury. For many, their main source of income is live gigs, and public health restrictions put a stop to that.

Don’t be too surprised if you discover that some of your favourite singers who have enjoyed mainstream success are struggling to get by financially during this pandemic era. Even a couple of hit songs might not add anything substantial to their bottom line in this era of streaming services, as artists typically earn less than a penny each time their song is streamed.

Artists and other concerned industry stakeholders are fighting for higher streaming rates and better compensation to provide them with a decent livelihood. They and everyone who contributes to giving us the music we love deserve to be fairly rewarded for their efforts. Policy-makers can better engage with these issues by listening to artists and advocates to better understand how the music industry functions as an ecosystem, and how current policies can hurt artists.

One policy that has the potential to help Canadian artists, depending on how it’s implemented, is the hotly debated Bill C-10, which could require digital streaming services to contribute funds to support Canadian artists or ensure Canadian content can be more easily discovered on their platforms. But no matter the bill’s fate, the discussion about fair compensation to artists from streaming platforms should still be a priority for policy-makers.

The drawbacks of streaming

Streaming sites have revolutionized the music industry since their creation in the early 2000s. Companies like Spotify, Amazon Music, Apple Music and a host of others have provided people with cheap and legal access to a practically limitless collection of songs, as long as they have a good internet connection. All this for free, if you don’t mind the ads that pop up every once in a while, or for a small fee in the range of $5 to $12 per month.

Streaming services have also benefited artists in some ways. They have contributed to a reduction in music piracy, which contributed to a worldwide decline in revenue from physical recorded music — from $37 billion in 1999 to $25 billion in 2007. Streaming has also helped level the playing field between emerging creators and established superstars. In the not-too-distant past, new and struggling artists couldn’t distribute their songs without the help of a record label. Streaming sites give everyone the chance to upload content on their platforms for free and be discovered by the public.

But where streaming falls short is in compensating artists for their work, due to a skewed payment system that tends to favour mega-acts and record labels. Rather than a user-centric system, where the royalties from each user’s monthly payment are distributed to the artists that user specifically listens to, Spotify instead opts for a “pro-rata” model. In this system, all monthly revenues are pooled together, and payments are shared among artists and labels based on their share of Spotify’s total streams for that month.

For the past two years, the rates paid per stream by most streaming giants have varied between $0.0038 to $0.0063 CAD. Spotify in particular pays an average of $0.0055 CAD when a user plays a song for 20 seconds or more (the time range that makes a song qualify as a stream). This as Spotify’s revenue grew from about $2.9 billion to $13.7 billion CAD between 2015 and 2020.

Table 1: An Estimate of How Many Streams it Takes to Earn a Dollar

Source: Estimate based on Visual Capitalist with ForEx calculation tool. It’s important to consider that this chart is an estimation, and with rapid changes in the industry, these rates may change slightly.

*Based on Ontario (Canada) general minimum wage per month

As seen in Table 1, to earn $1 as an artist on Spotify, your song needs to be streamed more than 100 times in Canada. Mind you, that dollar may not be exclusively for the artists and could be further divided if:

• The artist is not the sole rights holder of the song;
• The artist is not the distributor; or
• The artist is signed with a record label.

Late last year, musicians worldwide came together to form a group called the Union of Musicians and Allied Workers. The main purpose of the group is to force Spotify to change its miserly payments and raise rates to at least 1 cent per stream. As of March, more than 27,500 artists have signed up on the campaign and protested at various Spotify headquarters across the globe.

What Canadian policy can do

Canadian creators are also advocating for changes to the country’s Copyright Act. The Copyright Act contains safe harbour provisions that enable user-upload services like YouTube to give away musicians’ work for free. A safe harbour is a provision in regulation that affords protection from liability or penalty, or reduces liability if certain conditions are met — in this case, shielding web companies from liability when their users share copyrighted works such as music on their platforms without their knowledge.

With such provisions in place, music shared on YouTube distorts the market for paid, licensed services like Spotify and Apple Music, and affects the revenue the creator and rights holders of these music should be collecting. A 2018 survey from the IFPI found that 79 per cent of Canadian respondents use YouTube for music, and that nearly half the time they listen to on-demand music, they’re using YouTube. According to one estimate, the total revenue of Canadian music income in 2018 was $572 million, but it would have been nearly twice that much without YouTube.

Music advocates are asking the federal government to update Canada’s safe harbour laws so that they no longer apply to online services that optimize and profit from content uploaded by users, and only shield platforms that have a policy for addressing repeat copyright violators.

At this time, the federal government is considering Bill C-10, which would require digital service providers that earn revenue from sharing online content to contribute to the creation, production and promotion of Canadian content. Service providers that operate in Canada would be regulated under the Broadcasting Act, allowing the CRTC to impose regulations on them. In theory, this could be a means of restoring some of the revenue from streaming giants to Canadian musicians and creators, but there are several concerns about a new amendment that would appear to give the CRTC the power to regulate user-generated posts, which critics say could limit Canadians’ freedom of expression. Heritage Minister Steven Guilbeault has since promised further amendments to the bill to shield user-generated content from regulation.

Public health regulations aimed at stopping the spread of COVID-19 have significantly reduced the number of live shows and other social gatherings where musicians earn most of their livelihood. This is the time that streaming services and other platforms should step up to set a payment rate and model that can help artists make a decent living wage and continue to delight us with their craft. But without strong regulations that apply to digital content sharing, they have no motivation to do so. Further advocacy, research and policy measures are required to modernize the arts sector to better support artists and key actors in the music ecosystem.