Making money from music is hard.

An informal survey conducted by Larry Fitzmauriceon of Vulture found as much. Most of those asked didn’t own property and needed a number of concurrent side hustles to make ends meet.

Some musicians were even losing money on their music careers every year, and debt was a common denominator.

Most indie musicians simply can’t afford an apartment of their own, according to Cass McCombs, currently holding more than one million monthly listeners on a music streaming platform to remain unnamed.

What does that mean for artists, even those that have their music on streaming services and know for a fact that people are listening to them?

Well, part of the issue is that the way these platforms work is complicated, especially when you’re trying to figure out their pay structures for royalties. Most services follow a system known as “pro-rata” or “service-centric.”

This means that monthly royalties are established by dividing the number of total revenue generated by the streaming service by the overall number of streams for that month, for all artists. That’s then multiplied by a specific artist’s number of monthly streams.

Essentially, the revenue an individual artist can make depends on their share of the company’s overall streams.

Some allege that the “pro-rata” system inordinately favors the most popular artists, who are going to have an overall larger share of individual streams on the platform. And, there are reports to support this, showing that 10% of the most-streamed tracks represent the lion’s share of all music streams (99%).

With the service-centric formula, 90% of all other music that gets streamed only receives 1% of the revenues.

In the “user-centric” system, payment for artists is dependent on each listener’s consumption during a given month.

So, if a user pays $10 a month for their streaming service, and only listen to five artists for a month, then the royalties from that subscription would be divided equally between those five artists.

Streaming platform execs claim that this approach would make the costs of administering royalties significantly more expensive, and therefore worse for both the companies and the artists.

If this seems more than a little convoluted, the research team at ConsumersAdvocate.com, a consumer review website, recently wrote a whole guide on music streaming services.

Of particular use to artists is the handy calculator they developed, making it easy to see exactly how much royalties you can get on which platform.

So, it turns out, finding success in the modern music industry is so much more complicated than just turning out a good product.

Even getting signed doesn’t mean you’ll make it, though that’s never been the case with music, with Prince even going so far as to call it “slavery.”

It’s so easy to get lost in the shuffle if you’re with a big label, or conversely, to miss out on big opportunities when your small indie label doesn’t have the resources to showcase how awesome you are.

Here's What Music Streaming Platforms Are Actually Paying [INFOGRAPHIC]

The Music Entrepreneur

The Matrix, Music Man guitars, Gibson acoustics, Wegen picks, Border Collies, good books, a laptop, a bit of blogging, and a side dish of beauty. What else is there, really? Oh, right music entrepreneurship. That ol’ thing? It’s in our wheelhouse.
The Music Entrepreneur

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