A recent report from investment bank Citi revealed music artists receive around 12 percent of music industry revenue.
This 12 percent figure is up five percentage points from 2000, when just 7 percent of industry revenue reached artists.
Industry analyst Glenn Peoples believes this 12 percent figure is misleading as it includes revenue that cannot be “reasonably captured” by artists, but relatively on par with what an artist would earn if they independently contracted services to market their music themselves.
“I think AM/FM radio ad revenue needs to be taken out,” said Peoples. “It’s off the table for most labels/performers…So don’t put that ad revenue in the denominator. Labels/artists don’t get some performance royalties available to publishers. Music played in grocery stores, GAP outlets, and minor league ballparks pay a blanket license that provides royalties to publishers/songwriters. Just as labels/artists (mostly) don’t have access to AM/FM ad revenue, they don’t get to tap into grocery store revenues. Surely some small part of the retail experience is driven by music. My point is public performance royalties from AM/FM radio is tricky. Music provides value, but how much value? And if labels don’t have a performance right, and can’t get that ad revenue, I don’t think those ad revenues should be included in this study…But what if all/most artists go DIY? They’d own their rights and either build their own team (promo, marketing, product management, etc) or hire a label services/distro [sic] company. And they might need to make separate deals for other territories. And after all expenses are paid, and after managers/agents get their cut, an artist could be left with something like a 12 percent operating profit.”
Peoples goes on to estimate an artist could capture as high as a 19 percent of revenue if “reasonably captured” revenue had been calculated.
“Citi should have taken into account revenue that could reasonably be captured by labels/artists. So, remove AM/FM radio, and remove what publishing money comes from it, and the artist’s share of revenue jumps to about 19% (if my math is correct). Of course, you could say, ‘Well, it’s still just 19 percent. That’s not much for working artists.’ And I’d say, ’19 percent might not be great, but it’s a helluva lot better than 12 percent.'”
The Citi report also details possible adaptions likely to change the music industry in future years, including:
- Potential Expansion by Labels into Live Events
- Potential Expansion by Internet Music Distributors into Record Label Role
- Potential Consolidation Among Distribution Platforms (Amazon, Apple, Pandora, Spotify, iHeart, Sirius)
- Potential Vertical Integration on Music Value Chain (concert promoters could merge with existing distribution platforms)
Read the full report at ir.citi.com.
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