If your music is already on internet radio services like Pandora and iHeartRadio, you're probably aware of what the payout rates look like. If you don't know, let's just say that they aren't the kind of royalties that you can retire on, unless you're planning on having your songs streamed several billion times (you wish). Thankfully, the amount that you'll be paid per stream is going up. Not a whole lot, but when it comes to streaming (and making a living from the music industry), every little bit counts, right?
Many musicians may not realize that, unlike on-demand services (ones where you can choose a specific song or album to listen to), internet radio companies don't set the rates that they pay per stream to artists. That figure is set by the Copyright Royalty Board, which is a three-person panel of judges. That trio of people meets every five years to look at the state of the industry and the economy, and come up with a new figure.
Recently, the board met yet again to update the rates that will last for another five years, and it was a contentious legal battle. As with any court-mandated entanglement, the outcome is a bit complicated, but here's the gist.
Free streams – those being listened to by people who don't pay for an account, which is typically supported by the occasional advertisement – have gone up slightly. Services used to pay $0.0014 per stream, and that figure has grown to $0.0017. Doesn't sound like a lot, but when accumulated, that is several hundred million dollars extra that companies like Pandora will be paying per year. Those streams that come from customers that do pay for an account (so as to avoid advertisements) have gone the other direction, dropping from $0.025 to $0.022. Again, it's just fractions of a cent, but those all add up.
During the deliberations, the interested parties were allowed to submit a rate and make their case for why that should become "law." There were two sides this time around: SoundExchange, a nonprofit organization that collects royalties from internet radio services and distributes them appropriately, and platforms like Pandora. Now, it shouldn't come as a shock that those having to pay out royalties wanted to see the rates go down, while those collecting them for artists had the exact opposite in mind.
Going into the discussions, Pandora asked the judges to set free stream royalties at $0.0011 per play, while iHeartRadio went even lower, requesting that number descend to a measly $0.0005 per play. On the other side of things, SoundExchange reached for $0.0025 per free play, but that was a bit high. So, while the new, just-announced rates may sound pretty low to any musician out there, keep in mind that if the online radio services had gotten their way, rates would have been much, much lower.
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So, if we're talking about fractions of a cent, why does it matter? First of all, you should always know what you're being paid for your work. It doesn't matter if it seems like pennies or if you're not sure how it all works – this is your money, and you shouldn’t be casual about it. Second, these numbers might not make much of a difference to you when you think about streams individually, but we all know how popular streaming is becoming. In the first half of 2015, there were over one trillion streams between several of the most popular platforms, and that number is expanding rapidly. People will likely be listening to your music more and more. So, those tiny bits of dollars? Well, there will be a lot more of them in the future.
Since the aforementioned rates are going to be around for the next half-decade, it’s a good idea for you to know what they are. Will they go up or down the next time the Board meets? Nobody knows, and to be quite honest, the streaming world will likely be very different by then anyway.
Hugh McIntyre is a freelance pop music journalist in NYC by way of Boston. He has written for Billboard, The Hollywood Reporter, and MTV, as well as various magazines and blogs around the world. He is also the founder and editor-in-chief of the blog Pop! Bang! Boom! which is dedicated to the genre of pop in all of its glory.