Pennies for plays: Royalties from streaming services still small for many musicians

For almost three decades, Damon Krukowski has made his living playing the drums. But recent upheaval in the music industry has him questioning whether future would-be drummers will be able to do the same.

His former band, Galaxie 500, now regarded as a heavy influence on the slowcore and dream pop movements of the 1990s and 2000s, never reached its current esteem while active from 1986 to 1991.

As Krukowski puts it, the band was never bigger or smaller than it needed to be.

"If you put that in perspective for what that means for artists like us who were never trying to be pop artists, were never trying to be at the top of the charts, we never thought that's how we'll make a living in music and that's how we'll be artists and contribute to culture as a whole. We just want to play for our audience," Krukowski said.

Unfortunately for artists like Krukowski, it's the chart-topping artists with pop ambitions who are benefitting from the continual shift of the core of the music business from album sales to the current system — a rainbow of online streaming options. Smaller acts simply struggle to earn money this way.

Krukowski explored the the problem in a polemic column for Pitchfork.com last year.

"Galaxie 500's "Tugboat", for example, was played 7,800 times on Pandora that quarter, for which its three songwriters were paid a collective total of 21 cents, or seven cents each. Spotify pays better: For the 5,960 times "Tugboat" was played there, Galaxie 500's songwriters went collectively into triple digits: $1.05 (35 cents each)."

He then compared those earnings to what Galaxie 500's made from their "Tugboat" single 7". It cost the band $980.22 to press 1000 vinyl records of the single, or 98 cents per record. The band could make a couple of dollars off each sale. 

"Since we own our own recordings, by my calculation it would take songwriting royalties for roughly 312,000 plays on Pandora to earn us the profit of one — one  — LP sale. (On Spotify, one LP is equivalent to 47,680 plays.)," he wrote.

The question remains: who is to blame for the sad state of financial affairs for the little guys of the music business? Krukowski maintains that companies like Spotify, including Rdio and Pandora, are siphoning off the profits. 

D.A. Wallach, a musician and artist-in-residence at Spotify, says the online services are not the problem, pointing out that Spotify doles out about 70 percent of its income to artist royalties. The real problem, Wallach said, is the pervasive unwillingness of the average American to pay for their music.

"What I see is a world in which most people don't pay for music and more importantly in which people are listening to music in really poor quality in environments that artists don't control," Wallach said. "Spotify's basic business mission here is to try and convince people to start paying for music again.

But for now, sales numbers are in a free fall.

"There's no question about it that the industry has taken a big hit, it's lost about, at retail, 50 percent from the early 2000s to now," said Steven Marks, Chief of Digital Business and General Counsel for RIAA. 

Not long after iTunes was introduced in 2006, digital downloads began taking a huge chunk out of physical sales. One of the issues for the music business is that digital sales have not been able to fill out the hole they created.

"Some have moved to downloading but many have frankly just stayed on the sidelines," said Russ Krupnik, an industry analyst. "They're not buying CDs the way that they used to, but they never really adopted the digital file, iTunes type of model either."

Despite its recent dominance, digital music services are still young and they're likely to continue growing as they mature. Once this happens, it's likely all musicians will be able to get a larger share of royalties from digital.

The music industry has had to adapt to changing formats before, said Casey Rae-Hunter, director of the Future of Music Coalition, and they should be able to do it again.

"There's never been just one business model for musicians," he said. "All we want is a chance at being able to grow using whatever tools are available."