Blog

04 January 2018

The Value Gap

In IFPI’s 2017 Global Music Report, the issue of the value gap was highlighted and throughout the past year we have seen a number of lawsuits in relation to the value gap.

So what is the value gap that is being referenced?

The value gap has occurred due to the move of listeners over to streaming. In the LP and CD’s heyday, the amount of money that was being made per album was somewhat consistent, as were retail prices. However, with streaming as the most convenient and frugal option for listeners, it comes as no surprise that it has increased in popularity via paid subscription and non-paid subscriptions. Enters the value gap! The value gap is the difference in profits paid out to labels and artists from one service to the next. As many are aware, if you watch a music video on Youtube or listen to the same song on Spotify; the payout for the artists varies substantially from platform to platform.

The main reason for the variance in royalty payout rates is that there is no consistent legal requirement for them to payout a certain amount per track and there is not the legal liability on the streaming services to license the music they are providing to their listeners. An example being Youtube with user uploaded content. Streaming service, Tidal, used this theme in their marketing campaign for their launch, but faced backlash due to the nature of the advertisements and artists involved.

We will be looking at what unsigned artists make per play since signed artists have contracts established between their labels and streaming service. IFPI notes that the value gap in the music industry is the largest threat against the industry’s sustainability.

So where does your preferred streaming service payout?

IiB conducted data collection in order to see where each service ranked in 2017. Here are their findings for unsigned artists:

Napster: $0.0167  /play

Tidal: $0.0110  /play

Apple Music: $0.0064  /play

Google Play: $0.0059  /play

Deezer: $0.0056  /play

Spotify: $0.0038  /play

Pandora: $0.0011  /play

YouTube: $0.0006  /play

Clearly, it is problematic for the same song stream on YouTube to equal only $0.0006 and on Napster would equal a royalty payout of $0.0167. Although, one journalist has called the value gap a way to “demonize YouTube” and hinder tech innovation (Masnik, 2016). A large number of  artists, signed and unsigned, have acknowledged the value gap as an issue in the music industry. According to IFPI, artists have reached out to the European Commission about the variance and they have noted the need for legislative action. The European Commission drafted legislation that seeks to amend the value gap and is under the review of the European Parliament and Council of Ministers.

The solution of the value gap may be legislation, but we will keep updated!

To Read More About The Value Gap:

http://www.ifpi.org/downloads/GMR2017.pdf

https://www.musicbusinessworldwide.com/uk-recorded-music-business-grew-100m-last-year/

https://informationisbeautiful.net/visualizations/spotify-apple-music-tidal-music-streaming-services-royalty-rates-compared/

https://www.digitalmusicnews.com/2017/07/24/what-streaming-music-services-pay-updated-for-2017/

https://www.techdirt.com/articles/20160803/15263735147/ridiculous-concept-value-gap-music-services-how-it-could-harm-both-tech-industry-music-industry.shtml