This music payment platform fights the culture of “starving artists”
- Music revenues are expected to reach $ 131 billion by 2030. Even still, many small artists are struggling to get paid.
- Stem, a distribution and payment platform used by Frank Ocean and Childish Gambino, is trying to change that.
- “There is a lack of infrastructure and tools to support the modern music industry,” Stem’s CEO told Insider.
When listening to your favorite musicians, bookkeeping is probably the last thing on your mind.
Calculating the numbers may be the less sexy side of the music industry, but for Stem CEO Milana Rabkin Lewis, it’s the key to an industry-wide revolution.
“One of the unfortunate things about the music industry is that getting paid isn’t a given,” Lewis told Insider. “There’s this notion of starving artists… that when you work in music, you don’t necessarily do it for the money.”
After five years at United Talent Agency, one of the nation’s top artist management companies, Lewis realized that the traditional agency model was not working for the majority of emerging artists.
“The majors system is really designed to lead to stardom,” she said. “Anyone can do a song… they can’t provide that kind of machine that makes superstars every single one of them, so a lot of artists are frustrated.”
On Spotify alone, nearly 60,000 songs are downloaded every day. It’s almost one song per second, the streaming platform reported in February.
As the number of superstars has grown, so has a growing pool of mid-sized artists – musicians who still depend on streaming and touring income as their primary source of income. Without the backing of major labels, many artists jump through the hoops for every paycheck.
“Charging people was not a big deal when there were a bunch of majors controlling the whole business, and there were 40,000 songs a year,” she added. “The volume was manageable for humans to do the accounting flow.”
Spotify, which has 155 million paid subscribers, typically pays between $ 0.003 and $ 0.005 per stream. Artists need around 326 streams to make $ 1.
In April, Apple Music said its streaming royalties paid double what Spotify paid, although in reality it’s difficult to say exactly.
According to Spotify, 13,400 rights holders earn more than $ 50,000 a year – the median salary in the United States – from Spotify’s streaming royalties. Artists who earned more than $ 100,000 per year totaled 7,800, while 1,820 earned more than $ 500,000 per year.
Converting an independent song played one morning in a cafe into cash in the pocket of the songwriter, singer, and producer is a long and complicated process that involves different licenses, pricing calculations, and publishing agreements. For independent musicians, all this accounting is theirs.
“Royalty accounting has become complex and cumbersome,” Lewis said. “It scares most independent managers, artists and labels, to the point that they manipulate it so that no one gets paid.”
Stem is trying to change that. Its automated payment and distribution software allows creators to get paid 3-9 months earlier and saves business leaders around 15 hours of administrative work per month.
On Stem’s platform, producers, songwriters, singers, and promotional partners can split winnings according to custom percentages and receive payouts on the 15th of each month.
Thanks to “Scale”, a feature launched last year, independent artists and labels can also apply for advances in the form of a revolving line of credit provided by the financial arm of the company.
“The economy is much more artist friendly,” Lewis told Insider. “They keep between 80% and 95% of the profits, whereas it is a bit the reverse if they work with a major record company.”
Last month, Stem launched “Payback Rules,” an automated accounting option that allows managers to pay expenses such as marketing or promotion fees before dividing monthly income.
“I know it sounds unglamorous, but so far it has been a serious problem for all artists and especially independents,” said a spokesperson for Stem.
Alex Goot, a singer-songwriter and multi-instrumentalist whose YouTube channel GootMusic has more than 800 million views in total, said Stem has helped him run his own business.
“I’m an artist who buys a ton of cover licenses, but all of that expense comes straight out of my pocket. With Recoup, I don’t lose that initial capital anymore,” he said.
Lewis told Insider that a major label’s value proposition is not what it used to be, leading many artists to operate independently.
“More and more artists are doing things on their own because they no longer need to cede percentage ownership to a major label,” Lewis said.