Over on Tumblr, a post by Andrew MacLean about a company trying to create a Spotify for comics is making the rounds in industry circles. It’s a heartfelt plea for comic creators to resist such companies, and while MacLean’s passion is admirable, the most important element of it is the disclaimer that MacLean puts up top, informing everyone that he doesn’t know much about these kinds of business models and that he admittedly uses Spotify himself. As someone who primarily writes and works in the music industry and is well-aware of how shitty things are over there, I appreciate the argument MacLean makes, but there are some major flaws in his evidence and argument that anyone interested in this debate should be aware of
The first is that MacLean makes the claim that ASCAP is “THE union of musicians across the board.” Even if you’re not a musician or a music industry figure, you’re probably aware of ASCAP, since it is one of the oldest music-related unions still in operation and the first publishing rights organization. But the truth is that it is one of many unions operating on the publishing front, which is different from unions operating on the performance and recording fronts. A handy post on Songtrust (itself another musician advocacy group) breaks down the three major PROs (performance rights organizations, a somewhat misleading label for what are basically organizations that protect publishing/public play rights). These include ASCAP but also BMI (which is actually the largest and is the actual home of MacLean’s example of a Spotify success story Lady Gaga, not ASCAP) and SESAC (the smallest of the three but only because it’s the most exclusive).
That might seem like a minor sticking point, but understanding the divisions in music goes a long way towards explaining why royalties are structured the way they are there. In the Spotify vs. radio debate, the thing that is most frequently misunderstood is why radio pays out more, which primarily comes down to the number of listeners it impacts. If you’re listening to music on Spotify, you’re usually by yourself or maybe you’re at a party or even a restaurant or some other small crowd location. By contrast, radio play is hitting thousands of listeners at any given moment. Viewed strictly from ratios and percentages, Spotify technically pays artists better, but because there are far fewer listeners per play, it amounts to a much smaller check. Research recently conducted by David Touve at Washington & Lee University even found that on average, internet radio outlets like Spotify are paying artists a thousand times higher royalties than terrestrial radio. Detractors frequently argue that an artist on Spotify might get thousands of plays and receive a cent or less in royalties, but when you consider that if that artist had received the same amount of “listens” in airplay, that would be the equivalent of getting one play of her song at 3 am on a station in Norman, Oklahoma, and in that instance radio would have paid her somewhere around .0003 cents if they weren’t just paying ASCAP. Put simply, saying an artist should get paid the same for a thousand plays on Spotify as they do on radio is the equivalent of saying an artist should be paid the same for playing to 100 people versus a million and it distracts from the real figures who are cutting artists out of the royalty pie.
It is unfortunate that the issue of digital radio has been clouded by this misunderstanding of radio payouts, because it tends to conveniently forgive radio businesses like Clear Channel, who have used their massive lobbying power to avoid paying labels and artists royalties until last year, despite owning the bulk of the nation’s broadcast stations and despite the fact that organizations like Spotify have had to pay organizations like ASCAP and labels and artists since they’ve existed. Clear Channel arguably only took the step of including artists because radio is dwindling while businesses like Spotify continue to grow, and as they’ve grown, so have their payouts to artists. Last year alone, it paid out around a billion dollars, which is more than it had paid out in the years from 2009 to 2013 combined. This is why Spotify continues to be so important to artists and labels, because regardless of how much income it’s driving them now (and it’s hard to figure out what the income from Spotify truly is for an artist because of how complicated music industry royalties are in the era of the 360 deal), it’s clear that it is on its way towards becoming the same kind of revenue generator MTV once was but with more industry control. Yes, the music industry payout system is tremendously flawed, but Spotify is proving itself to be an area that is benefiting artists, even if it is doing so more slowly than some people would like.
MacLean’s argument also hinges on a peculiar detail that is either an example of his self-confessed lack of understanding of how these business models work, or may actually be a detail shared with him by the unnamed comics Spotify business, which is that income from this business would strictly arrive from advertising. If you use Spotify, ads are likely the area that most visibly drives profits. Every few songs, you’re forced to hear an overly compressed ad for KFC’s new Doubled Up Double Down Sandwich or whatever and then another ad pops up later and so on. But Spotify brings in a hefty amount of revenue from its subscriber base, which hit 10 million users last year on top of the 40 million free users it also features. These 10 million subscribers are paying to not hear those intrusive ads, but that doesn’t mean advertising isn’t still getting to them, whether it’s in the form of Spotify’s featured and curated content or other methods. These businesses would never survive if they were forced to generate income strictly through advertising, and it’s naive to assume that not only would that be the foundation of their viability, but even the advertising figures MacLean throws out are misguided. In 2009, Spotify had around 5.5 million users, the bulk of which were free users, but at that point it was not even available in the US. After its first year in the US, it reportedly grew to have 5 million paying users and 20 million total users.
For simplicity let’s just assume this comics Spotify manages to get all of the major publishers except Marvel on board (since Marvel already has its own Spotify/Netflix-like service that is subscription only). Let’s further assume that in its first year, this service is able to generate a million total users and 100,000 are paying a subscription of $10 a month for a total subscription income of $12,000,000. And then on the ad front, given that Spotify’s US launch ad rate was about $12 CPM, let’s say this company is going to charge $6 CPM for a basic display. That means you’re working with a ceiling of $1000 per ad, but because the comics industry lacks organizations like BMI or ASCAP, and for the most part the only splits are happening between the creators of a comic and the publisher, a lot more of that money can go to the hands of the creators than MacLean would have you believe, particularly since he assumes this organization wouldn’t have a way of breaking ad revenue down based on views.
It’s important to not overlook the fact that any article you encounter on Spotify, or a comparable business, is going to point out that these businesses’ biggest expenditure is licensing. An artist like MacLean’s Accordion-Guy is only getting pennies on the dollar for every thousand plays (if he gets anything) because his money is first getting divvied up not just by Spotify but by his label, by his publisher, by figures like managers and producers and agents who get a cut of his royalties and then what’s left is trickling down to him. The massive, century old divisions in the music industry also mean that the royalties are less artist friendly because no one can agree on how to deal with these companies or the nonstop evolution of digital culture. Everyone likes to joke about how MTV used to actually play music, but as Rob Tannenbaum and Craig Marks’ I Want My MTV will tell you, it was far more profitable for Music Television to stop dealing with the bickering record labels, artists and other industry figures and focus on cheap in-house programming. When that happened, the music industry’s last real boom period ended. Likewise, the downward spiral the music industry is in now is specifically because of its missteps with the digital evolution. As Rob Reid pointed out in the interview I linked above, the first MP3 players on the market were available before consumers even had an option to purchase music legally, which forced them to illegally download songs and taught them early on to just download. Comics has been somewhat progressive on the digital front, since comiXology appeared more or less at the same time as tablets and allowed consumers to purchase comics for their brand new iPads immediately and they’ve done significant work encouraging new readers through giveaways and bundles. If we can acknowledge streaming systems are becoming more in demand– and they are– then the key to profiting from them is making them work for the industry early on, rather than hoping they’ll go away.
So rather than encourage creators to try to stop a flood with their pinky fingers, why not encourage them to learn from the music industry and ensure they’re protected when this comics Spotify emerges? Writers and artists working on Big Two titles might not be able to get a 50/50 split with their publisher when titles they’ve worked on hit this app, but they can bargain to get themselves a cut of it to augment what they already make through existing comic distribution channels (and DC has supposedly already made steps to give creators more of a cut of digital profits). And creators at indie publishers with creator owned works can bargain to have advertising that shows up while their comic is read to go directly to them rather than have it shared because, again, there is no ASCAP or BMI of comics forcing a shared revenue model and technology allows these companies to target ads and find out who is pulling in the most readers. And unlike libraries, the original Spotify, any streaming comics system offers a new, phenomenally accurate method of finding out who your readers are, where they’re located and what else they’re into. No more buying shitty banner ads on comic sites no one goes to. No more begging Previews for coverage. Now you have an entire company churning out demographic analytics to you potentially for free. On the libraries note, it’s worth keeping in mind that according to the source I cited above, they already account for more than 10% of the comic industry’s sales, and perhaps another way to further drive income to comics is to make any Spotify-like business actually buy the titles they want to include at the same cost as a library or more. Point being, there are a number of ways that people are reading comics for free and rather than try to put the genie back in the bottle, we’d all be better off making that genie work for us.
Nick Hanover got his degree from Disneyland, but he’s the last of the secret agents and he’s your man. Which is to say you can find his particular style of espionage here at Loser City as well as Ovrld, where he contributes music reviews and writes a column on undiscovered Austin bands. You can also flip through his archives at Comics Bulletin, which he is formerly the Co-Managing Editor of, and Spectrum Culture, where he contributed literally hundreds of pieces for a few years. Or if you feel particularly adventurous, you can always witness his odd .gif battles with Dylan Garsee on twitter: @Nick_Hanover