DISTURBED singer David Draiman, who has been a vocal supporter of Spotify for years, says that people are too quick to demonize streaming services for the paltry payments they pay out to music rightsholders.
The most popular subscription service, Spotify reportedly has more than 100 million users, 40 million of whom pay for monthly plans while the rest get advertising along with their music.
Spotify pays out around 55 percent of its revenue to labels, a simplified number due to the complexity of the contracts and additional payments made to publishers.
Commenting on the fact that many artists have complained about how little Spotify pays them, Draiman told "The Jasta Show" podcast (hear audio below): "It's a simple thing. It comes down to very, very basic principles. The question is, for your individual recording contracts, with whomever you're signed with, what is your digital royalty rate? If it's treated a license, that's a 50-50 split. If it's treated like however they want to go ahead and put it your fine print, and they're giving you 0.04 percent of what they're taking, well, then you can only blame yourself for not reading the contract, number one. Number two, the biggest problem is that when streaming services make deals with record labels, they make deals based on their entire catalog. So any label will license their entire catalog for, let's say, ten million dollars. And over the course of that year, it only generates five million worth of spins. What happens to the other five million? They keep it. And it doesn't go to the artists and it doesn't go back to the streaming service. The record label pockets that. So all of that additional revenue that is pulled out unnecessarily, because it's unjustified, right? — 'cause it should be spin per spin, right? — instead they say, 'Hey, our catalog is gonna be worth 'X' in the next year, give us this.' They are forced to agree to it, because it's the only way they can legally stream the stuff on their platforms. And that's why, if you just saw, and if you look at every single record label's bottom line, digital has become the bulk of their profit margin, or leading towards profit. Warner Bros. just issued a statement this past quarter where it's the smallest loss they've seen in years, and they're going more and more into the positive, because of what they are generating from digital and streaming services. So it's not that there isn't money to be made. The issue is, take a look at your recording contracts, make sure you know what you're getting, and whether we like it or not, streaming isn't the big demon here; YouTube is the big demon. When you're being paid a sixth of what a streaming rate would be, and they're claiming that they're giving you all the bang for your buck because of exposure when you're the reason why people are going ahead and advertising, that's the criminality."
He continued: "The industry is creeping — and, unfortunately, it's a creep — slowly, slowly towards finally making this whole digital concept a little bit more transparent; they're gonna have to, one way or the other, eventually. When they do, just for accounting purposes, for data collection purposes, because that's what ninety percent of these things end up being — big data plays — they're gonna end up having to be accountable.
"Look, the Irving Azoffs of the world, the big heavy hitters of the world, are pushing us forward in that direction. I applaud Nikki Sixx and the guys from SIXX:A.M. for taking a strong stance on the YouTube issue. There are a number of people out there who are doing it right. But people are very quick to demonize streaming services. Spotify and entities like it were created to directly combat piracy. Piracy is the issue, and that's what people are forgetting. It's almost like the media is putting so much hype on these paltry royalty rates, when, in truth, at least there is a royalty rate. You get nothing from piracy — absolutely nothing — and you have an entire generation of fans that have been raised to think that that's okay, when it still isn't."
Draiman added: "All of these streaming services are still — and Spotify in particular — seventy percent of their proceeds are going back towards license holders. License holders — that's the key. But not only that. You can't look at streaming as something that's supposed to replace physical sales. Physical sales are done; they're done. In two years, you won't see records in stores anymore, period. The CD will be as extinct as the VHS tape just became recently; it's just a matter of time. So the entire environment has shifted. The industry is finally adjusting towards it. It's a painful adjustment period, it's gonna take time, but it'll get there, and whether we like it or not, the revenue stream will never be the same. So we need to then re-approach things, simply deal with the status quo, try and make these royalty percentages better, more in our favor, be smart about the recording contracts you are signing, pay attention to the fine print, and make sure you know what you're doing. Start maximizing your touring, start maximizing your merch. You need to view streaming the same that we've always viewed publishing. Same thing — you are being paid per spin, not per sale. It's not the same thing. So streaming royalties are not a whole lot different than publishing royalties. Physical sales may simply no longer be something we can count on, and that is a very hard pill to swallow."
Spotify brought in a whopping $2.18 billion in revenues in 2015, while net losses stood at $194 million.
The company's payouts to the music industry (categorized as "royalty, distribution and other costs") reached $1.83 billion in 2015 — up 85 percent year-on-year.
DISTURBED's sixth studio album, "Immortalized ", was officially certified gold on September 23 by the RIAA (Recording Industry Association of America) for sales of more than 500,000 copies. The certification came seven months after RIAA started including on-demand audio and video streams and a track sale equivalent in gold and platinum album award.
"Immortalized" features DISTURBED's version of "The Sound Of Silence", which has been a huge hit for the band. Paul Simon shared his approval of it publicly after watching the band perform the song on "Conan" and also exchanging e-mails with Draiman.
DISTURBED's record label, Warner Bros., credited the song's popularity to the video for "Silence", which was released in December 2015. To date, the clip has been seen more than 110 million times, a record number of views on YouTube for the group.
"Immortalized" was released in August 2015. The effort became the band's fifth LP in a row to enter the chart at No. 1 — a feat shared only with METALLICA and DAVE MATTHEWS BAND.