Music-streaming service Last.fm is now paying unsigned artists royalties for every song played on its service. Since the company announced the program last January, 170,000 70,000 artists and small music labels have signed up for it and uploaded 450,000 tracks.
What Last.fm is doing here is creating an alternative to the official royalty-collecting organization for musicians (i.e., SoundExchange). Last year, the royalty rates for music streamed over the Internet were raised, making it more difficult for ad-supported music startups to stay in business. Last.fm got bought by CBS, so it’s not in danger of going under. And for any song owned by a label or artist who participates in SoundExchange, Last.fm continues to pay the going Internet radio royalty rate. But it is beginning to bypass Sound Exchange by giving new, unsigned artists an alternative.
By cutting out the middlemen (labels, SoundExchange), Last.fm claims that artists that sign up for the program will receive more than twice the royalty rate they would see if the same song played on commercial radio. That’s because the money goes directly to the artist. (The total royalty, though, is less than what it pays SoundExchange). The royalty that Last.fm is paying unsigned artists is equivalent to 10 percent of the advertising revenues associated with their songs (update: in certain cases, see below). Musicians get a quarterly check, and can withdraw the money once it reaches $10.
We’re not talking a lot of money here, a few fractions of a penny per song. But as the online music industry grows, and along with it online advertising targeted at music listeners, these numbers in aggregate could start to become meaningful.
More importantly, it creates a direct economic link between Last.fm and up and coming artists that have not yet been discovered or signed by a label. The program is also appealing to tiny labels that don’t participate in SoundExchange because they are too small or it is too much of a hassle. (Anyone who already collects royalties through SoundExchange is not eligible for the program). Of the 170,000 signups so far, 30 percent are labels. And daily artist account creation in general is up 60 percent since the announcement in January.
Since it is Last.fm’s program, it controls the royalty rates it pays out, which it can adjust according to how much advertising revenues these songs generate. Now, does anyone actually want to listen to these songs and ill musicians shift over in massive numbers from the labels to this sort of direct arrangement? That is what will determine how disruptive this really is.
Update: Last.fm is offering tiered royalty rates. From the FAQs:
* If your track is played on our free radio service you will accrue a 10% of the Share of Last.fm’s Net Revenue (see the definition of “Share” and “Net Revenue” in the terms and conditions) from the free radio service.
* If your track is played on our personalised premium radio service, you will accrue the greater of either 10% of the Share of Last.fm’s Net Revenue from the personalised radio service, or US $0.0005 for each complete transmission on the personalised radio service.
* If your track is played on our free on-demand service, you will accrue 30% of the Share of Last.fm’s Net Revenue from the on-demand radio service.
* If your track is played on our premium on-demand service, you will accrue the greater of either 30% of the Share of Last.fm’s Net Revenue from the premium on-demand service, or US $0.005 for each complete transmission on the prepaid or subscription on-demand service.
Another nail in the coffin.
How cool is that….
This is nothing new. Fanbox.com, formally SMS.ac, the socially network integrated with a digital market place began doing this nearly 3 years. It hasn’t necessarily gained the traction that a last.fm has. Fanbox is currently ranked 422 on Alexa. Last.fm is in the 200s. Either way, paying royalties to unsigned artists is fantastic. This concept will kill the record label industry. Why have all of your money go to the record label if the the internet allows you to market your goods for a significantly low price? Look here for the answer… http://www.readtheanswer.com/index.php?RTA=web2
What a great thing, thanks Last.fm! We’ll definitely be making our artists aware of this revenue stream through Last.fm on our upcoming launch of Apricado.
Of course, we’re trying to tackle the other side of it for indie artists, which is making it easy for indie artists to sell stuff on their own without a label. We’re launching a few artist stores as private beta sometime next week!
This sounds almost identical to the model mp3.com was using back around 2001.
Love it. Im a huge fan of Last and love anything that sticks it to the existing, ass-backwards music industry.
http://www.last.fm/user/quikness/
dm
“This sounds almost identical to the model mp3.com was using back around 2001.”
MP3.com would let you have a CD made of the songs and have it sent to you. They would take a large cut of that.
Definitly a required move for last. Music industry is an interesting sector as you can always get unexpected results.
For record label companies, as the internet continues to get a bigger part in our life, they will suffer more.
I think, this kind of moves are required to help the music industry grow even more.
First off, I completely agree that it’s great the way different music business models are popping up on the internet with the advancing technology, but I do take issue with the way everyone assumes labels are the bad guys right off the bat.
I think that people don’t quite understand how labels work. Labels are nothing but venture capitalists, finding acts that need support, providing the money up-front for those artists to record their music, providing the ability to distribute the recorded music widely and then finally recouping the money from the album sales. No artist goes into a record contract blindly, allowing the label to “screw” them. Artists have entertainment lawyers that they retain on their own (independent of the label) before they sign any deals, so if an artist claims he’s getting screwed by a label, he should really be pissed at his lawyer for allowing that deal to go on and letting him enter it in the first place.
I agree, also, that it’s amazing that artists don’t *need* a label anymore. They don’t *need* one. But there are services that a label provides that indie artists really can’t do on their own–hitting critical mass at mainstream radio (still essential in quite a few genres) and distribution are jsut two examples.
I wish people would think it through just a little more before just wildly yelling out that labels are the bad guys. Labels want exactly what the rest of us music-junkies want: more great music out there.
great way. last.fm - music label 2.0
Hi there
What about Last fm starting to pay some of these artists for use of their music over the last 7 years - on which they have built a $230m business?
Great News! The records labels are getting cut out from all sides. If you are an artist and you want a royalty from the $3.4 billion commercial music licensing market (performance and sync licensing as opposed to personal use like last.fm), head on over to AudioMicro at http://www.audiomicro.com and start uploading your wholly owned music and sound effects.
last.FM is in the digital music game for the right reasons. Any additional revenue to keep these artists on the road is only a good thing.
I understand the significance of this announcement but fail to see how a quarterly check of $25 will solve the woes of the up-and-coming artists. Exposure on Last.fm seems far more valuable and while the 10% of ad revenues is a great start bands still need a better way to monetize their popularity.
Last.fm is owned by CBS, and they’re doing no big favor to indie artists or labels. DashGo knows, we rep a few of them. The reality is their rates are WAY below industry standard for on demand streams - Yahoo, Rhapsody and others pay a great deal more to offer the same service. Full disclosure, we’ve opted in the bands and labels that we distribute that wanted to be included, but it only works so long as it is complimentary and not competitive with other revenue streams of recorded music. Even bands that write just one great song deserve compensation for their copyright. Maybe not by a major label force bundling it into an album, but certainly at more than 30% of whatever pitifully low CPM Last.fm and CBS can dredge up - something they won’t even guarantee a floor on. And, they historically have not reported ACTUAL performance data to SoundExchange, meaning that indie bands are tremendously under-represented in royalty disbursements, all so they can fight internet royalty rates that seek to compensate artists somewhat for the huge role their music has in other companies businesses.
Not every band can design great T-shirts, or even tour. Not all indie artists are great, and sharing some revenue is a great step, but it would be nice if all these behemoths stopped crowing about how “fair” they were being to “indie” artists by paying them the absolute minimum they possibly can and building an entire business off of their content while offering minimal promotional and sales tools.
If you think they’re paid too little then buy some advertising on Last.fm, get a subscription there, buy some CDs, support the arts. The way I see it, the more artists we have in the world, the less crime we have, wars, etc.
There’s another way to invest in new bands, via http://www.slicethepie.com. I’ve signed up, but haven’t had any spare cash to invest yet - but it definitely looks good. Invest in bands, and get a return if they make it…
We are experimenting with alternative ways of distributing music over at http://www.ringtonefeeder.com/
Its great to see Last.fm catch up with the trend - at We7 we have been paying unsigned artists since we opened our Beta 12 months ago. What is sadly disappointing is the level of royalties being paid by Last.fm. At the end of the day the music is why people come to Last.FM or We7, and it should be important that the musicians share is significant. At We7 we are paying 50% of Net Ad revenue to unsigned artists, and levels which are scaled much higher.
Steve Purdham
CEO We7
http://www.we7.com
This is definitely a step in the right direction. While the royalty payments are small and there is that whole $10 thing (meaning, wow, it will take forever for me, a DIY artists, to make ANY money). I think it’s important in this digital age to figure out a way to make musicians money from their art. If you look at both sides of the industry spectrum — from the labels on one end to Creative Commons on the other — most musicians aren’t making too much, and there needs to a new model attached to digi music.
Last.Fm’s model, however, isn’t quite right. While it does pay more than sound exchange, that doesn’t make it ideal. I mean, SoundExhange is essentially the de facto digital arm of the RIAA. But, at least they’re engaging in some mild profit sharing with the musicians.
I think the next year or so will experience new ways for musicians to make a buck online. this is just the first bang.
Hey the new Ava Leigh single mad about the boy is out and available to buy on I tunes or check out avaleigh.co.uk
Wow! things are def looking UP for the indie artist!! we have distribution now, and we can even get instrumental tracks and hip hop , rap, R&B and pop beats for that are approved by A&R execs that were involved in the mega hits! Sing or rap, everything you need is available to the indie artist, not like before where you had to have the in and spend 100, 000 dollars!!! Times they are getting great!! I got some slamming beats, all fully produced and mastered at:
http://www.beatslocker.com
Already on the radio in LA!!! In the past thee guys only worked for the major labels… this is great.. now if we can figure out the promo and marketing.. its done.. no need for a label …LOVE IT!!
now this topic is why i have created htp://www.mycoolband.com before I bought about 5 CDs a month now I maybe buy 2 every 6 month, there just aint anything out there and it dossent matter what kind of music you look for, its sad.
Hello - I just wanted to share this info, as a wannabe Musician you always try to promote your Music everywhere, here is a new site http://www.mycoolband.com I know they are still working on the site, so new stuff will come up, but its already a great site, well just a tip.
I doubt it pays more than commercial radio.
http://www.getbeatsonline.com