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Direct-to-Consumer Music: A Threat to Traditional Music Sales?

This control that the streaming services and record companies yield unceremoniously revealed itself recently as Kanye West, one of the biggest names in music, found his recent release, Vultures 1, subjected to the whims of both the distributor (FUGA) and the streaming services.  Within hours of its release onto the streaming services, FUGA allegedly directed the streaming services to delete Vultures 1.

Various reports state that FUGA gave West no advance notice or explanation. Adding insult to injury, allegations persist of data manipulation by the streaming outlets to keep Vultures 1 from attaining the #1 spot. 

The situation with West and FUGA (his now former distributor) provided a highly visible example of what can happen to an artist who has handed over control of their art. For artists everywhere, the situation with Vulture 1 further agitates the need to escape the golden handcuffs that promise fame and fortune. The golden handcuffs that often leave artists broke and tethered to record companies, like under-watered fruit dying on the vine.

The music streaming services Spotify, Apple Music, and Tidal initially gave artists hope as an alternative way to become successful without a record contract. While this strategy may have worked for a very small group of artists, a la Chance the Rapper, Macklemore, and Frank Ocean, most indie streamers find themselves baffled by the economics behind these music streaming services.

How Much Is Spotify Paying for Music Steams?

In 2023, Spotify reported a total revenue of $3.57 billion1,2.

Regarding the portion of revenue distributed to artists, Spotify typically maintains a payment structure where approximately 70% goes towards content licensing costs, including royalties for artists and copyright holders3,4.

Therefore, assuming similar proportions held in 2023, roughly USD 2.50 billion went towards compensating artists and related parties. Remember that specific amounts received by individual artists vary greatly depending on numerous factors such as contract agreements, popularity, genre, etc., making precise calculations difficult without detailed breakdowns.

2023 Spotify Artist Stream Payouts - Infographic
A breakdown of how much Spotify pays music artists for streaming.

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While Spotify does not publicly disclose the exact number of unique artists whose music appears on their platform, according to the statistics mentioned in the search results, approximately 200,000 artists contribute significantly to the majority of the royalty pool, accounting for 95% of the total royalty distribution despite representing only 15% of all tracks available on Spotify5

This stat suggests that although millions of creators have uploaded music to Spotify, a smaller subset generates substantially higher earnings due to engagement metrics and their status within the music industry. The number fluctuates constantly due to the dynamic nature of adding new releases and removing older material. Still, the cited statistic provides insight into the scale of active contributors to the Spotify ecosystem.

Considering just the “significant” music contributors, Spotify’s average gross earnings per artist were a meager $12,500! That’s below the US minimum wage.

It would be safe to assume that the majority of the streams, even from those “significant” contributors, go to the top names in music. So, as these numbers get dissected, it becomes more apparent that the economics don’t present an opportunity for artists to survive on streaming alone.

So why are so many artists frustrated at what they consider fleecing by the streaming services?

Even at $12,5K annual earnings, those artists would have to get their music over 4 million streams based upon Spotify’s proclaimed $0.003 per stream payout.  Upon closer inspection, most artists don’t even earn that per stream because Spotify has different and often much lower payouts based on user locations, ad consumption, user account type (free vs paid),  time spent in the app, and likely many other factors.

Time To Flip the Script And Change The Channel

In my marketing career, both in the corporate environment and when working with clients, everything has been about achieving a measurable and defined outcome.  In marketing, we’ll use terms like CPA (cost-per-acquisition), ROAS (return on ad spend), ROI (return on investment), churn rate, conversion rate,  and lifetime value of a customer – to name a few.

When defining a goal and reviewing the budget, I have to evaluate all the different demand and marketing channels available to assess how best to allocate time and money resources to achieve the goal.

In today’s world, numerous channels are available – social media, PR, influencer marketing, video, email marketing, web, events, online advertising, SMS, affiliate marketing, etc. 

Each channel tends to have its characteristics. For instance, still somewhat surprising even for me after being in this business for twenty years, email marketing tends to have the highest conversion rate of  2.8%.  That means nearly three of every 100 email recipients would do something you want them to do, like buy a product.

When your email list segment is comprised primarily of existing fans and customers, I’ve seen that conversion rate jump as high as 22%!

Could you imagine owning a faucet that you could open once or twice a month and that would just spit out money? That’s what having a direct line to your fans, and carefully crafted offers can provide.

Is Spotify or any streaming services providing you with that connection to your fans?  

Do you know who is listening to your music?

The Data is The Thing with Direct-to-Consumer Music Sales

Maintaining direct-to-consumer music websites and utilizing email marketing platforms gives artists more valuable data than relying exclusively on Spotify. By owning your marketing channels, you gain valuable insight via marketing analytics and data that help inform your business decisions. Some notable differences in customer and buyer behaviors that artists can gather via self-owned channels include:

  1. Demographic Information: Direct contact enables more profound knowledge of audiences beyond primary geographical location and listening habits found on Spotify alone. Email subscribers provide details when signing up, allowing artists to segment lists accordingly.
  2. Purchasing Behavior: Insights gained from website purchases reveal product interests, spending levels, frequency of visits, cart abandonment rate, conversion funnels, and lifetime values — critical aspects missing from pure audio streaming figures.
  3. Marketing Effectiveness: Tracking open rates, clickthrough rates, bounce rates, conversions, and referral traffic empowers artists to measure campaign effectiveness accurately, enabling optimization and refinement of messaging and tactics.
  4. Fan Engagement Metrics: Interactions outside of passive listening allow measurement of comments, shares, reviews, feedback forms, event attendance, and community participation, fostering stronger connections with followers.
  5. Personal Preferences: Self-collected surveys, polls, contests, quizzes, and preference settings enable tailored communication and customized products catering to individuals rather than broad segments.


While Spotify provides essential listener data, comprehensive analysis requires multiple touchpoints along the purchase cycle. Combining proprietary datasets with third-party tools enhances decision-making capabilities regarding tour planning, album launches, pricing models, partnership opportunities, and long-term sustainability plans. Ultimately, diversifying data points increases autonomy and profit margins for artists navigating modern music landscapes.

Inside The Numbers of Direct-To-Consumer Music Sales

The debate and banter about music artists going direct-to-consumer versus streaming are not worth the air time. We spoke earlier about “channels” in marketing. It is no different from a craftsman and his toolbox. Can you pound a nail with a wrench? Yeah, but it will likely take you longer.

You use the resources available, and virtually no barrier separates you from establishing one-to-one connections with your fans. Too many artists look at Spotify and the other streaming services like they’re a wrench when they are screwdrivers.

Suppose you want to crank up your earnings as an artist. A mindset that is too prevalent among many artists is that they can either wait for a record company to put them thousands of dollars in debt with advance money and/or hope that streaming services will suddenly become charitable. Instead, they should take their music directly to their fans, leveraging the tools available now for negligible financial costs.

I’m sure every artist would want a platinum album, but reaching a million without first seeing ten thousand is impossible.

Well-run businesses always have goals. If you are a music artist looking to sell your music in whatever form, you must first realize that YOU are a business, and your music is the product.  Like any well-run business, you should set achievable goals.

Let’s start by getting ten thousand fans. To be clear, a fan is not someone who only likes your music. Fans will invest their time and money in you and your product. This investment can take the form of buying a ticket to your show, buying your merchandise, or plopping down $10 or more on your CD or vinyl album.

Before you say it, I know no one is buying CDs anymore, and the data reflects that.  However, vinyl has a very different story these days. More on that later.

YOY Direct-to-Consumer Music Sales Growth for 2023.

Are you ready to hustle and work to get your first 10,000 fans and earn in the low six figures?

The math is simple with direct-to-consumer music sales.  

Expense/Revenue SourceCost/RevenueNotes
CD Production (10,000 CDs with inserts)$2,000 to $3,600 
E-commerce Store & Digital Marketing$650 to $6,000*Assuming ongoing costs for store maintenance and marketing
Total Revenue from Sales  
CD Sales Revenue+$100,000Assuming full inventory sold
Merchandise Sales Profit+$7,50025% of fans buying, with $3 profit per t-shirt
Live Show Revenue+$5,000Rough estimate for a couple of shows
Streaming Revenue+$5,000 
YouTube Channel Monetization+$5,500 
Total Potential Earnings$107,900 to $114,850Before deducting other ancillary expenses not shown

In this scenario, an artist would earn $107,900 to 114,850 with a modest 10,000-member fanbase.

If artists produce two albums in a calendar year, their earnings could easily exceed $250,000.


DID YOU KNOW
YouTube pays creators approximately 55% of ad revenue generated by their channels;
the average spent per view is $0.018 versus $0.003 per stream paid by Spotify!


Building Your Online DTC – Direct-To-Fans Infrastructure

“How do I start direct-to-consumer music sales?”

In all likelihood, you have already started building your direct-to-consumer music sales infrastructure.  A solid social media presence on IG, Twitter, Facebook, etc., is just one facet of your business’s infrastructure.  

The most critical component in this endeavor will be your online store, which will serve as your retail outlet for fans to buy your products. There are several options available for the DIY’er.  There are four platforms that I would recommend music artists consider if they are looking to jump-start their music business – Shopify, Square, Wix, and WooCommerce. 

Each platform offers unique advantages and challenges that cater to different needs and levels of technical expertise. Here’s a comparative overview.

Shopify

  • Pros: Shopify is incredibly user-friendly, offering a streamlined interface that simplifies the setup and management of your online store. It supports many payment gateways, including Shopify Payments, credit cards, PayPal, Amazon Payments, Apple Pay, and Google Pay. The platform boasts a vast app marketplace, enabling extensive customization and functionality enhancements for your store.
  • Cons: The platform can be more expensive due to its monthly subscription and transaction fees if Shopify Payments are unused. It offers less flexibility in layout customization compared to Wix.

Wix

  • Pros: Wix is an excellent choice for beginners due to its easy use and drag-and-drop website builder. It allows for significant customization without the need for coding skills. Wix stores can accept payments through Wix Payments, credit cards, PayPal, and manual payments, providing a range of options for your customers.
  • Cons: While Wix is great for smaller stores and offers many out-of-the-box e-commerce features, it might not be as powerful as Shopify or WooCommerce for more extensive operations. There are limitations on the number of product photos and the depth of site navigation.

WooCommerce

  • Pros: WooCommerce is a free, open-source e-commerce plugin for WordPress, offering complete control over the customization of your store through access to thousands of plugins and themes. It supports physical products and digital downloads, providing easy inventory management and a variety of payment gateways.
  • Cons: It requires a more hands-on approach to store management, including handling updates, backups, and security. You’ll need a domain and hosting, which come at an additional cost. The platform best suits those with web development experience or those willing to hire a developer.

Square

  • Pros: Known for its ease of use, Square is an excellent option for an integrated payment solution with a straightforward setup. It offers a free online store that seamlessly integrates with its payment processing system.
  • Cons: It may offer less flexibility in customization and e-commerce features compared to dedicated platforms like Shopify or WooCommerce.

The choice between Shopify, Wix, WooCommerce, and Square will depend on your specific needs, technical ability, and budget. Shopify and WooCommerce provide more robust e-commerce features suitable for scaling. At the same time, Wix offers simplicity and ease of use, ideal for beginners. Square is a good option for those prioritizing integrated payment solutions with minimal setup. Always consider the long-term goals of your music business and choose a platform that can grow with you.

Basic Comparison of Platforms for Online Music Sales

Comparison of Features Across E-commerce Platforms for Music Artists
Feature/Platform Shopify Square Wix WooCommerce
Digital Downloads Free app available; Third-party apps vary in cost Requires third-party integrations; costs vary Free with Business plans; limitations may apply Free plugin; Additional functionality may cost extra
Automatic Shipments Requires third-party integrations; prices vary Included: Advanced features may require extra fees Included in eCommerce plans Requires plugins; costs vary
Taxes Automated tax calculations included Automated based on settings; Advanced needs may incur additional costs Plugins may be required for advanced features; prices vary Basic functionality included; Advanced plugins may cost extra
POS Capabilities POS app available; Hardware costs extra Free POS app; Hardware costs extra Not directly available; Requires third-party solutions Third-party plugins are required; prices and capabilities vary
Upselling/Cross-Selling Built-in features: Enhanced via apps at additional cost Basic functionality included; Advanced options may cost more Basic features included; More advanced features may require premium plans Plugins may be required for advanced features; costs vary
Platform Setup Plans start at $29/month Free plan available; Transaction fees apply Free to start; Premium plans for eCommerce start at $23/month Free; Requires WordPress hosting costs
Site Design/Templates Free and premium themes are available Free and premium options Free and premium templates are available Free and premium themes are available
Integrated Marketing Included: Advanced features may require additional fees Basic tools included; Advanced features may cost extra Basic marketing tools included; Advanced features may cost more Basic functionality included; Advanced tools require plugins or external services
Ongoing Operation Cost Monthly plan fees + transaction fees + app costs Transaction fees + potential monthly fees for added features Monthly plan fees + apps may incur additional costs Hosting fees + plugin costs + transaction fees
  • Ease of Setup: Shopify, Square, and Wix offer user-friendly platforms that are relatively easy for beginners to set up, while WooCommerce, being a WordPress plugin, might require a bit more technical know-how.
  • Digital Downloads & Physical Product Sales: All platforms support selling digital and physical products. However, the ease of integration and the need for additional plugins/apps can vary.
  • POS Capabilities: Shopify and Square provide robust POS systems suitable for physical retail environments. Wix’s POS capabilities are limited and often require third-party solutions, while WooCommerce’s POS functionality relies on additional plugins.
  • Customizability: Shopify, Wix, and WooCommerce offer high levels of customization for your online store, while Square is somewhat more limited but still offers a good range of options.
  • Integrated Marketing: Shopify offers comprehensive, integrated marketing tools. Square, Wix, and WooCommerce provide essential tools with more advanced features that are available through additional services or plugins.
  • Automatic Shipments: All platforms support automatic shipment notifications and integration with various shipping services, though the specifics and ease of use can vary.
  • Taxes Management: Shopify, Square, and WooCommerce offer more comprehensive solutions for automatic tax calculations, while Wix provides basic functionality with the potential for expansion through apps.
  • Ongoing Operation Cost: Shopify and Wix have higher monthly fees depending on the plan, while Square and WooCommerce are more affordable in terms of base costs but may incur additional expenses through transaction fees, plugins, or premium themes.
  • Portability: WooCommerce scores high due to its open-source nature, allowing entire site export and migration. Shopify has medium portability, allowing data export but not a full site backup. Square and Wix are less portable, with significant limitations on moving to other platforms.

Key E-commerce and Website Features for Direct-To-Consumer Music Sales

Comparison of Features Across E-commerce Platforms for Music Artists
Feature/Platform Shopify Square Wix WooCommerce
Digital Downloads Free app available; Third-party apps vary in cost Requires third-party integrations; costs vary Free with Business plans; limitations may apply Free plugin; Additional functionality may cost extra
Automatic Shipments Requires third-party integrations; prices vary Included: Advanced features may require extra fees Included in eCommerce plans Requires plugins; costs vary
Taxes Automated tax calculations included Automated based on settings; Advanced needs may incur additional costs Plugins may be required for advanced features; prices vary Basic functionality included; Advanced plugins may cost extra
POS Capabilities POS app available; Hardware costs extra Free POS app; Hardware costs extra Not directly available; Requires third-party solutions Third-party plugins are required; prices and capabilities vary
Upselling/Cross-Selling Built-in features: Enhanced via apps at additional cost Basic functionality included; Advanced options may cost more Basic features included; More advanced features may require premium plans Plugins may be required for advanced features; costs vary
Platform Setup Plans start at $29/month Free plan available; Transaction fees apply Free to start; Premium plans for eCommerce start at $23/month Free; Requires WordPress hosting costs
Site Design/Templates Free and premium themes are available Free and premium options Free and premium templates are available Free and premium themes are available
Integrated Marketing Included: Advanced features may require additional fees Basic tools included; Advanced features may cost extra Basic marketing tools included; Advanced features may cost more Basic functionality included; Advanced tools require plugins or external services
Ongoing Operation Cost Monthly plan fees + transaction fees + app costs Transaction fees + potential monthly fees for added features Monthly plan fees + apps may incur additional costs Hosting fees + plugin costs + transaction fees

Note: The costs can vary based on the artist’s specific needs, such as the level of customization, the scale of operations, and any additional plugins or apps required to meet their particular business needs. Always check the latest pricing on the platform’s official website or consult with the platform’s sales or support team for the most accurate and customized pricing information.

Store Ownership – Who Owns Your Music Store?

Ownership of your brand and music is a critical consideration for all artists. Many examples exist of artists’ careers stuck in limbo because the record company has ceased investing in them while the artist is still under contract.

Other scenarios where artists have lost control include removing artists’ music from streaming platforms or distributors who fail to push an artist’s music out.  So, what are the considerations regarding your ‘artist-owned’ website and e-commerce store?  Who owns the design, content, and data?

I always encourage all businesses to own and retain as much control over their brand and i.p. as possible.  The reality is that with some of these online store platforms, there is some trade-off between ease of use and control of your store.  

I don’t say they have done this to music artists. Still, some of your platform options could determine/decide that you have violated their terms of use. From my research, I’ve found no evidence that these platforms have removed artists because of political, social, or even offline criminal issues related to an artist.

Reasons your music store might be taken down include but are not limited to.

  1. Copyright Infringement: Hosting copyrighted material without permission or proper licensing can lead to takedown notices under copyright laws.
  2. Violation of Terms of Service: Each platform has its own set of rules and policies. Violations, for example posting prohibited content, can result in the website being taken down.
  3. Illegal Activity: Engaging in or promoting illegal activities, including selling illicit goods, can result in immediate termination of services.
  4. Hate Speech and Harassment: Content that promotes hate speech, violence, or harassment against individuals or groups based on race, ethnicity, religion, gender, or other identifiers is grounds for removal.
  5. Non-payment of Fees: Failure to pay the required subscription or service fees can lead to suspension or termination of the service.
  6. Security Concerns: If a website poses a security risk to the platform or its users, it may be taken offline to protect the community.

Artist Website Portability




































Comparison of Platform Features: Portability, Risks, and Local Copy Options
PlatformPortabilityRisksLocal Copy
ShopifyMediumTerms of Service violations related to contentData export available, not a runnable site
SquareMediumTerms of Service violations related to contentData export available, not a full site backup
WixLowTerms of Service violations related to contentNo
WooCommerceHighDependent on hosting provider’s termsYes, full site backup and migration possible

Of the platforms I’ve recommended, WooCommerce is the only one where the take-down risk for the above reasons doesn’t exist.

WooCommerce, an open-source e-commerce plugin for WordPress, has no authority or mechanism to take a website down. Unlike Wix, Spotify, or Square, which offer hosted solutions and can suspend or terminate accounts due to policy violations, WooCommerce operates under the WordPress installation controlled by the site owner.

However, the hosting service where the WordPress site and WooCommerce plugin are installed can take a site down for various reasons, including, but not limited to, non-compliance with the terms of service, illegal activities, security issues, and non-payment of hosting fees. 

If you’ve maintained your WooCommerce store’s backups, nothing prevents you from reopening your store within another host.  The entire process can be done in as little as 15 minutes.  You absolutely could not do this with the other platforms.

Web publishers and owners need to understand the terms of service of their hosting provider and ensure their site complies with these terms to avoid potential takedowns and business disruptions.

The ideal scenario for any web property is that the business owner can take their website in its entirety, move it to another hosting platform, access the associated data, or store copies of the site anywhere they choose.

Conclusion: The Future of Direct-to-Consumer In the Music Industry

As a musician, music fanatic, and 20-year digital marketing professional, I am here to tell you that the days of record labels fleecing artists are ending.  Technology has democratized artist access to the building and communicating directly with their fan bases.  I don’t know what has taken so long to get to this place.

I am unsure if he was the first, but my earliest recollection of a significant artist who gave energy to the direct-to-consumer music sales concept was Prince. He was known for his entrepreneurial spirit and desired to control his music distribution.

In the late 1990s and early 2000s, Prince released his music through his label, NPG Music Club, and later through LOtUSFLOW3R, which sold his music and show tickets6. He also experimented with selling his music directly to fans online, which influenced other artists like Radiohead7. Prince’s direct-to-consumer approach was seen as a way to maintain control over his music and to reward artists for their work and talent8.

No specific statistics are available on the growth or penetration of artists that have gone with direct-to-consumer music sales. However, according to Luminate’s 2023 Midyear Music Report, DTC physical product sales in the US are up 20% over the same period last year, higher than the overall US physical marketplace, up 13.3%9. This data suggests that the DTC model is gaining traction among music artists and fans. The global music streaming market is expected to reach $57.78 billion by 2028, with a compound annual growth rate (CAGR) of 14.2%10. The increasing popularity of streaming services spurs this growth and helps artists reach broader audiences and engage directly with fans.

Each artist should carefully assess the target audience’s demands regarding their product format—CD, vinyl, or digital download.

Contrary to my earlier example, CD sales have fallen off a cliff, dropping 95% since 2000. They have been at their lowest since 198611.

Vinyl album sales are an entirely different story. For the third consecutive year, vinyl album sales outsold CDs, with 49.61 million vinyl albums sold in 202312.  In 2023, the average price of a vinyl record in the US was approximately $29.6513.

Today, music artists have tools and resources that make going independent more than a fantasy.  While most artists dream about going “big,” it’s time you reassess your definition of success.  Today, success can be maintaining control of your music and future while being able to live comfortably.

As a music artist controlling their destiny, you must acknowledge that you are a “business-man”.  As such, you must find ways to deliver unique value to your customers… your fans.  

So maybe that means you autograph every physical copy of your albums that you ship. If you reach a point where that seems too much, that would be a great problem.


References

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