1 million streams = $90? NeYo reveals the truth about how songwriters get paid

By Fusion Staff | June 9, 2015 | 3:54pm

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NeYo’s most famous work doesn’t have his name on it. He’s won three Grammy awards for his R&B albums, and debuted two albums in the Billboard Top 200. His single “Closer” is probably the most popular song in his personal discography, but it’s nothing compared to the songs he’s written.

As a songwriter, NeYo has written for Beyoncé, Mary J. Blige, Alexandra Burke, and Jennifer Hudson. He wrote Rihanna’s 2007 number one single “Take a Bow” and Beyoncé’s 2006 “Irreplaceable.” He’s prolific, popular, and pretty successful, but he’s still worried about the future of the songwriting industry.

The government controls how much money songwriters get paid

There’s no law that says that an album is worth $17.00 or that a digital album download should be priced at $9.99. Capitalism — or in this case, a bunch of record executives — figured out how much consumers were willing to pay for a product, how much it cost to produce said product, and then picked a value that made the most money for everyone involved. That’s how music has been paid for ever since we learned how to create and distribute physical copies of songs. Or, at least, that’s how half of music has been paid for.

Every song has two very separate copyrights. The first is for the sound recording, which is the actual song played. This license is usually between the artist, the record label that represents them, and the company trying to play the song. The second is for the musical composition, which covers the people who wrote the song, recorded the song, and published the song.

When a song is played on the radio, the payment is split between the songwriter, the publisher and ASCAP or BMI; when a song is streamed, the payment is split between the performance copyright, ASCAP/BMI, the publisher and the songwriter. (The sound recording copyright is separate copyright; when a song gets played on the radio, the performer does not get paid.)

Here’s an idea of how the money gets split:

Songwriters are primarily concerned with the musical composition license because it’s the one that determines how much they are paid. In 2015, how much artists and songwriters should be paid for creating music is the topic of hearty debate because the extreme rise in streaming coupled with the severe drop off of music purchasing means that listeners are shifting to a format that pays artists significantly less than selling hard copies did.

In the midst of this debate, though, performers have an easier time revolting than songwriters because they have more control over their music. Taylor Swift may be a songwriter, but she could pull her music from Spotify because she had a direct deal with Spotify that allowed her to do so. Songwriters don’t all have the clout of Swift, and they also don’t have the same legal abilities.

There is money in the music industry. It’s just not winding up in the hands of songwriters.

Instead, songwriters are subject to a mechanical license (a concept that dates back to the use of player pianos) that charges companies a flat rate to pay for the musical composition copyright. The sections of the copyright law that govern these (Sections 114 and 115) set conditions on how the mechanical copyright is set and how it can be determined.

What that means is that a governmental agency has to change the rate, which is why instead of songwriters battling labels or publishers, they were in Washington lobbying members of Congress this month about The Songwriter’s Equity Act — reintroduced to Congress in February by Senator Orrin Hatch (R-Utah) and Congressman Doug Collins (R-Ga.). It attempts to change the Copyright Law so that songwriters, and their publishing royalty counterparts ASCAP and BMI, will have more weight against streaming companies to ask for more money.

“What the songwriter’s equity act will allow us to do is to point out to judges the difference between and the inequality of the things,” Paul Williams, a songwriter and the president of ASCAP, told me. “The amazing thing is, while the two sides of the aisle can’t agree on what time the sun comes up, we tell them how little songwriters make and their jaws just drop.”

That’s where this conflict really rests. Not on the streaming companies or governmental action, but on the relationship between how much more performers are paid for their portion of the song.

Songwriters are paid very little compared to performers

“Most songwriters aren’t recording artists or performers — they don’t tour, they don’t get endorsement deals,” NeYo told me. “And people aren’t really buying CDs anymore. That makes the revenue that songwriters receive from streaming royalties, when people listen to our music online, more and more important to our livelihoods. Today we’re in a situation where someone can record a song that I write and make 12 to 14 times more in royalties than I do from online streaming services.”

Paul Williams agreed and said performers are being paid 14 times what songwriters make in the United States.

Che “Rhyemfest” Smith, who co-wrote Kanye West’s “Jesus Walks” and John Legend’s “Glory,” told me that his song with Kanye West, “Clique,” was streamed 76 million times. “I got paid $60,” he said.

This kind of doomsday number projecting is pretty common. Aloe Blacc did it last year in an op-ed for Wired, and Taylor Swift did it in the aftermath of her fight with Spotify.

The frustration by songwriters, here, though, seems unanimously pointed at how much they are making off of streams of their albums. “Right now, for example, 1 million streams of a song on Pandora only earns a songwriter $90 on average. And that then has to be split with publishers too,” NeYo told me. “Even if you write a hit song that’s streamed millions of times, you’re still not going to earn enough to pay the rent from streaming. And that’s where the entire industry is moving.”

The changes proposed by songwriters and the Songwriter Equity Bill almost unanimously effect their relationships with non-interactive streaming services like Pandora Internet radio. While Pandora declined to comment on the exact number of plays and pay-outs NeYo received last year, Dave Grimaldi, director of public affairs for Pandora, wrote to me that “Pandora is the highest paying form of radio, and we are proud those payments have directly contributed to ASCAP’s and BMI’s record revenues. Our payments to songwriters are the fastest-growing segment of Pandora’s royalty payments, increasing by 49% in 2014, and we expect those payments will be far greater in 2015 as we continue to rapidly monetize our business.”

But as happens in most public fights, each side is cherry picking the numbers. In this instance, songwriters are comparing their payouts to what performers make for the song, something that section 114 of the Copyright Law explicitly says cannot be considered when determining the worth of the license.

That 14:1 number is also probably a little high. The data shows that (with some variance, service to service) songwriters and publishers get 4-5% of revenue paid out from digital services and labels and performers get between 45-60%. The greatest number you could get from that data is a 14:1 pay out. The least is 9: 1. Both numbers are bleak enough that songwriters can argue that the system creates impossible living conditions for them, and spells bad news for the future of music.

Additionally, when songwriters and their representation compare how much money they are making off of streaming to how much they formerly made off of purchased music, they ignore the biggest sector of the music industry by far—the radio. Though songwriters make less from non-interactive services than they might from, say, Spotify, they make more on Pandora than they do on traditional AM/FM radio.

It’s also unclear just where the money is leaking from. Pandora claims its pay outs are some of the highest in the industry. Soundexchange, which filters the performance rights for non-interactive streaming, reported a record profit year in 2014. And according to Page Six, Marty Bandier, the CEO of publishing group Sony/ATV, is reportedly about to sign a $7 million/year contract extension. There is money in the music industry. It’s just not winding up in the hands of songwriters.

“If songwriting were more of a lucrative career, then people who have more to say about the world and the problems in it wouldn’t have as much of a problem getting into the industry and maybe it wouldn’t be so difficult for them to get their song heard,” Crystal Nicole, who wrote Rihanna’s “Only Girl in The World” told me.

But what is a fair pay out for songwriters?

Determining the value of writing a song versus performing it is where things get complicated. Most of the criticisms of the current system used to determine songwriter pay-outs from streaming come from the reality that performers are (no matter how you cut it) paid significantly more than songwriters are for their portion of the song.

“Songwriters of the past were people in the industry and knew music. I think that level of respect has gone down,” Nicole told me.

She’s right. Not everyone knows songwriter names like Esther Dean, Max Martin, and Ryan Tedder. But everyone in America knows performer names like Beyoncé and Katy Perry. Everyone knows that “Thriller” is sung by Michael Jackson, but it was written by Rod Temperton, a name most have never heard.

And that’s where the real question of capitalism comes into play. How much of a song’s fame is due to the song itself and how much of it is due to the name on the performance that brings it into the public eye? In other words, how much is each part of a song really worth?

Andrea Finkelstein, a Senior VP at Sony Music, wrote in an email last summer (leaked during the Sony Hacks last fall):

“Certainly, we could not survive as an industry if the revenue from new digital distribution models moved to (or even close to) a 50/50 split between master and publishing.

When we record a song, it seems to me that our role is more like that of the film company in that we fund and direct the entire process of turning words on paper into a fully realized entertainment experience. And the song/songwriter is more in the role of the screenplay/screenwriter – incredibly important and fundamental to the film, but one element in a collaborative process.”

Finkelstein completely rejects the idea that a composition copyright is 50% of a song’s worth. She believes that composing a song is “fundamental” to the process, but it’s clear that she doesn’t think the worth of a song’s composition and the worth of its performance are equal. Equality, it seems, could also destroy the entire infrastructure that the music industry is built on.

There’s no good solution

The options are few and far between for changing a system that’s based on laws written a century ago and are controlled by a Congress that barely passes legislation. It’s unlikely that the Songwriter’s Equity Act will go anywhere. House Judiciary Committee Chairman Bob Goodlatte (R-Va), has indicated that he intends to look at the copyright issue and propose his own solutions in the coming months. It’s unlikely that any reform around copyright law will pass while that committee is still drafting.

The biggest danger in keeping the system exactly the way it is now is that it will limit the kind of music produced. But radically changing the payment systems that the music industry is built on could lead to something just as bad — listeners being unable to access the music created by songwriters and performers.

“I’m in D.C. today to talk to the lawmakers to make it feel even so that we can still have music. If I’m not able to have a career in writing music, then there’s certain songs that just won’t be made and certain movements that won’t be had,” Rhymefest told me.

It’s an uncertain future, for songwriters and for fans. As NeYo puts it: “Everything in the music industry starts with a song.”

Kelsey McKinney is a culture staff writer for Fusion.