Musician Derek Webb argues that he can make more money in the long run by giving away his music than selling albums or tracks on iTunes and providing his music to streaming services like Spotify:

For example, I am paid $0.00029 per stream of a song on Spotify, and even this amount depends on whether the song is being streamed by a paid user or someone using the service for free.  This means it will take upwards of 3,500 streams of a single song on Spotify to earn $1.00 versus that same revenue for one iTunes song purchase (not to mention the fact that Spotify refuses to pay the same amount to independent artists as they pay major labels, unlike iTunes)…

If someone buys my music on iTunes, Amazon, or in a record store (remember those?), let alone streams it on Spotify, it’s all short-term money.  That might be the last interaction I have with that particular fan.  But if I give that fan the same record for free in exchange for a connection (an e-mail and a zip code), I can make that same money, if not double or triple that amount, over time.  And “over time” is key, since the ultimate career success is sustainability.  Longevity.  See, the reality is that out of a $10 iTunes album sale, I probably net around a dollar.  So if I give that record away, and as a result am able to get that fan out to a concert (I can use their zip code to specifically promote my shows in their area), I make approximately $10 back, and twice that if they visit the merch table.  I can sell them an older/newer album and make approximately $10 back.  The point is, if I can find some organic way to creatively engage them in a paid follow-up transaction, I increase my revenue 10 times on any one of these interactions.

This is all an equation of scale. I might be able to outright sell 20,000 albums for $10 each (again, netting around $1 each).  Or I can remove any barrier from someone hearing about or discovering my music by giving it away, which will result in an order of magnitude more albums distributed, maybe around 100,000.  If I can then convert 20% of those free downloads into paid transactions of any kind over time, I have probably well over doubled or tripled my money.  And I can do this repeatedly as I continue to grow, and learn more about and invest in my tribe, to whom I now have a direct connection (rather than having to go through Facebook, Twitter, or Lord forbid, MySpace to access them).

If this is true for middling to struggling artists, what does this mean for the music industry in the long term? Will many artists follow Webb’s example and can they if they aren’t already established artists? I assume the low compensation for artists from streaming services has to do with the services making money.

I wonder if this is just about the money or if this is also about certain artists wanting to truly connect with fans as opposed to simply selling them music. Webb suggests there has to be a more meaningful relationship between artist and consumer for the whole industry to thrive:

Music does have monetary value.  But more than its monetary value is its emotional value, its relational value, its artistic value, even its spiritual value.  When you make meaningful connections with people based on artistic self-expression, I think you’re actually increasing the value of that art based on the many ways it’s valued.

How many musicians see it this way?

A side note: I haven’t yet tried Spotify but I have been tempted, particularly since my Facebook feed has been full of messages noting the songs my friends have heard through the service. If you think I should really jump on board, let me know. Webb’s opinion wouldn’t necessarily stop me from trying the service but I would now think more than before about joining.