The Real Reason So Many Musicians Are Frustrated By Spotify

know about Tracy. Like I don't really know what kind of music she's in two for example, I've gone to karaoke with her a couple of times, so I know a little bit about what she likes to sing, I think, but in terms of what she listens to, I actually don't know. I was going to ask her. As for myself, you know, like I'm a forty one years old, so I have very cliche tastes. I would suppose I like a lot of old indie rock, and I hardly I'm not very good on keeping up with new music. By

and large. Pretty much, if I discover new music, it's often courtesy of the algorithm that Spotify serves up to me. But I don't really know about how it all works and how the industry works and who benefits from this current system, and I've always wanted to learn more. It's particularly interesting now because of course we've had a number of artists take their music off Spotify, notionally sort of

in defiance of Joe Rogan's We're All There. But also I think there's been a lot of musician frustration with Spotify and other streaming platforms, the new economics of music that long precede any of the current drama. So in light of all that, I want to learn more. And I'm very excited about our guest because he writes a lot about the economics of the music business and how it all works and where the money is and so forth.

But also beyond that, he was a member of one of my favorite bands, and so this is personally very enthusist estek I'm gonna be speaking with Damon Krakowski. He is was the drummer of the indie rock band Galaxy and currently part of the duo Damon and Naomi. Damon, thank you so much for coming on odd lot, Thank you for having me. You know, with musicians don't get asked about business very often. I'm really grateful for the opportunity.

Will you write a lot about business? And I guess that's that's why we could have this sort of music slash your business conversation. Why do you write about business? Why is it? You know, there are a lot of musicians who probably are frustrated with the economics of the music industry, but you were. You write quite a bit, You've written books, you have a sub stack, a newsletter about it. Why is it important for you to uh to write about music? Yeah, it's a really it's a

question I asked myself pretty often. So, yeah, I started a sub stack. It's called Dotta Drummer Almanac, and my Twitter handles dot a Drummer That's where that came from. And you know, I started writing about the business of music very accidentally. It's the same way that I had to pay attention to the business of music accidentally, which

is from being a musician. And you just end up at the other end of so many contracts and so many deals and so many accounting reports that you know, you either I guess at a certain but for quickly early on, decide I'm never going to pay any attention to any of this and turn it over to someone who convinces you that they are, or you start reading all that stuff. And there actually are a surprising percentage

of us that do read all that stuff. Um, some some just out of necessity, because if you don't have a manager, or you elect not to, or you don't trust your manager, or your manager cheats you. I mean, you know, there's so many ways that musicians end up having to look finally at, even if they didn't want to, at what the hell is going on? And once you take a look, well, it's a big business and so

it's got a lot to learn. Takes a time for you to learn how this came to be because musicians tend to be they come in very young, many are not in the business very long, and the business is oriented toward the next set of musicians that are coming. You know, not you, um, you're always you're just a temporary talent for an industry that has set itself up to deal with a revolving door of talent. And so you know, things are not explained to you. It's kind

of like who can bother who? You know, why bother explaining something to a band. They're only gonna be around at best, you know, a few years, a few albums, whatever, we're gonna make our money and move on. So just get what you can. So you know, there's a lot of that, but then we learned, you know, so what happened to me was our first band, Galaxy. You know,

we were young. We signed the classic contract that handed over all our rights and uh, and then the record label declared bankruptcy and our contracts were thrown into Banks Co in Manhattan. I spent over a year dealing with that, trying to extricate our contracts and an ownership of our records in perpetuity throughout the universe, known and unknown. These are boilerplate things that are typical of music contracts, UM and all formats uh, you know, as yet undiscovered and

all you know, blah blah blah, every contingency. Um. They were just thrown into this Banks record and and and put up for auction. So I spent a long time. You know. We called our music business lawyer who we had a very fine firm, grew Upment and Turskey Schindler representing us at the time. They were Madonna's lawyer and whatever, and they said, I'll forget it. You know, you have no you have no rights to have no chance. I mean, you signed that deal and we're like, you told us

to sign that deal. They're like, well that spoilerplate. The company goes bankrupt, you know, it goes into bankruptcy court. It's and that your contracts are an asset. It's like, no way, you know, what do you mean? It's it's just an asset gone into into bankruptcy court, our own contracts. As I understood that the stock from the warehouse went in, I understood that maybe the Master Tapes head ownership, but I mean our contracts were that. That was insane to me.

So anyway, I was like no, So I read all the stuff and did my own negotiations, you know, and called up the bankruptcy court appointed lawyer and taught myself the business. Uh and we won. We got our rights. I love that. So so I'm I'm a Galaxy fan.

I discovered it. I discovered the band Luna first three year old band mate Dean were them, and then of course I went backwards and discovered Galaxy for for listeners who maybe aren't from the layer, can you describe like, I think it's a pretty influential band, but a little bit sort of like how big you guys were, however you want to measure it and what kind of contract gets offered to a sort of highly influential, but I don't think like a Billboard chart topping band in the

late eighties, right, No, we weren't a pop band by any by any measure, and nobody nobody saw us that way, most importantly ourselves, and so we had no pop ambitions and there was no question of trying to be world conquering multi millionaires would have. So anyway, we were a niche band. Uh an in indie band when we started was called college rock because it was college radio stations that played on our music, not commercial stations, and that

divide was very um significant at the time. It meant the major labels produced music that they tried to get on commercial radio and into the chain store record stores, and that that was their world and we really had no part of that world. But but a lot of people in the music industry were not part of the world yet were in the music industry and built a fully functioning, very very efficient and good system of distribution and sales outside of that. So we had independent stores

in every town. We had uh college radio stations which are mostly nonprofit but or community stations also but played our records, and you know, the potential on the air, it's the same as a commercial station, so you still can reach people. And we had venues that we played that the major label bands didn't go near, and so we had a fully functioning network. That network was hard one. It had been built by a generation or two of bands before hours. It was really mostly the hardcore scene.

Actually from from our from my point of view of kind of white college indie rock more or less was more was pretty much forged by the hardcore bands who went out and slept on people's floors and and found alternative spaces to play and built this system. We came in a sort of a more diverse musically, a little bit less male, unfortunately, still pretty close to white, which is something that really wasn't discussed or acknowledged nearly enough

at the time. But we came and sort of stepped into that world and opened it up musically, I think a little bit more than it had been and so a lot of types of bands went through those channels to the point where the major labels turned around and realized that there was a market there that our world had developed and was communicating with and selling product too, and they were not. And that's the expression would happened

in the nineties. So the major labels kind of realized that they had missed the boat on a whole lot of music that was potentially more salable than they thought. So they looked at our scene and they, you know, they sent their and our scout, they hired in our scouts out of our scene, sent them back in to kind of evaluate who could take it to another level commercially.

And then there was this really pretty ugly moment in the late eighties early nineties where our scene that had existed was destroyed more or less by the major labels coming in and investing in it. So what they did

was they he picked from bands. They broke up Galaxy five hundred by well Gas Bars being offered a major label contract of its own, and in its place, Dean was offered a solo deal by an A and our guy who had worked for our record label, Rough Trade and independent label, had been fired by Rough Trade, had told his colleagues a Rough Trade that he was going to break up our band in retaliation, got a job with Electra, which is owned by Warner Brothers, and offered

Diana solo deal. At the same moment that Galaxy of Hunter was being offered a band deal by Columbia. So Dean double cross to us he signed the deal on his own with a different label instead of signing the deal that we had already negotiated with our mutual lawyer with Columbia. Besides old arguments which are long since, I mean, you know, this is a long time later. But what illustrates is what happened to the scene as a whole.

The deal that we had negotiated with our lawyer as a band with Columbia was going to have complete artistic control. We were going to choose our producer for our records, we were going to choose our singles for our records. We were going to control our videos. Our lawyer said to us, and this gives you a hint of how this all goes down. Our lawyer said to us in our band meeting with him in street conference room, if you insist on that you will get less money. You

understand that. And we all said yes. But of course I realized in retrospect that Dean didn't necessarily say yes. He just was sitting there not saying no. So so you know, and then um, the deal that Dean signed with Electra Solo, where he had no negotiating power as a band because we had built our brand and we had built our audience. That deal was without any artistic control, and so he signed as a solo artist to be shaped by the label, and the band that he then

put together was his were his employees. The label chose his producers, the label chose his singles. The labels ran him a million dollars in at as we all now know because he has spoken about it in interviews and such, and ultimately dropped the band. Of course, that's that's that's what happened, kind of largely to the scene as a whole, because how do the major labels work. Well, It's like they have a bunch of hits that fund everything else is not a hit, and everything else is not a

hit eventually just drops off their radar altogether. They're not really in it for anything else, and only the hits fund the business. That's how entertainment generally works as an

economic model. It sounds like the venture capital industry to where you you sort of aim for one massive winner that the returns a hundred extra on your investment, and then everything gets sort of tossed by the wayside before we sort of move on from like this moment, Like, can you just talk a little bit more about the economics of a Galaxy five album in terms of like the income that you were able to generate both from how much is from album sales versus how much was

from the touring that you did, Like what is the what does that look like? Obviously? Um, yeah, on the on the indie labels of the time, right, Well, it all speaks to the same two differing models really, right, so that we just talked about the major label model classic entertainment business. And it's interesting to hear you compare

to venture capital. I'm sure it's the same idea. You're basically gambling, but you the odds are are pretty good that you know, if you have like a thousand pieces of product, you know one one is going to become huge, and you stack the deck by making sure you control the distribution channels and the promotion channels that all those hits go through. So whatever it's gonna hit is going to be one of the ones that you have. It's

not gonna be somebody else's, right. That's that's crucial, and that's crucial to looking to what's happened now with streaming the other model is an independent model, a niche model, which is what the independent world that I was a part of and still am operates on. And that is, like I've always said, it's like running a lemonade stand. It was like we didn't need any more economic know how than a kid opening a lemonade stand on the sidewalk.

It was like, we had a product, we had to sell it for a couple little bit more than we caused us to make, and we had to know who, how many too, how much to make. I mean, that was all it was. It was like it was just like basic capitals and any like American five year old understands, and that's all we were doing, and that's all any of the bands in our scene were doing. We were pressing records, in selling them for more than they were

cast us to make, and making a small profit. And there was no model that would take that much bigger. But you, as you well know, on that model or is pretty much like every small business traditional small business ever. So it was like having like a small grocery store or harbor store or anything that serves the neighborhood of community and survives by pays the bills plus then some

and you have a p business model. It is not a business model that attracts capital, right, So this is really interesting, and I guess it gets to the heart of the tension here, which is that we all sort of understand that I mentioned VC, but I think Hollywood

is the same. And I guess currently sort of mainstream music, which is it's really about the hits, and you aim for one hit out of I don't know, a hundred or a thousand, and it's just so big and so massive that you could have numerous flops and it doesn't matter. And this sort of the tail is very, very skewed towards these mega stars. And today you know obviously Taylor Swift and Adele and a handful of artists that just

sell an absurd amount. And so I guess the question, and maybe this sort of leads into where we are now, is like, is the lemonade stand model effectively dead? At this point? There's just no other route to music other than or sort of Yeah, there's the lemonade stand model dead in a world of streaming only, Yes, that's the

way to put it. Yeah, recorded music, yes, because what happened was they were there were parallel methods of distribution and sales and reaching your audience before and the majors, So the majors when they broke up for example, My I mean, they've done this time and again, but my particular moment, it wasn't like indie rock was like the only time this ever happens, happened over and over and over and over again in many many different genres to

the independent jazz world that you know, all these things have gone through similar cycles. My particular world, you can see it very clearly again to stick with with references to your generation and my generation of artists. Um, you can see it in Nirvana. So at that moment the gas have found broke up was also the moment that Nirvana was signed by Geffen and we all knew. We were all all told because Nirvana was on another independent label, Subpop.

They were on our scene. We were playing the same venues that they where. We were at all the mutual friends. Everyone knew before the public knew that Nirvana was going to be a huge hit and this was going to

change everything. And that's also why that's when Dean got signed to a solo contract, everybody was already in gear looking for more Kirk cobains, because it was like, Okay, they can take something from our scene and turn it into this other model, which is you have one hit and a thousand failures, and that's just part of the model, right, And so what what I witnessed in on my own little scene in the late eighties early nineties was the

way that that all shook out. The difference to now is that even though that happened, the rest of us could continue our non major label model of distribution and sales and of lemonade stand style business. And we did,

you know, Naomi and I formed to do. We signed with sub Pop, which had been Nirvana's previous navel, and continue making records and touring at the same kind of scale budget that we always had, reaching the same sort of curtailed subset of of a music audience that we always had been a part of, and being played on college radio, non on commercial radio, and not making videos

for MTV, etcetera. So that continued. And so what's changed now is that there's no parallel network for distribution and sales. So what digital did was, as in all our businesses and all our communications, it uh scaled everything up through fewer channels, and you don't really have another way now of distributing music. There's no indie channel for um sales and distribution online. We have to go through the same channels that everybody does. It's Spotify, it's Apple, it's Amazon.

These are the biggest corporation. Well, Spotify is one of the biggest corporations, but in music they're enormous. I mean, their valuation on the stock market is bigger than the major labels, and Apple and Amazon are literally among the

biggest corporations in the world. So we're talking about like little me and also not just middle aged me, but young versions of this of the pattern that I followed, who really have no choices and no already established audience, and no ways of navigating this outside the way that everybody does. So everybody just has to put their music

up in the same platform. It's as if back then in the eighties and nineties, we all had to put our compete for this for the sales space in Kmart and Walmart and and and eventually Target, instead of being

able to go to the independent record stores. If you see what I mean, there's no other channel, and that's the problem with with the model that's going on now because there I mean, there are many problems that I'm happy to go into, but the basic, basic one from music music business point of view or a band's point of view, is that there's no choice. And the other thing is that these platforms treat us just like they do consumers, where we're kind of just like another It's

just like Facebook, you know, we're just like users. We don't get some special status because we're producing the content. They treat us just like all social media. There's no distinction really between content producers and consumers. So I just have an account. Basically, I can't get anyone on the phone. I can't ask a question can you update? Like can you write your band bio or anything like that. They're very limited ways in which you can interact with these platforms,

just like there are on any platform. Like yeah, you can change your profile picture, you know, it's it's it doesn't go much beyond that. On Spotify, you can't just upload your music Spotify. They're a handful of distributors that have access to that obvious. The three major levels are the main ones they hold. I forget the exact percentage, it's over the copyrights that are on there. The Indians go through consolidators that are approved and have an account

with them. It's already limited in that way. It does make room for independent artists and all kinds of ours, everything can be up there. Theoretically that's important to their business model, but that doesn't give us any status beyond

really essentially just another user on the account. They create websites that we can interact with in this extremely limited, condescending manner and change, you know, tiny little bits of the of the individual page, but really so limited that it's ridiculous, but limited enough that I've gone on Spotify and our one artist official playlists that we're allowed to create is called I forgot exactly jording. I said, Damon,

you have me official downloads available on band camp. That's the name of the playlist, so that if you click on it, if you look for the artist official playlists, it will be called go to band camp. And of course Spotify doesn't notice that and take it down because they're not looking at my account. So I mean, Galaxy is there's probably a lot of listeners on Spotify still

I presume I don't know. I mean it comes up on my playlist a lot but I guess that's because I listened to it, But I presume that on sort of related artists it's probably I don't know, above it for people who are fans of a certain style of indie pop comes up decently. What do you get from that? Like?

What are the benefits to you? And you know, obviously one of the things that people talk about all the time is like, Okay, yeah, you're not gonna people musicians don't make that much recording, but other things live concerts and so forth, Like what does that look like as

a not huge but also not irrelevant indie band? Now the sort of the ongoing listenership of Spotify, I think you said there have been something like sixty two million users or sixty two million streams of your song, Like, what's the benefit to you from there's only really one for a band like Cars, which is no longer performing.

We haven't played a show as God's Fence, so um, But that's not irrelevant because the bulk of streaming on Spotify is catalog, because the platform is actually oriented toward non working bands or anyway old records catalog. So it's no surprise. Why is that? How sorry? How is like in what sends. Does Spotify oriented itself towards non working well, is it? Really? It's a great question. I mean, one of the things that that Spotify is not is transparent.

So we don't know how those algorithms work, and they won't share that information. So why my band, my old band might pop up on your feed, will never know. But I'll tell you this, if we pay Spotify to boost our work in their algorithm, they tell us, they brag about it, that it will it will come up more often. I didn't even know that. I didn't even know there was a thing paying to be well, it

shouldn't even be legal, is what you was. The other thing you might say, I didn't even know that was legal, because if it was radio or analog distribution, it would not be legal. That is payola. Those these were fights that were fought in the nineties, fifties and sixties about radio broadcast because radio becomes so powerful and corrupt and famous. DJ got caught and there was congressional action about it. So paola wasn't illegal before Congress got involved. Spotify is

in a digital space. They claim they're not governed by radio broadcast rules, and so they say they're not covered by payola rules, so they have an official marketing. It's two sided marketplace. They bragg a better in their investment call and their investor calls. It's the discovery mode. They call it Capital D and it's a program where this is This is the small way. They say it's not payola. They say they're not taking cash. They're taking a lower

royalty on selected tracks. But for all we know, there are other ways that they are taking cash because their contracts with the major labels, for example, are privately held and never disclosed. So we've always believed in the industry, those of us who watched this, that the playlists were for sale. How could they not be Radio always was radio continued to be after payal the laws, just in third party arrangements so called radio promoters who handled the

cash in between. I mean, this is in my experience and my direct understanding knowledge, So how could it not be on Spotify, which is even so powerful these playlists, so in any case, but then loan behol while we're busy accusing them of that. But officially, just but just officially, we don't. There's no evidence as such, other than the part about how you can an artist can agree to take a lower royalty and theoretic right, but taking here,

but here's the evidence. I mean, for one, taking Lottle royalty is paying Spotify obviously say currently they say they're algorithms are based on the consumer's interest, right, Like so if you if you're wondering why this gaspel fund to come up in your playlist, you'd be thinking, what is it about my taste? That's the first thing you said as you introduced it. But if that's the case, how could it change by if you give them a lower royalty on a given track? Is not editorial placement on

They have two types of placement on playlists. One is editorial, one is algorithmic. They distinguish them even on their reports to us. They give gasp Funder, for example, next to no editorial placement. I don't know if that's because I've been so vocal, but I will tell you that Damon and Naomi, my own personal band, gets zero editorial placement. They give us a percentage of our plays based on playlists,

and the percentage for editorial placement is zero percent. And other artists who are very active and critiquing Spotify have a similar issue. Now I'm not saying I know that that's why, but I will put it out there that we know what for For what is the breakdown of algorithmic streams versus editorial I think editorial streams for Galaxy is something like five of our total stream so that's

next to nothing. In others we have not been given the benefit of their is they're officially declared editorial interventions, which is they create a playlist that's like, this is the music you should listen to if you like. Now, then there's the other type, which is algorithmic. Now, the algorithmic playlists, which both both of my bands get to various degrees and it swerves around with time, are totally opaque. We have no way of knowing what what is doing this.

But they have now admitted by bragging for their own marketing program making this available from manipulation, that if you cut them a deal, they will boost it so that that's the algorithm that's not the editorial side. So this is the side that's supposedly based on nothing. But you know all this data that they're collecting, so obviously the data is manipulatable, that the algorithm is manipulatable. I mean of course it is theoretically anyway, because human beings create

those algorithms and make choices. But this is officially saying it is manipulatable for business purposes. Now, once you get that understanding of how Spotify is working, then it starts to open up a whole lot of other explanations of how their entire business model is working. Because let's not forget, since we're on a business podcast, Spotify declares a loss nearly every quarter on music. Music is a losing proposition

for Spotify, according to them. And yet I'm sure a lot of people are listening to this have invested in Spotify and are not thinking they're losing punk cop proposition, because of course they aren't. But music is a loss leader for them. That's what they That's what they claim. So where is their profit coming from? And that's what you really got to start to look at with Spotify.

It's obviously coming from like other tech platforms that give away their product for free, their content for free, It's coming from data. Uh, It's coming from two sided marketplace deals like Paola. It's coming from the stock market, from capital investment, from growth, it's coming from market share that they leverage in all kinds of other ways that have nothing to do with music, So they move further and

further from the lemonade stand version of music. It's not my product or galaxy of hundreds product that makes Spotify any money anyway, and that's crucial to seeing what what what's wrong with the with the industry? Well, let me, I mean the whole reason Spotify is back in the news, And I mentioned this in the intro, of course, Neil Young saying he's going to take his music off of Spotify, ostensibly out of his anger about their contract with Joe Rogan.

But how much is that as sort of in your view, I guess a, I don't know, an excuse, but as sort of like trigger point of there's already a number of musicians large and small, frustrated with Spotify. Spotify, in your view, doesn't care that much about musicians. It may view podcasts as more profitable and a potentially more durable business model. So how much is the recent kerfuffle like sort of like a bunch of people who didn't like the model anyway suddenly like this is a good uh

rallying point to voice their displeasure with the platform. There was certainly no no organization taking advantage of this current moment. Neil Young did that as he's always done things in his career completely on his own, without announcement and without contacting groups like my group Union of Musicians and Allied Workers that's been organizing very diligently for for over a year about UM the financial model of Spotify UM. But

the flashpoint is telling for so many reasons. It's actually, if you're interested in pursuing a musician's version of what's going on with Rogan, I would look to India Ari, who was very very articulate about putting together all these various issues that are going on with Spotify, Joe Rogan's racism being paramount because it speaks to a model of discriminatory practices that are tied to the type of capitalized

businesses Spotify is. And that I mean, I don't think you have to be a Marxist like I probably would be identified by by some of your listeners to to appreciate that these issues are tied together. On that how you treat your labor force is tied to how you reward your labor force and also how you you know how you set up your business in terms of capital and labor. Spotify is set up capital. They have no

connection to music. We are the labor that provides the content on that platform, or that has built it to at least in its first stage of development as a corporation, to the point where they're on the New York Stock Exchange. They are a music company, and they do not negotiate with us. They do not extend us even the common courtesy of having a relationship with us UH and they certainly don't reward us in any kind of way that

we consider most of us consider fair. And yet we have no way of organizing and demanding anything from them. We were not even at the table. They only cut the deal with the three major labels, not their artists, but just the labels themselves. And the way they cut the deal, the way they entered the US market, was they gave the three major labels ownership shares in Spotify before they went public. Now this is how then the

labels cut them a deal that screwed their artists. They cut them a deal of minuscule royalties because the royalties from the major labels point of view passed through the major label to the artist accounts. Ownership was held by the corporation and was pure profit for the corporation, so they traded ownership for decent royalty deals. So the artists on the major labels were not any better represented than I was without any seat at that table at all.

They were sold out by the majors. So the major label artists are no happier with this than the rest of us. Now. The one difference, though, is that there are certain artists on the major labels who've been making money hand over fists from streaming because what the model does is consolidate it's more of the money in the music industry into the top of the pyramid. It's it's it's designed that way. The way they calculate royalties, they put everything into one pot. It's called a pro roder

system that they capitalized on. The majors have proved this, So my streams go into the same pot as Taylor Swift streams, and then we each get paid back out according to the percentage of all the total streaming that we each hold. Mine is of zero to to disappearing infinity compared to what the few people at the top hold. Now we get back to the whole question of the playlists and the algorithm where Spotify is steering consumers to listen.

Of course, they're steering them towards a handful of places, because the whole thing is designed to consolidate as much all the money in the industry into the top. Then we get to the podcast because here's the magic for podcasts. From Spotify's point view, you might have been wondering, why are they spending so much money on podcasting. Podcasting doesn't seem that lucrative. I mean, in present company, I'm sorry, podcasting as is not that lucrative in it for a

lot of reasons. But of course he has a lot of listenerships, so you know, can you turn that into money somehow? Here's the thing for Spotify. There's no royalties on podcasts, so Joe Rogan streams have no royalties to pay right, Taylor Swifts do Adele's do. It may be from my point of view, too little the Spotify sharing for the royalties, but from Spotify review, it is a serious expense, and the more they stream music, the more

that expense goes up. It's one to one. They can't get around it except by pulling cacamam schemes like reduce your royalty and will boost your algorithm. Right that what they're after is reducing their overhead. I mean again, it's just back to the that's lemonade stand I understand they're trying to reduce their royalty exposure. They only have two ways to do it, pay musicians even less or get to stuff that doesn't have royalties. So they're doing it

in multiple ways. One is podcasting. There's no royalties on podcasts, as you know. Second, they're commissioning music and owning content. Now, there's another long standing scandal in the music world that didn't get out to the general media, but did enough in the music press that is commonly accepted now of

the so called fake artists. This is because Spotify at the at the top of some of Spotify's most popular playlist So that means all the money and Spotify is in the play lists, okay, because you go on the site, they push you to a playlist that then they control what you what you're going to stream, and it's not just on the popular place at the top of the playlist.

Because of course, how many songs you listen from the beginning and how how deep do you get into playlist, well, most listeners just get a few songs in, so all the money is caused. It's the same pyramid thing. All the money is concentrated in the top of the top playlists. That's where the bulk of the streaming is happening. That's why payola is so crucial here, because of course, getting on the top of the playlist will make you a living.

What is Spotify do to to reduce their royalty exposure? Well, they started inserting tracks in those playlists and those popular playlists that they own. How did they do that without consumers noticing? They created fake bios for fake artists, That's what That's why it's called fake artists with you know, photos that they pulled off of the internet, fake bios and a song title and they slip it in to a playlist. I mean, is this just on like you

instrumental sort of ambiance? No? No, no, no, no no, no, it's anything, it's anything. So there other fake country musician, Well, I don't know specifically country, but there are fake well so called fake there are fake tracks scattered throughout Spotify. The only way we know about them is that journalists, investigative journalists figured it out. They figured it out by not recognizing a name at the top of the playlist and googling it, finding a bio page and then finding

no other links. It didn't have any existence. These artists have no other existence anywhere in the world except at the very very top tier of one of the top tier playlists. So it's clear that it's Spotify owned and not just someone who used like one of the aggregators to upload because I found that, because you can trust the copyright. And where did this music come from? There all come from Swedish recording studios Spotify. The Swedish company

Spotify said well, these aren't fake artists. These were created by these producers in Sweden that that we paid to produce this music got it. So their argument is what do you mean fake? This is as real music as anything else. And now you get into another set of investments to Spotify has been making, which is into AI. What is AI going to do for them or is

already doing for them? You can create sound like music that people can't distinguish in terms of style or you know, so you feed in, take the take whatever is at the top of the charts at the moment, feed it all into AI and have it spit out a track that's enough like it that a listener on a playlist, as passive listener on a Spotify playlist, will not stop the playlist and move away from the from it, letting go continue when they hear it is maybe not an

artist they recognize, but they accept it going past them. It sound I'm just looking. I'm reading a I pulled up a Variety article from and it sort of gets at this, and they deny that fake artists exists, although the Variety article sites insiders who say that it is about, as you say, reducing the streaming royalties that they owe,

the leverage that they have against the record labels. So yeah, but I think if you look at the language of their denial, all they're saying is that these are real people. But the fact that they own those tracks is the crucial part here. I mean, whether it's an artist that they signed to their own label like Rogan, that they

own a percent. So the key with the difference would be essentially in your view, that they are real people, but have Spotify commissioned the songs and therefore the royalties they're not leaving, They're not They're not going as far they're not well, they're not going anywhere they own. The problem is Spotify cannot be and this is the Rogan controversy has brought this to the fore, and I've been really happy to see this terminology surface in the mainstream

press about it. Spotify cannot be a platform if they're also a producer, right there, a producer of music tracks. We have known this for years in the music business. We have been screaming about this. Nobody cared, of course outside the music industry, and those who are running the show don't care because they're making money hand over fist. I mean, the estimates are that the major levels are

making a million dollars a minute from streaming. So obviously, I mean, we started this conversation and you know, as you point out the beginning, Galaxy never aspired to be like a true like pop band that was going to have like a megahad. Wasn't your seeing the lemonade stand business model. Nonetheless, the pop scene has always existed the hits driven record you know, whether it's radio stations, record store CDs, etcetera. That's always existed just within the realm

of pop setting. Aside, the end of the lemonade stand model. Has it gotten even more skewed? Is streaming royalties to the handful of artists that make a killing on it,

like the Taylor Swift, like the Adeles? Is it even more skewed than it used to be if we went back to say, record sales and radio plays in the era of say Madonna, Well, here there's some squish nous because it's very hard to compare one to one because there has been a sea change from analog to digital in terms of how the business is structured and how the royalties are calculated, etcetera. I think everybody feels that

it has gotten more concentrated. I don't know of any good studies that I can point to two that make the case with numbers. I hope they're out there. If they're not, I hope somebody's working on it. But it is a kind of a difficult thing to compare. And this is a lot of the discussions around what's wrong with streaming sometimes quickly revert to, well, how many hours we're making a living in right versus today. It's just not the type of calculation that's that that exists because again,

because the business was decentralized so much more. And I think that even framing the question those terms is an indication of how centralized it is now. We do have the figures for right now and here they are, according to Spotify themselves. Because so my my scrappy group of independent arts, self employed artists that got together during COVID and are forming a new union called the Union of

Musicians and Allied Workers Union of Musicians dot org. We launched our own punk rock campaign to alert people to what's going on with Spotify and streaming in general. But we used Spotify as our target because they're they're running the show, they have the largest market share, and they're they're such a good enemy because they put the foot in their mouth all the time. So we chose them well,

i'd say, as this podcast proves. And you know, we launched a campaign called Justices Spotify, and we've got all

close to thirty thou musicians have signed onto it. It's it's it's it's really it's made ripples in the music world, and it certainly has called Spotify's attention, because then they launched a website to answer our accusations called Loud and Clear, and that was a website just directed to it's like a giant f a Q with their talking points counted to our arguments for what's wrong with Spotify on that website. So this is on Spotify's own pr designed to counter

musicians complaints. They say, wait, look how many people are making a living from from Spotify and they say it's thirteen thousand, four hundred globally are grossing fifty thou dollars a year or more? Okay, so this is their claim to the success of this model. It's very hard numbers so well as they're just like lift a little corner. Now, the only reason they said that was they thought it sounded so good. First of all, their mission statement was

to make a million artists a living. Four hundred is not a million. They're off by nine eight, seven thousand whatever. Right, they're wildly off. And now let's consider what fifty thou grows is for a musician, typically for a band, or

for any artist, there is a label involved. We talked before about how Spotify doesn't even platform unless you go through at least a distributor, but mostly the lion share of stuff on there is from the majors over and then you've got all the independent labels on top of that, So most people on Spotify are on a record label. Labels have various deals. Of course as a private contracts privately negotiated, but as a rule of thumb, you can

assume the labels taking at least fifty of that income. Okay, so now we're talking thousand dollars a year for thirteen and a half thousand artists globally. Now, so you get twenty five dollars in for a year. Now that's gross. Say you're in a band, say you're in Galaxy off I foundred that has three members that split the money evenly. Well,

now you're earning a third of dollars gross. That's without any percentage that goes to management, distribution, all the other overhead that any artist has producing product that gets itself on Spotify. So you're talking about below minimum wage. And this is the figure that they're bragging about as their big model of success. They have drained the music industry. Streaming is now eight of all revenue in the US for recorded music, all revenue from all sources, and of

that Spotify as alliance share. So yes, it's a little bit more from the other platform. So if you're making k from Spotify. Yeah, you're probably making I don't know, SEV, but you're not really making that. You're making less than minimum wage. So what have we traded for this global model for most of us, for almost all of us, nothing, We get nothing out of it. I could make that money back with with two tho LPs or less, but they're making it impossible for me to do that. I

have to go through Spotify, and that's the problem. So before we wrap up, but we just have a couple of minutes left, I want to ask a couple of quick questions about this, because this is where I was

about to go. I mean, first of all, you know you're talking about okay, just modified but versus say the late n A band can raise their profile in all different kinds of ways, and there's Twitter, and there's Instagram, and there's Facebook, and so sure, maybe the record stores that network maybe is uh diminished, although there are still our record stores and some independent music stores. But what if someone says, like, you know, look, it's two Yes,

there are obviously things that have gotten more skewed. On the other hand, the ability of a musician or a band to become a name to promote themselves. They don't have to go through a record label anymore. There are other things that have countervailed that that allows someone to get awareness and build fans on the internet and monetize their music in some different ways. Why why does that

not work? Why why does it not counteract by the fact that there's all these new platforms for an artist to promote themselves, well, because none of them are are monetizing. I mean, you stick monetizing monetizing in there, but but the platforms you mentioned are not. Don't pay. Twitter hasn't pay your Facebook doesn't pay you. So the only modernization that has been open to artists in the streaming era is live performance. And it is absolutely true that you

can leverage your exposure. I mean it's basically, we're all interns through our recorded music to the music industry, and then we're supposed to make our living live. I mean, the truth is only some type of bands can make a living live. I mean, live music doesn't fit all the models of the type of music that you might want to listen to and recorded music, and there are entire genres of music that can't really turn a profit live,

like jazz, for example. I mean there's a whole. There's a whole, there's a whole, vast amounts of recorded music that cannot translate into will go hit the road and just live that way. Then there are a whole lot

of personalities and lifestyles that don't fit that way. Then there are a whole lot of people who fall to pieces on the road because you know, actually going on the road is is a tall order, okay from And there's a reason why we have all these stories, and there's a reason why the end of Kirk Evans story is what it is. But here's what happened in the last two years, which is COVID, so all of live

music shut down. That's why my group got together Union musicians and allied workers because we were all unemployed because our only employment in the streaming era has been live performance. That is only monetization available to us. All the modernization channels of recorded music have been swallowed by streaming. That's that pie chart that the r i A, the Record Labels Association takes note of every year that's now up to from streaming. What's left in that seventeen is everything

else you can think of. It includes soundtracks for films, uh selling to commercials. It includes radio performance, it includes satellite radio, it includes everything else you can think of that monetizes recorded music. Streaming has taken it all. It's done it by going into all the other markets and swallowing them. For example, back when we had coffee shops and bars, they play music, and they're supposed to play and we pick up a small license from that music.

But what are they doing If you ever ask your barista, they're playing their own personal Spotify account when on a phone plugged into the onto the machine. They're not supposed to do it. And if you dig and dig and dig on Spotify's website, you will come up with a page that says, do not use this for commercial situations. But boy, they don't work very hard to let people know that do that. In fact, Starbucks as a deal with Spotify where they give free premium accounts to every employee.

I mean, you can see what that does, right, So we lose that. Satellite radio it was a good income stream that was coming up because of they were being installed in all the new cars. And there's a different royalty model for salar radio that's very secure for musicians that was set up by Congress in the nineties that was really booming. I mean, it wasn't a lot of money, but it was going up straight line up. And now it's going straight down because of course, what is everyone

playing in their cars? They stream instead of playing salid raid because you don't have to play, you don't have to pay the subscription Sali radio or maybe already have one subscription to streaming service. You just use that. So all these other channels branding, To take a great example, people think, oh, you build your your thing. Brands put on playlists on Spotify. They put our music on. They

don't have to negotiate with us. They don't have to pay us anything for that because it's just another playlist on Spotify, Nike presents whatever the hell they want to label it. It used to be a brand wants student wants to associate themselves with your music. That was a big payday. The biggest payday Galax five hundred ever got was from Honda who used thirty seconds of instrumental track of ours in a television commercial. That was a huge pay day for us, more than our record royalties that

we ever managed to collect from our labels. Um that we were assigned to before we took made our own label. That's much better. But in any case, that doesn't exist anymore. Honda wants to have a playlist on Spotify, they just build it. Do they pay Spotify? Probably to Spotify report that back as music income? No, right, you see how this goes, so that that's what's going on. Spotify has

a model. It's unregulated. There are no set royalties from anything except the three major label contracts that they did. And that's a very winning model for destroying the music industry. But here's the kicker that I really want to emphasize for your listeners in particular, it's not a winning profit model. They still say they don't make money on music, and I believe them because look where they're putting their money.

They're putting their money in Joe Rogan. And that gets back to why Neil Young calling out Joe Rogan, which he had every reason to do, was explosive because it actually speaks to the whole problem and in the ari put it all together, even putting it together with racial issues in the music industry, I mean, the music industry has a long, ugly history of making money from black artists that go to white executives, and you've got to

look at this tie to that too. Well, Damon, this was a fascinating conversation, and I'm sure there's plenty of more roads and other aspects of all of this that we could go down, but I think that's a good, uh place to stop it. Really really appreciate you coming out odd Life. Thank you for having me, really appreciate it. Take care of them. Well, that was for me. I

loved having that conversation. Like I said at the beginning, I'm a big fan of Damon's music and a galaxy, but that really did actually put some pieces together for me about the frustration because in my view or the way I thought about it before, it was like the music, the music industry is always brutal. Very few people actually get to become superstar musicians or make a living at Anyone who ever has made a living at recorded music

has of course been very lucky. But this sort of comparison that he made between the the the hits driven pop model, which has always been hits driven, versus what he called the lemonade stand model, where you can not expect to make a gigantic hit, but maybe between record sales and touring taken a bit more income than the cost to put it all on. That really clicked for me,

and that was that was really strike against. So this idea that with the loss of most record stores, the loss of the CD business, and recently, of course the loss of live music, that really everyone is shuffled into the hits business. That clicked to me. So I really enjoyed that conversation, and uh big thanks to Damon for coming on. So this has been another episode of the Odd Lots podcast. I'm Joe Wisenthal. You can follow me on Twitter at The Stalwart. Follow my co host Tracy Alloway.

She's at Tracy Alloway. Follow our guest Damon Kurkowski. His handle is at Data Underscore Drummer. Follow our producer Laura Carlson at Laura M. Carlson. Followed the Bloomberg head of podcast Francesco Levi at Francesca Today, and check out all of our podcasts at Bloomberg under the handle at podcasts. Thanks for listening.