The Realities of Streaming Music For Artists

Posted on March 25, 2016 by

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By, Wendy Day

I saw that Daniel Ek, CEO of Spotify, tweeted earlier this week that Spotify now has 30 million subscribers (as of March 2016).  So curiosity had me do a quick Google search to learn that:

-Apple Music has 10 million paid subscribers (January 2016), [As of June 2016, Apple Music has 15 million subscribers]

-Rhapsody has 3.4 million paid subscribers (December 2015),

-Tidal has 3 million paid subscribers (March 2016),

-Deezer has around 6 million paid subscribers (March 2016).

I couldn’t find the the membership statistics for Microsoft’s Groove, Slacker, or for the Google services– when you subscribe to Google play for 10 bucks a month, you also get YouTube Red included. In comparison, although it’s film and television, Netflix has over 75 million subscribers (worldwide).

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Pandora, which is more of a radio streaming service than an on-demand streaming service has 81.1 million monthly listeners. They pay via Sound Exchange rather than the Performing Rights Societies, ASCAP, BMI, and SESAC, like terrestrial radio.

Yesterday, the RIAA statistics for 2015 were finally released. Streaming is officially the #1 way fans receive monetized music. People no longer care if they own music as long as they can listen to whatever they want, whenever they want. It’s why cable television and Netflix are so popular in the film and TV world. Paid-subscription streaming income increased 52.3% to $1.22 billion in 2015.

In addition to streaming services earning income from subscribers, they also earn income from ad revenue which was just over $385 million in 2015. This is a 30.6% increase over 2014’s revenues for the free tiers at streaming services like SoundCloud, YouTube and Spotify. Of streamed music in 2015, paid-for services accounted for 51% of the overall income, ad-funded contributed 16%, and SoundExchange accounted for 33%.

 

 

Thanks to streaming services like Spotify, and with the introduction of TIDAL and Apple Music, the overall retail income increased 0.9% in 2015 to $7.02 billion in the US, according to the RIAA. The money paid to artists and labels also increased 0.8% to almost $5 billion–the 4th consecutive year that wholesale income has grown.

Income from digital download sales declined 10% to $2.3 billion while revenue from non-interactive streaming services such as Pandora, paid through to SoundExchange, were $802.6 million, an increase of 3.8% from 2014. Including SoundExchange, total streaming income hit $2.41 billion in 2015.

 

In terms of revenue producing music (meaning: not bootlegged or illegally downloaded) in the US, streaming accounts for 34.3% of the market, digital downloads are 34% of the income, and physical sales are 28.85%. The remaining 2.9% of US revenues are from sync fees.

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This made me wonder what independent artists earn from streaming revenues of music. Here is an example for the month of December 2015 from a new artist who has a distribution deal that’s an 80/20 split. He keeps 80%, which is listed below, in the order of highest income per stream to lowest.

December 2015

Groove paid .02547945 per stream
Tidal averaged .01546973 per stream
Slacker Radio paid .00840909 per stream
Rhapsody paid .00649688 per stream
Google Play paid .00637216 per stream
Deezer paid .00503719 per stream
Apple Music paid .00411745 per stream
Spotify paid .00385073 per stream
Youtube paid .00137158 per view
iTunes Match paid .00110036 per stream
Google Play Locker paid .00024091 per stream

So, according to what this new artist received in the month of December 2015, to make at least $100 in income per source (remember he loses 20% to his distributor for collecting the money for him and for getting him on playlists and front pages when he drops a new single), this is how many streams he needs to get at each service: Groove 3,925 streams
Tidal 6,465 streams
Slacker 11,892 streams
Rhapsody 15,393 streams
Google Play 15,694 streams
Deezer 19,853 streams
Apple Music 24,287 streams
Spotify 25,969 streams
YouTube 72,909 views

Percentage of streaming income: 72%
Percentage of digital download sales income: 28%

If this artist chooses to sign to a major label, he will only receive a small percentage of streaming income (or any music sales income) AFTER the label recoups the expenses spent on his project. I imagine this is why most signed artists complain about the low profitability of streaming music. They better figure it out quickly because 1/3 of all music revenue now comes from streaming, and that’s only going to increase as fans prefer streaming music for 10 bucks a month on their phones to purchasing CDs or storing digital downloads. They can only remove their music from streaming services for so long…eventually fans will forego a release or find it bootlegged elsewhere rather than buy a CD or digital download that they don’t really want. Streaming isn’t just the future, it’s here now!

One of my clients made almost $2,000 in December just on music sales– and again, he is at the beginning of his career. Plus we give his music away for free online and in-person. When you add in the income from shows and selling merchandise at those shows, and the money he gets from having his music featured in TV, film, games, and commercials ($13,600 in 2015), he can support himself and his family by doing what he loves: rapping. The key is to find an investor, and then build your fanbase and cater directly to them on the streets, on social media, and with your music. Just so you know, this artist did not have any bloggers post his music and he had no famous artists featured on any songs with him. This was done 100% by reaching fans face to face in the southeast and online, mostly via Twitter and Instagram. He gives his fans what they want from him and he prefers to make money rather than building fame.

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