A company by the name of consumersadvocate.org reached out to me and asked if I would share their new guide on the music streaming industry which has an infographic and calculator that breaks down how much you can get paid by each streaming service. I checked it out and it looks like it is helpful and supportive to our community of aspiring artists. Below is a summary and a link to their full guide:
The following is written by consumers advocate:
A Streaming Boom
It used to be that artist’s revenue came mostly from selling records, but not anymore.
For the past few decades revenue in the music industry has shifted from album sales
towards touring, and more recently streaming. With the exception of vinyl records, which
Nielsen’s Mid-Year Report confirms have had steady growth from 2006 onward, digital
services have dominated sales. The industry is much alive, but making a living through
music has drastically changed, and artists’ strategies to monetize their work have had to
follow suit.
The current mid-year report by the Recording Industry Association of America (RIAA),
confirms the rise of streaming media. The U.S. music industry has seen an up in
revenue during the first semester of 2019. There’s also been a substantial increase in
paid subscriptions, which reached 60 million for the first time in history. The music
streaming market grew to $5.4 billion, which represents 80% of the overall music
revenue.
Growth, so it seems, will be the trend for the foreseeable future. Another report by
Goldman Sachs, predicts that by 2030 there will be 1.5 billion paid subscriptions, adding
up to a $27.5 billion industry. The main takeaway from these reports is that people
seem to prefer to pay for ad-less streaming over “freemium”. This begs the question:
how much of that money is actually reaching the artists? Not much.
Getting Paid
The majority of streaming services use a licensing model called "service-centric” or “pro-
rata” which calculates royalties based on the total revenue generated by the streaming
platform. Payment is based on the overall number of streams per-month for all artists.
That means that each artist’s monthly revenue represents their percentage share of the
company’s overall streams.
Many critics have voiced concerns over this system. They insist that this formula only
favors the most popular artists while neglecting independent and upcoming acts. This
might be true, as reports have shown that around 10% of the most-streamed tracks
represent 99% of all streams. Which means that 90% of all other streams get only 1% of
revenues.
What’s favored are “user-centric” licensing systems in which artists gets paid based on each listener’s
monthly consumption. For example, if you pay $10 per-month for the service and only listen to certain artists,
100% of royalties stemming from your subscription will go to those artists, a method of payment similar to the
one used for record sales.
To aid in understanding how many streams it would take for a song to become
profitable, you can use the royalty calculator in this streaming services article. Just write
a hypothetical number of streams, select a service, and click "calculate." It’s important
for artists to choose the right streaming service in which to host their music. Being part
of the correct community of listeners is an essential part of a successful business
strategy.
Reaching the Right Audience
Which service is best depends on the artists. It’s a question of what pay-rate feels fair to
them, how much control they have over their work, or what audience they are trying to
reach. For example, if an artist works classical compositions, Idagio is their best bet.
They pay royalties on a play-per-second basis, basically, the time users spent listening.
Play count might work for short pop tracks, but listening-time clearly favors longer
compositions.
YouTube is still the go-to for artists with audiovisual strategies. However, YouTube
Music ranks towards the bottom of the per-stream rate pool. It allegedly pays only
$0.00074 per-stream. Put into perspective, that’s $740 dollars for a million plays. That
same amount of streams would represent close to $6000 on Apple Music, which pays
about 0.0060 per-stream. Apple’s is the second best per-stream rate after Tidal which
currently reports the payment at 0.0125 per stream.
Tidal advertises itself as a platform “by artists for artists.” Part of their strength is using
its owners’ industry insight and contacts to highlight up-and-coming artists not yet
signed with major labels. All the same, the best industry rate is Napster’s, which offers
0.019 per stream. Unfortunately, Napster has no artist programs with which to upload or
submit music for consideration. Instead, they choose to work directly through music
distribution groups.
Some of the most popular streaming services offer less competitive rates but have great
music discovery algorithms. For example, Spotify’s data analytics and predictive
features have become pretty much standard for streaming platforms. They use a
process called “collaborative filtering” where user’s tastes are combined with those of
similar listeners. However, Spotify also ranks on the lower spectrum of pay charts at
0.0044 per stream.
Similarly, Pandora uses its Music Genome Project, considered by many the best music
discovery algorithms. It is extremely valuable to musicians as it plays their work to a
meticulously tailored audience. Pandora allows artists to submit work for evaluation
through their AMP program. Their rates, unfortunately, sit just above YouTube’s, at
0.0013 per stream.
Different to the other per-stream practices, SoundCloud, employs an advertisement
monetization strategy. The platform has made a name for itself by jumpstarting the
careers of many Rap, EDM and Lo-Fi music acts. They advertise that their revenue
share “meets or beats any other streaming service”. Artists need to have at least 5,000
plays a month to qualify for the program in which they receive 55% of the total revenue
garnered through advertisements.
For now, most artists can’t yet depend solely on streaming as a source of income. Even
so, streaming services can offer a steady compliment to their work portfolio and greatly
improve audience reach. Current rates might not be enough for an artist to stop touring
or to abandon their retail offerings, but growing numbers also show great potential for
the industry as a whole. Hopefully, in the near future, this will translate to better rates for
content creators which at the end of the day are the backbone of any streaming service.
for a much more in-depth look at streaming services go to https://www.consumersadvocate.org/music-streaming-services#toc-fairness-in-royalty-payments