When it comes to getting paid, the bigger streaming service is not necessarily better for most musicians and song writers.
While the revenue and market share have grown for the leading streaming services, some significantly, the royalties paid to artists have been declining.
According to a recent article in The Trichordist, a publication dedicated to the protection of artists rights in the digital age, streaming royalties paid to artists declined in 2017.
The blog took snapshots from a major indie portfolio for 2017, 2016 and 2013. It found that “when streaming numbers grow, the per stream rate will drop.”
This data set is isolated to the calendar year 2016 and represents a label with an approximately 150 album catalog generating over 115 million streams, a fairly good sample size. All rates are gross before distribution fees.
Spotify was paying .00521 back in 2014, two years later the aggregate net average per play rate dropped to .00437 in 2016, a reduction of 16%, reports the Trichordist. The current effective per stream rate at Spotify has now dropped to 0.00397, a reduction of 9% since last year. This a cumulative reduction of 24% since 2014, which is an average decrease of 8% a year of the per stream rate.
Business Model Questions
“If the music business could set a per stream rate that allowed revenue growth, proportionate to consumption growth that would be a much better model,” said David Lowery, editor of The Trichordist and leader of the band Cracker and Camper Van Beethoven. Lowery teaches in the Music Business Certificate Program at Terry College of Business, University of Georgia.
A notable change from last year is that Pandora replaces YouTube with the greatest value gap of streams at 21.56% volume with only 7.86% of revenue. YouTube drops to 8.38% of volume with only 1.70% of revenue.
Indie Label Sample: 115 Million Streams
Apple appears to be the lone streaming service that is growing both in market share and revenue, and is paying relatively high royalties. It accounts for 22.29% of the revenue on 10.48% of the streams, and pays approximately six-times the per-stream royalty rate of Pandora. (Apple’s iTunes is a direct purchase model, while Pandora offers a more radio-like format, which precludes on demand listener selection.)
More than 95% of the streams and 98% of the revenue were concentrated in the top ten companies. The top three, Spotify, Apple iTunes and Pandora, comprise about 80% of the streams for this representative catalogue and 82% of the total streaming revenue.
Image source: thetrichordist.com