The future of music for artist revenue streams seems more uncertain than ever. Digital Music News is reporting a quote from Spotify’s Daniel Ek on CNN Money which appears to show the failure of the companies CEO to perform simple math.
It should be noted that Daniel Ek was also the CEO of uTorrent, “the world’s most popular Bit-Torrent client” which is advertising funded.
Spotify CEO: “Artists Will Make a Decent Living Off Streaming In Just a Few Years” | Digital Music News
CNN: At what point can an artist survive on a Spotify income?
Ek: Well, I mean, the interesting thing here is that we’re just in its infancy when it comes to streaming. And we just last week had an artist announcement where we basically said if there would be 40 million subscribers paying for a service like Spotify, it would be more than anything else in the entire music industry, including iTunes.
We don’t want to say Mr.Ek is lying, but he does appear to be very bad at simple math and to be misinformed about the actual size of the record business and the revenue being generated by Apple’s Itunes.
Is anyone actually capable of doing simple math in a spreadsheet? Here goes. 40m Spotify Subs at $10 a month is only $3.3b in annual revenue to artists and rights holders at paying out 70% of gross. How is $3.3b “more than” the current $15b total annual global revenue or the $7b in domestic revenue in the US?
Here’s the simple math…
40,000,000 * $84 = $3,360,000,000
$84 dollars per subscriber annually is calculated at $10 per month per subscriber paying out 70% to Artists & Rights Holders or, $7 per month. $7 per month, multiplied by 12 months equals $84 per year, per subscriber payable to Artists and Rights Holders.
40m Subscribers x’s $84 per year = $3.3b in annual global revenue to artists and rights holders (assuming they really are paying out 70% of gross).
If you are an artist you might also read these links below:
Music Streaming Math, Can It All Add Up?
Venture Capitalist Admits Artists Can Not Make A Living On Streaming Royalties…
The Internet Empowered Artist? What 1 Million Streams Means To You!
Streaming Price Index : Now with YouTube pay rates!
It appears to us that music streaming can only truly be profitable to those with participating equity in the streaming company itself. Those with equity are leveraging their catalogs of assets against the potential revenue of an IPO (in which the catalog of assets is being leveraged for that equity). Thus far however, it appears that the artists and songwriters who have created those assets as the basis for that equity leverage do not participate in any profit sharing that the equity shares may earn.
So it’s not that music streaming can not be profitable, it’s just that it can not be profitable (or equitable) to artists.
Please tell us which artists are being compensated from the $3b sale of Beats music to Apple? Let’s see a show of hands… Bueller… Bueller… Bueller…
Remember when we were told that in countries where music streaming was the most successful that transactional sales also increased? We’ve got a bridge in Brooklyn to sell you too, and cheap. More food for thought below.
Streaming Isn’t Saving the Music Industry After All, Data Shows… | Digital Music News
Album Sales Hit A New Low | Billboard
No Surprise Here: Spotify Streams Soar While Track Sales Fall | Billboard
3 thoughts on “Spotify’s Daniel Ek is Really Bad At Simple Math, “Artists Will Make a Decent Living Off Streaming In Just a Few Years””
I think it’s hilarious that Zoe Keating made more money selling 1325 of her catalog CDs through Amazon than over 2.5 million streams through various services. Although we don’t know how many streams she had through Pandora which is bizarre in itself. https://docs.google.com/spreadsheet/ccc?key=0AkasqHkVRM1OdHg2eWZRYVp1YmgyUDFvbWtwLWNCN0E#gid=0
The problem is that Spotify is unwilling to put limitations on their free service so they can harvest paid subscribers. And this is true for all of these services with the exception of Beats Music and Sirius XM satellite radio.
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