No, Streaming Is Not Saving Us. Revenues still down by Half.

We’ve been hearing an alarming narrative that “record labels are making more money than ever from streaming, but they’re just not paying musicians”. To be clear, we certainly have our issues with major labels, however we also need facts and to be truthful.

The truth is, that a decade after losing half of it’s revenues due to piracy as reported by CNN (click here), record labels are now only getting back up to half of what the peak business was in 1999. Half of where we were in 1999, twenty years later. Let that sink in. As unpopular as he was twenty years ago, Lars Ulrich was right.

Twenty years later, and we’re still only half of where we were in 1999.

There are only three numbers that matter when looking at the record industry post-piracy and here they are:

1999 : $14.6b = $22.01 in 2018 Dollars
2009 : $6.3b = $7.37 in 2018 Dollars
2018 : $9.8b = $9.8b in 2018 Dollars

This is clearly illustrated in the chart below provided by the RIAA, the trade group responsible for tracking these figures. At their lowest point in 2014, revenues from record sales were less than one third of their peak.

What this chart also shows is a decade long loss of $10b or more annually, which is over $100b in lost revenues to labels and artists. That’s $100b in lost revenues to labels and artists in just the past decade.

If we track total lost revenue to labels and artists since the launch of Napster in 1999 it totals just under $200 Billion Dollars in the USA alone.

The fundamental problem remains the same. There’s a hole in our bucket and all that revenue falling out though the bottom leads more or less to advertising funded piracy and YouTube. Many have suggested that YouTube is effectively the largest ad supported piracy platform. As we reported earlier this year in our updated Streaming Price Bible, the YouTube Value Gap is very, very real.

In future posts we’ll offer solutions and suggestions that should be under consideration at every major label. Not the least of which is transitioning subscription streaming models to incorporate a per stream transactional baseline, or a minimum wholesale price per stream.

In streaming, consumption does not grow revenues. More consumption and more streams do not generate more money. Revenue can only be generated by charging more for subscriptions, generating more advertising revenue (ad supported only, obviously) and expanding into more markets (gaining new subscribers). But eventually, everything flattens.

So the biggest question remains. What happens to overall revenues as streaming matures and cannibalizes the remaining revenue sources into purely niche markets. Digital Downloads will account for less than 10% of recorded music revenues by the end of the year, if not already. The CD market continues drop, and vinyl also declined slightly from 2017 (4.4%) to 2018 (4.3%).

Will streaming compensate for the lost revenues in other formats and continue to grow revenues towards a true recovery? It’s possible, but there will have to be some changes to address the economics presented to consumers despite what Goldman Sachs says. For the year of 2018 the industry reported $9.8b in revenues. To make that $37.2b by 2030 the industry needs to add nearly $3b a year for the next 10 years!

We don’t know what else they’ve got in that crystal ball that can predict revenues over a decade into the future but even by their bullish estimate of $37.2b in 2030, that is only $28b in 2019 dollars. Right now we’re still about $20b short.

 

 

 

@musictechpolicy: Wixen Music Publishing Files Lyric Infringement Lawsuit Against Pandora And Raises Questions About Lyric Licensing

Guest post by Chris Castle

In the “it was only a matter of time” department, Wixen Music Publishing has sued Pandora over infringing reproductions of the lyrics in songs it represents.  (For those reading along at home, Wixen is represented by badass David Steinberg, so good luck Pandora.)

All these cases against tech companies start with very similar facts–they were given a chance to fix the problem and they either entirely ignored the copyright owner (like David Lowery and Bluewater) or they obfuscated and tried to deflect blame, or did both.

Here’s the key fact from this Wixen case:

Plaintiff’s representatives put Pandora on actual notice of its infringing conduct in early 2018, yet Pandora did not even attempt to address its infringing conduct until May 2019, when it first purported to cease displaying some of the lyrics to the Musical Compositions on its service….Pandora’s infringement is therefore willful and deliberate.

In other words–Pandora apparently blew off its responsibilities for over a year and still didn’t fix the problem.  Here’s a practice point–when Wixen or someone like Wixen calls, you need to fix your problem.  Right. Now.

But this case raises an interesting side point that may indicate a likely waypoint down the trail.  There is a company called LyricFind that licenses lyrics for many publishers according to their advertising.  Wixen notes in the complaint:

Pandora may claim that it had obtained licenses to display the lyrics to the Musical Compositions from one or more sources, including an entity called LyricFind, the self-proclaimed “largest lyric licensing service” in the world, which claims that it “has licensing from over 4,000 music publishers, including all majors.” However, as Pandora knows, and has known, LyricFind did not have the authority to grant licenses to Pandora for the display of any of the lyrics to the Musical Compositions on its service.

How does Pandora know this?  Probably because Wixen (and possibly other publishers) told them so.  It’s entirely possible that Pandora has a license with LyricFind for the songs it represents, but if Wixen hasn’t authorized LyricFind to represent them for lyric licensing (which they evidently have not), then this is an irrelevant fact.

I have to believe until shown otherwise that LyricFind would be the first to tell their licensees that LyricFind does not purport to license all the lyrics for every song ever written or that ever may be written in any language from any songwriter or publisher in any country on the face of the Earth.

The problem seems to be the same problem that Big Tech has had with music from the beginning–the tech companies don’t want to have to confirm their rights because that involves human beings and human beings cost money.  It’s this dismally poor administration of licenses by the licensees that seems to be the stumbling block.

However, it does make for interesting viewing to see exactly what was said by whom when about what, and what assurances were given.  My bet is that the next step will be like the Music Modernization Act–a retroactive safe harbor with a blanket license and a statutory monopoly.

Read the Wixen complaint here.

2018 Streaming Price Bible! Per Stream Rates Drop as Streaming Volume Grows. YouTube’s Value Gap is Very Real.

Here we go again. To see previous years, click [here].

This data set is isolated to the calendar year 2018 and represents a mid-sized indie label with an approximately 250+ album catalog now generating almost 1b streams annually. 2018 is the year we saw streaming truly mature as the dominant source of recorded music revenues.

In parsing the data provided we find that digital revenues are 86% of all recorded music revenues globally (RIAA Reports Digital Revenues as 90% of Total). Streaming is 80% (or more) of Digital Music Revenues. Downloads are about 20% of digital music revenues for the year, however if we isolate Q4, it would appear download revenues could be less than 15% of digital revenues. The transition from downloads to streaming is well beyond the tipping point and we wonder how long the major services (Apple, Amazon, Google) will continue to support the format.

As we dig down into the physical revenues much of the gross is eroded by manufacturing, shipping and inventory costs of both CDs and Vinyl. In short, the recorded music business is now the streaming music business. Whatever charm there is to vinyl, it is at best still a truly niche business in terms of meaningful net revenues.

Every year there are surprises in the data and this year is no exception. As always we present this data as a single sample, but one we feel is fairly representative of the state of the business. As such, we welcome comments from others with access to similar data to report on their findings. Some of the percentages may vary dependent upon the genre of music and the size of the label or artist. However, we generally don’t find trends that are completely contradictory to our sample where it matters most, in reporting on stream rates and relative marketshare.

We’ve also simplified the chart this year. Just one chart, and only the Top 20 streamers which represent  99.35% of all streaming dollars. The Top 10 streamers account for over 97% of all music streaming revenues. The Top 5 account for over 88% of all streaming dollars. What we see below is a maturing marketplace with a small number of dominant players. Anyone who thought the digital revolution would remove so called “gate keepers” are painfully wrong.

If you want to compare these numbers against the RIAA’s official report for the first half of 2018, click [here]. That data is for the USA and only through June of 2018. It’s hard to get “apples to apples” reporting, so everything should be taken as different perspectives on the overall business. If you are an artist or label, see how your own data compares.

The biggest takeaway by far is that YouTube’s Content ID, (in our first truly comprehensive data set) shows a whopping 48% of all streams generate only 7% of revenue. Read that again. This is your value gap. Nearly 50% of all recorded music streams only generate 7% of revenue.

 

The Spotify per stream rate drops again from .00397 to .00331 a decrease of 16%. Apple Music gains almost 3% for an total global marketshare of about just under 25% of all revenue.

Apple’s per stream rate drops from .00783 to .00495 a decrease of 36%. We need to state again, that 2018 saw a massive shift of revenues from downloads to streaming and no doubt this expansion of scale, combined with more aggressive bundling (free trials) as well as launching into more territories was bound to bring down the overall net per stream.

Apple Music still lead in the sweet spot with about 10% of overall streams generating 25% of all revenue (despite the per stream rate drop). Spotify by comparison has nearly triple the marketshare in streams than Apple Music but generates less than double the revenues on that volume.

The biggest takeaway by far is that YouTube’s Content ID, (in our first truly comprehensive data set) shows a whopping 48% of all streams and only 7% of revenue. Read that again. This is your value gap. Nearly 50% of all recorded music streams only generate 7% of revenue. Apple Music and Spotify combined account for just short of 40% of all streams and 74% of all revenue.

We don’t know how the powers that be at the major labels can continue to allow for this gross inequity. It will be interesting to see how YouTube Red numbers evolve over this year. YouTube Red, the newly rebranded version of the disastrous “Music Key” is off to a slow start in a competitive subscription music marketplace. One has to ask, what incentive is there really for Google/YouTube with the Red subscription service when they already benefit from service 48% of all streams while paying only 7% of the overall revenue?

In looking at the per stream rates for song and album, you might want to read this article by Billboard on the current calculation of how many streams equal and album for the purposes of charting. We don’t know if YouTube Content ID streams count towards charting, but they absolutely should not. The report states that, “The Billboard 200 will now include two tiers of on-demand audio streams. TIER 1: paid subscription audio streams (equating 1,250 streams to 1 album unit) and TIER 2: ad-supported audio streams (equating 3,750 streams to 1 album unit).”

In the coming year Amazon’s Unlimited Music service shows promise. We also wonder about Google Play. The payouts on Google Play are fair, but when bundled into the YouTube ecosystem is largely inconsequential in terms of both streams served and revenue. As smart home assistants grow there could be a larger market segment for paying subscribers to have streaming music catalogs available and on demand.


These numbers are from one set of confidentially supplied data for global sales. If you have access to other data sources that you can share, we’d love to see it.

  • HOW WE CALCULATED THE STREAMS PER SONG / ALBUM RATE:
  • As streaming services only pay master royalties (to labels) and not publishing, the publishing has to be deducted from the master share to arrive at the comparable cost per song/album.
  • $.99 Song is $.70 wholesale after 30% fee. Deduct 1 full stat mechanical at $.091 = $.609 per song.
  • Multiply the above by 10x’s and you get the album equivalent of $6.09 per album
[EDITORS NOTE: All of the data above is aggregated. In all cases the total amount of revenue is divided by the total number of the streams per service  (ex: $5,210 / 1,000,000 = .00521 per stream). In cases where there are multiple tiers and pricing structures (like Spotify), these are all summed together and divided to create an averaged, single rate per play.]

[royalties][streaming royalties][music royalties][royalty rates]

Spotify’s Big Lie, Streaming Habits Mirror Purchasing Habits

One of the biggest lies told by Spotify is that streaming will provide more revenue over the life of a record because every play will be monetized. This as opposed to the one time payment earned from a transactional purchase where all the revenue from the purchase of the record is paid at once. There is however, a very big problem with this theory, which is that the consumption curves of streaming match the consumption curves of transactional sales.

So, what about that so called long tail? Well, it doesn’t exist. Not for music consumption. Or we should say, it doesn’t exist any different for streaming than it did has for transactional sales. What do you think is more profitable in generating revenue? Is it the album sales of artists catalogs, or is streams?

Keep in mind, streaming is a fixed cap market. So it does not matter how much the market grows in actual consumption, the revenue is capped by the amount of revenue earned by the hosting provider. If consumption doubles, but revenues stay flat, every stream is worth half of what it was previously.

We’re already seeing this trend as we noted earlier this year that Spotify per stream rates appear to be dropping steadily by about 8% per year. This is likely a combination of both the growth of consumption and the slowing of revenue across both subscriptions and advertising.

If anyone truly believes streaming is going to generate more revenues than transactional sales, we have a bridge in Brooklyn to sell you cheap. The fix is simple. The industry must move towards adopting an industry standard streaming penny rates. Only by setting fixed per stream rates will compensation scale with consumption.

[NOTE:] Chart from a mid size indie label showing revenues from Downloads and Streaming. The Spikes indicate new release activity / hits which reveals that revenue tails off for streaming the same way it does for transactional downloads.

2017 Streaming Price Bible! Spotify per Stream Rates Drop 9%, Apple Music Gains Marketshare of Both Plays and Overall Revenue

We first did this back in 2014, and then again last year, so here we are again.

As we predicted as streaming consumption grows, the per stream rate will continue to drop, every year, year to year.

This data set is isolated to the calendar year 2017 and represents a mid-sized indie label with an approximately 200+ album catalog now generating over 200m+ streams annually. That’s a pretty 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%.

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.

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. Looking at the stats below we can actually see that working for Apple Music!

An interesting 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. Again, this is just music delivered to YouTube via the distributor for the automated song generation and it does not include Content ID or Artist Channel revenues.

For the second year in a row Apple Music Streaming sits in the sweet spot generating the second largest amount of streaming revenue.  The current per stream rate seems to have actually modestly increased from .00735 last year to .0783 this year. A nominal increase but worth noting. Apple’s current effective rate of .00783 is pretty close to double the Spotify effective rate of .00397.

There’s more good news for Apple as their market share has risen from 7.18% last year to almost 11% this year. But the bigger story is that Apple Music is now accounting for over 22%+ of music streaming revenues up nearly 11% from last year. This is good news and shows the power of both Apple’s commitment to streaming, and the value of a paid only platform. Apple Music is actively taking marketshare away from Spotify.

To put this list in the context of our previous reports and numbers we’re adding the chart below with the data sorted by the quantity of streaming plays required to match the revenue of a single song or album download. This is important as we work towards defining and setting a fair per stream rate and also setting an accurate economic equivalent of streams to songs and albums for the purposes of charting.

Billboard currently calculates 1,500 streams to one album for the purposes of charting, which at current streaming rates (at Spotify) actually sorta matches an economic equivalent. But that’s just backing out of an arbitrary rate set by Spotify, it doesn’t actually define what the cost of a stream should be.

Keep in mind every streaming service has a key piece of data that would allow artists and labels to set a fair per stream rate. Every on demand streaming service, Apple, Spotify, Tidal, Google Play all know how many times a song is played (per person) on average over time. This is the data that is key to setting fair streaming rates. Who will share this information? Apple, Jimmy Iovine, we’re looking at you.

 

These numbers are from one set of confidentially supplied data. If you have access to other data sources that you can share, we’d love to see it.

  • HOW WE CALCULATED THE STREAMS PER SONG / ALBUM RATE:
  • As streaming services only pay master royalties (to labels) and not publishing, the publishing has to be deducted from the master share to arrive at the comparable cost per song/album.
  • $.99 Song is $.70 wholesale after 30% fee. Deduct 1 full stat mechanical at $.091 = $.609 per song.
  • Multiply the above by 10x’s and you get the album equivalent of $6.09 per album
[EDITORS NOTE: All of the data above is aggregated. In all cases the total amount of revenue is divided by the total number of the streams per service  (ex: $5,210 / 1,000,000 = .00521 per stream). In cases where there are multiple tiers and pricing structures (like Spotify), these are all summed together and divided to create an averaged, single rate per play.]

[royalties][streaming royalties][music royalties][royalty rates]

 

If Only Artists and Managers Had Listened To Us : Spotify Per Stream Rates Keep Dropping

We hate to say we told ya so, but… Below is our post from September 2015. Two years ago we predicted the inevitable truth of the all you can eat Spotify subcription model. Like many of our predictions and proposals (example; windowing titles) we’ve had to wait for the industry to catch up to us. Today, two years later, Digital Music News confirms our prediction.

Read the report from Digital Music News by clicking the headline link here.

Exclusive Report: Spotify Artist Payments Are Declining In 2017, Data Shows | Digital Music News

Our original post from 2015 is below…


Spotify Per Play Rates Continue to Drop (.00408) … More Free Users = Less Money Per Stream #gettherateright

Down, down, down it goes, where it stops nobody knows… The monthly average rate per play on Spotify is currently .00408 for master rights holders.

PerStreamAvg_Jun11_July15

48 Months of Spotify Streaming Rates from Jun 2011 thru May 2015 on an indie label catalog of over 1,500 songs with over 10m plays.

Spotify rates per spin appear to have peaked and are now on a steady decline over time.

Per stream rates are dropping because the amount of revenue is not keeping pace with the  number of streams. There are several possible causes:

1) Advertising rates are falling as more “supply” (the number of streams) come on line and the market saturates.

2) The proportion of  lower paying “free streams”  is growing faster than the proportion of higher paying “paid streams.”

3) All of the above.

This confirms our long held suspicion that as a flat price “freemium” subscription service  scales the price per stream will drop.  As the service reaches “scale” the pool of streaming revenue becomes a fixed amount.  The pie can’t get any larger and adding more streams only cuts the pie into smaller pieces!

The data above is aggregated. In all cases the total amount of revenue is divided by the total number of the streams per service  (ex: $4,080 / 1,000,000 = .00408 per stream). Multiple tiers and pricing structures are all summed together and divided to create an averaged, single rate per play.

After 16% drop in Per Stream rates, Spotify asks for another 14% Reduction…

We can’t make this up. We’ve stated many times before, as the consumption of streams increase (and those services grow) the per stream rate will drop as revenues level off. This is simply because revenues can not keep up with consumption, and there is no fixed per stream rate.

In our latest look at streaming rates we found that Spotify streaming rates had dropped 16% from 2014 to 2016. Now, Hypebot is reporting that Spotify is asking for another 14% reduction in royalty payments.

Please someone break out a calculator… that would be a 30% reduction in per stream rates in two years! It’s just math. Wow.

Read the full story at Hypebot:

Spotify’s Latest Offer To Labels: A 14% Lower Royalty Rate | Hypebot

Spotify Retaliating Against Apple Music Exclusive Artists, Execs Say… | DMN

Nope… nothing to see here…

The Times dropped the bombshell after digging into the Frank Ocean situation, one that is actively causing the music industry to reinvestigate their practices around exclusives.  “Executives at two major record labels said that in recent weeks Spotify, which has resisted exclusives, had told them that it had instituted a policy that music that had benefited from such deals on other services would not receive the same level of promotion once it arrived on Spotify,” Sisario wrote.  “Such music may not be as prominently featured or included in as many playlists, said these executives…”

READ THE FULL STORY AT DIGITAL MUSIC NEWS:
http://www.digitalmusicnews.com/2016/08/26/apple-music-exclusive-spotify-sabotage/

Spotify might not suppress search, but that doesn’t mean artists with exclusives get treated equally | Tech Crunch

Hmmmm…

However, while Spotify has been clear about rejecting one part of the argument against the company, there is another piece of the story that remains unaddressed. Hidden in the details, the accusations are really twofold, including both the notion that

* Spotify directly suppresses tracks from artists that have previously signed exclusives with Apple Music or Tidal in search results.
* And, Spotify indirectly targets artists who have signed exclusives with Apple Music and Tidal but promoting music differently in playlists and banner ads.

READ THE FULL STORY AT TECHCRUNCH:
https://techcrunch.com/2016/08/26/spotify-might-not-suppress-search-but-that-doesnt-mean-artists-with-exclusives-get-treated-equally/

Spotify Is Burying Musicians for Their Apple Deals | Bloomberg

New boss, worse than the old boss…

Spotify has been retaliating against musicians who introduce new material exclusively on rival Apple Music by making their songs harder to find, according to people familiar with the strategy. Artists who have given Apple exclusive access to new music have been told they won’t be able to get their tracks on featured playlists once the songs become available on Spotify, said the people, who declined to be identified discussing the steps. Those artists have also found their songs buried in the search rankings of Spotify, the world’s largest music-streaming service, the people said. Spotify said it doesn’t alter search rankings.

READ THE FULL STORY AT BLOOMBERG:
http://www.bloomberg.com/news/articles/2016-08-26/spotify-said-to-retaliate-against-artists-with-apple-exclusives