Category: Royalty Rates

About Royalty Rates

No, Streaming is not more profitable than Transactional Sales… Not Today, Maybe Not Ever…

There’s a recent report from the Wall Street Journal that is being grossly misinterpreted from this line,

“Data reviewed by The Wall Street Journal showed that one major record company makes more per year, on average, from paying customers of streaming services like Spotify or Rdio than it does from the average customer who buys downloads, CDs or both.”

This does NOT mean that streaming will be more profitable than transaction sales anytime soon. It seems to suggest that streaming could possibly, possibly become more profitable than transactional sales, but that is seemingly unlikely due to simple math which will review below.

What that sentence says is that a premium paid subscriber spends approximately $120 per year on music purchasing, whereas an average music consumer spends less in total over the course of a year. This does not take into account the non-average music consumer who spends much more than $120 a year, nor does it take into account that the number of “average music consumers” is hundreds if not thousands of times larger than the number of premium paid subscribers.

What would be truly interesting and important to the conversation is to see how much total revenue is being generated by streaming in the aggregate against transactional sales. As we’ve reported before, using a simple spreadsheet, streaming services would need at least 90 million subscribers to be competitive as a viable option to replace transactional sales.

By most estimates there are few people who think Spotify can scale up to and maintain 30 Million paid subscribers in the US. So this begs the question…

If streaming is the future how does $2.5b in revenue from a massively successful Spotify replace the loss of $8.3b in annual earnings?

Complicating discussions around the streaming revenue issues are also the risks of cannibalization. As the early year end numbers come in for 2013 we’re already seeing transactional download numbers starting to flatten and decline.

As Music Downloads Decline, Expect More Anti-Spotify Anxiety | FastCoLabs

It’s official: We’re buying less digital music. Just like vinyl, cassettes, and CDs before it, the digital download may have reached it peak, with total sales dropping 4% from last year. The culprit? It’s complicated, but expect the already-raging debate over Spotify, streaming, and the future of music distribution to heat up.

Here’s a breakdown. In the first half of this year, U.S. music fans paid for 25-30 million digital tracks per week, according to Billboard. In October and November, that number dipped below 20 million. Billboard blames “a web of interrelated stories that show new technologies affecting consumer behavior” for the decline, with the most obvious culprit being that little green and black icon on your home screen.

READ THE FULL STORY AT THE WALL STREET JOURNAL:
http://online.wsj.com/news/articles/SB10001424052702304020704579276123352482930

by Trichordist Editor

David Byrne: “Do you really think people are going to keep putting time and effort into this, if no one is making any money?” | Salon

Start the stopwatch for the synchronized swimming rapid response team… David Byrne in Salon:

The musical genius shares his songwriting secrets, opens up his finances and ponders the future of art and the Web

Lots of us believe that musicians, along with other artists, are struck by inspiration and have this emotion which they must express and share. But you argue in your book that it is actually the opposite — that the idea of the songwriter pouring heart, soul and autobiography into his or her music is wrong-headed. “The accepted narrative,” you write, “that the rock and roll singer is driven by desire and demons, and out bursts this amazing, perfectly shaped song that had to be three minutes and 12 seconds. This is the romantic notion of how creative work comes to be, but I think the path of creation is almost 180 degrees from this model.”

READ THE FULL STORY AT SALON:
http://www.salon.com/2013/12/21/david_byrne_do_you_really_think_people_are_going_to_keep_putting_time_and_effort_into_this_if_no_one_is_making_any_money/

by Trichordist Editor

Pandora loses BMI court battle over music licensing | Circa

Pandora has spent more than a year in legal battles with music publishers over exactly what songs the online radio service has access to.

A federal judge in New York has ruled that Broadcast Music Inc., a performance rights organization, may allow its members to prevent their music from being licensed to Pandora. The Dec. 18 decision means that Pandora may soon lose access to music from publishers like Universal and BMG.

READ THE FULL POST AT CIRCA:
http://cir.ca/news/pandoras-music-licensing-battles

by Trichordist Editor

Graham Henderson: “Of what is and is not broken…”

The Canadian Independent Music Association just completed a study that pegs the average musician’s income in Canada at $7,228. This echoes an earlier study undertaken by Professor Doug Hyatt of Rotman which put the number at $16,491. Income at these absurdly low levels render it virtually impossible to pursue music as a profession. It starts to look and feel more like a hobby. And let me tell you that this is a far cry from the conditions that could be obtained prior to 1999.

The “middle class” for want of a better term is in a state of what appears to be terminal decline. This is a phenomena that has been remarked on and discussed in many fora but rarely as it applies to the creative class. We now live in a world where a very few musicians have become fabulously wealthy, leaving almost everyone else with very little on the table. Was not digital technology supposed to have done EXACTLY to opposite? Successful bands today have become more brand than band, diversifying into luxury goods, film, television and beyond. This is in strident contrast to musicians of the past who would have been horrified beyond imagining to have their art, their political speech, associated with mere products. I knew artists who turned down absolutely fabulous sums rather than shill for an advertisement.

READ THE FULL POST AT MUSIC CANADA:
http://musiccanada.com/newsitem.aspx?scid=65834

by Trichordist Editor

As Music Downloads Decline, Expect More Anti-Spotify Anxiety | FastCoLabs

We’re starting to get the answer to the question, “is Spotify revenue instead of transactional download revenue, or in addition to transactional download revenue”?

It’s official: We’re buying less digital music. Just like vinyl, cassettes, and CDs before it, the digital download may have reached it peak, with total sales dropping 4% from last year. The culprit? It’s complicated, but expect the already-raging debate over Spotify, streaming, and the future of music distribution to heat up.

Here’s a breakdown. In the first half of this year, U.S. music fans paid for 25-30 million digital tracks per week, according to Billboard. In October and November, that number dipped below 20 million. Billboard blames “a web of interrelated stories that show new technologies affecting consumer behavior” for the decline, with the most obvious culprit being that little green and black icon on your home screen.

READ THE FULL STORY AT FAST CO LABS:
http://www.fastcolabs.com/3023581/as-music-downloads-decline-expect-more-anti-spotify-anxiety

RELATED:

Music Streaming Math, Can It All Add Up?

Xbox Music : Microsoft to Pay The Most of Any Music Streaming Service?

Why Spotify is not Netflix (But Maybe It Should Be)

by trichordist

Bloomberg ALMOST get’s it right about Spotify and Streaming… ALMOST…

Bloomberg almost gets it right. While Megan McArdle correctly identifies the problem with Spotify in the context of current market economics she fails to recognize the source of the downward pressure on online music distribution, Ad Funded Piracy.

Lou Reed and Dead Kennedys Go Public Against Ad Funded Piracy with Facebook Posts

As we have said many times, we don’t object to streaming as a business model, we only object to the poor revenue and compensation economics that these services currently provide. In other words, the economics of music streaming are a direct symptom of the larger disease of Ad Funded Piracy – this is why we hope to see more artists speaking up about the actual source of the problem as pirate sites are a for profit business that do not compensate artists at all.

BLOOMBERG:

In other words, while the cost side has improved, the revenue side has gotten worse even faster. People simply aren’t willing to pay very much for recorded music anymore. If you’re an artist, and especially if you’re a record label, that’s very bad news. Naturally, some artists want to shoot the messenger, blaming Spotify for their paltry payments. But Spotify is not the problem. The market is the problem. Spotify is just the messenger telling them what the market is now willing to pay for their songs.

We have a suggestion for any streaming music company executives who should happen across this post – if you really want to help musicians, why not start educating the media and musicians about the cause and source of why streaming economics are really so bad, Ad Funded Piracy.

Let’s join forces and aggregate the power of the community to restore a fair, ethical and balanced marketplace to music so that artists, songwriters and performers can have sustainable careers, and you too.

READ THE FULL STORY AT BLOOMBERG:
http://www.bloomberg.com/news/2013-12-09/spotify-isn-t-why-musicians-can-t-make-a-living.html

RELATED:

Google, Advertising, Money and Piracy. A History of Wrongdoing Exposed.

Over 50 Major Brands Supporting Music Piracy, It’s Big Business!

by trichordist

Get Ready For The Streaming-Music Die-Off | ReadWrite

We’ve been saying for a while that we’re not opposed to music streaming as concept so much as we are about the revenue models and royalties. We’ve offered our criticisms that the math just never really adds up, even if you scale out Spotify to it’s logical conclusion.

We’ve also offered our suggestions for how these streaming services could offer a more robust and diverse environment to both artists and consumers. Looks like we’re not the only ones seriously questioning the economic validity of these models.

The streaming era is the next music industry ice age.

Beyond their broken business model, these companies share a lot of dubious promises to investors, shareholders and artists. Rdio hopes to get in the black by luring in more ad-supported subscribers. Spotify promises that when it scales up to 40 million paid users—it’s currently at 6 million—that artists will get paid five times what they make from the service today (the math works out, but that 40 million figure is a big “if”). Pandora, unprofitable and crippled by royalty fees as its user base grows, promises that mobile ad revenue can offset the revenue it’s hemorrhaging.

READ THE FULL STORY AT READ WRITE:
http://readwrite.com/2013/12/06/streaming-music-competition-pandora-rdio-spotify#awesm=~opsnA43Lt7QuiQ

by Trichordist Editor

Aimee Mann Wins First Round of Digital Music Lawsuit | Billboard

In July, Aimee Mann brought a noteworthy lawsuit over the possible existence of a massive amount of unlicensed music being streamed online.

In the cross-hairs of Mann’s multimillion-dollar legal claims was a company called MediaNet, originally backed by EMI, AOL, BMG and RealNetworks before being taken over by a private equity firm. MediaNet is essentially a white label that has served up more than 22 million songs to more than 40 music services, including Yahoo Music, Playlist.com, eBay and various online radio services.

Mann sued the company for allegedly infringing 120 of her songs, saying that a license agreement signed in 2003 expired three years later. There was also hint that she wasn’t alone. Her lawyer told The Hollywood Reporter at the time that the lawsuit served “as a call to other artists to follow the lead set by Radiohead and Pink Floyd to put an end to the unlicensed, uncompensated use of their music by online services.”

In reaction to the lawsuit, MediaNet maintained it had a valid license. On Friday, however, a California federal judge punched a big hole in this defense.

READ THE FULL POST AT BILLBOARD:
http://www.billboard.com/articles/news/5812305/aimee-mann-wins-first-round-of-digital-music-lawsuit

RELATED:

Aimee Mann Exploited by Russian Brides, Wells Fargo Bank and Nationwide Insurance

by trichordist

Finnish pop musician earns mere pennies on Spotify | YLE

Finnish pop artiste Anssi Kela has gone public with his earnings from content streamed via the popular commercial music streaming service Spotify.Kela claims that on average he earns an underwhelming fraction of a cent for each song played via Spotify’s free service. The precise sum is 0.002 euros, or considerably less than one cent.

Read the full story at YLE:
http://yle.fi/uutiset/finnish_pop_musician_earns_mere_pennies_on_spotify/6921281

by Trichordist Editor

Beck on Spotify: “The Model Doesn’t Work. And the Quality Sucks.” | DMN

The model doesn’t work, so we have to come up with ways in which people can help us to make music for free, or at least for much less. But the current way isn’t working, something’s gotta give.

If I tried to make my albums with that Spotify pays me, I wouldn’t make them. I couldn’t hire other musicians or someone to master it; I’d have to do everything myself.

Read The Full Story at Digital Music News:
http://www.digitalmusicnews.com/permalink/2013/11/14/beckspotifywork

by Trichordist Editor