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 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

Jimmy Iovine says, “YouTube is 40% of music business volume and 4% of music business revenue. That’s a problem!” ‪#‎vfsummit‬

‘Freemium’ music streaming

“This whole thing about freemium, it’s a shell game. These companies are building an audience on the back of the artist, and it really bugs me.”

On YouTube and music

“Here’s a little statistic … they are 40% of consumption of music and 4% of the revenue. That’s a problem! … They know that doesn’t work. But do they care? I have no idea.”

READ THE FULL STORY AT THE LA TIMES:
http://www.latimes.com/business/technology/la-fi-tn-jimmy-iovine-20151007-story.html

Why .002 is Greater than .001 and Why 90 Days is Better than Forever…

There’s been a lot of talk and understandable dissent surrounding Apple’s free tier payment of the reported .002 per play during each consumers 90 day free trial period. We now live in a world of lessor evils.

Here are three things that we may want to keep in mind…

One:

Eliminating the Unlimited Free, Ad-Supported, On-Demand Access to Music is Job #1. Apple Music and Tidal are both positive steps in that direction.

Two:

.002 is DOUBLE .001 which is what Spotify is paying on it’s ad-supported free tier (see chart below). Yes, we’d love Apple to pay the full ride. Yes, Apple can afford to pay the full ride. Yes, we support any action that influences Apple to pay the full ride – but as a compromise we could be doing worse, and in fact we have been for over five years since the Spotify launch.

Three:

90 Days is Limited. Ad-Supported is forever. This is the big problem. Even if  Spotify was limiting their ad-supported free tier to 90 Days, Apple is still paying DOUBLE. But the real problem is that Spotify is FREE FOREVER. It’s time to keep the eye on the prize here.

Three Steps to a Sustainable Digital Music Ecosystem:

1) Eliminate the Unlimited Free, Ad-Supported, On-Demand Access to Music

2) Windowing

3) Tiered Pricing, based on Access and Consumer Value Proposition

That’s really it. It’s not really any harder than this and we can already see these models working for the Film and TV businesses.

 


 

Streaming Is the Future, Spotify Is Not. Let’s talk Solutions.

 

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

 

Why Digital Exec’s ARPU is Bad Math and also Bad Philosophy for Artists.

Why Apple Music and Tidal are the right business models with the wrong optics.

Since Spotify launched in 2010 the music business has been in an existential crisis. Convinced that ad-supported unlimited free access to on-demand music would ultimately grow recorded music revenues the major labels opted into what may be their worst decision ever. This decision aided by an estimated 18% (or more) equity position in Spotify has not grown overall music revenues over the past five years. In fact, for the year ending 2014 global revenues reported by the IFPI stated that revenues were at the lowest point in decades. So what to do?

For starters the first and most obvious solution would be to eliminate the unlimited ad-supported free access to on-demand music. This is the model that made ad funded, for profit piracy so popular on over half a million infringing links from unlicensed businesses served by Google search and delivered to your inbox by Google Alerts complete with social media sharing buttons. These unlicensed businesses are receiving hundreds of millions of DMCA notices annually from artists and rights holders. Let us not forget that this is also the same model that Daniel Ek helped to perfect as the CEO of u-torrent the worlds most installed bit-torrent client. Ek has said he’d rather shut down Spotify than give up his failed ad supported business model.  We thought Spotify was built on converting ad supported (where Spotify board member Google makes money serving ads) to subscription (where artists make money).  So much for that.

And this is who the record business is taking notes from? Perhaps that’s why Universal is restructuring.  This may have seemed like a good idea to some senior executives but it turned out to be a complete disaster.  Time to change.

Despite moves in the right direction by Tidal and Apple Music the optics for both of these companies at launch of their respective streaming models have been somewhere between missteps and an absolute disaster. Dismissing for a second that both Apple and Tidal could be the targets of public relations campaigns by competing corporations such as Spotify, Pandora and Google (YouTube) let’s look at what each is offering. Tidal and Apple Music offer no unlimited ad-supported free access to on-demand music. That means no business to those selling advertising… like, Google.

There is nothing more important to the future of the recorded music ecosystem than removing the unlimited ad-supported free access to on-demand music.

For all intents and purposes even free streaming is ownership and here’s how you can tell. If you can chose it, and access it, you essentially own it whether you pay for it or not. Streaming replaces ownership at the consumer level but does not compare to ownership on price. At some point there needs to be a market correction to properly value music consumption.

The launch of Tidal should have been a rallying cry for all artists to support a business model that limited free streaming, incentivized paid subscriptions through exclusive offerings and diversified consumer experiences with higher quality streaming formats. This is the model we should be focused on. As the Buddhist saying goes, “trust the teaching, if not the teacher.” In other words it doesn’t matter if you don’t like Jay-Z and Madonna.  And securities laws makes the whole stock issue so difficult that Tidal would have been far better off saying they’d pay all participating artists a bonus in the cash from the company’s own stock sales rather than get down the rabbit hole of who gets stock and who doesn’t.

Unfortunately the celebrity that could have united a community, instead divided it through messaging that most would acknowledge appeared to be less than inclusive. Worse, the optics appeared to be elitist whereby those already rich and famous seemed to be more focused on their own fortunes as opposed to a sustainable ecosystem for the next generation of musicians.

Perhaps if each of the artists at the Tidal launch would have appeared with a developing artist they were supporting the messaging and optics would have been more inclusive and more about community than celebrity.

We have to acknowledge what kind of business we want going forward. Clearly, unlimited ad-supported free access to on-demand music is not working. Both Tidal and Apple Music do NOT have unlimited ad-supported free access to on-demand music. So what’s the problem?

Following the Apple Music launch Spotify announced it had achieved 75m global users (we love that, “users” no kidding) and 20m paid subscribers. So let’s look at the numbers in relationship to what Apple Music could bring to the market place. Keep in mind that 55m of Spotify’s user base are NOT paying for the service. Based on reporting we’ve been provided the free tier accounts for 58% of plays which is only 16% of the total revenue.

With all the back and forth between Apple and labels and the announcement last week by NMPA of the publisher’s deal—freely negotiated without government “help” by the way–it’s pretty clear that Apple announced Apple Music without all their ducks in a row contractually.  This opened up an opportunity for haters who are just gonna hate.  Now that the picture is becoming a bit clearer, we feel more confident than ever that most of the noise is coming from competitors who would like to create yet another consent decree situation but this time for artists and record companies.

So there are a few questions we need to ask about the launch of Apple Music to evaluate the trade-off for eliminating the unlimited ad-supported free access to on-demand music. But before we ask those questions, we need to understand the mechanics of the Apple Music ecosystem.

First, the 90 days free without payment at launch requires the understanding that all consumers will get 90 days free at Apple Music whether they sign up at launch or at any other point later. This means that some people will opt in at launch, some will opt in at some later time. Based on what we have seen of how these streaming subscription services scale we have to ask a few questions.

How many people will have access to opt into Apple Music Streaming on launch? We’ll assume it’s the entire installed user base who upgrade into iOS 8.4. Here’s some back of the napkin math from the iPhone 6 launch when Apple dropped that U2 album into everyone’s Itunes.

According to CBS News 33 Million people of the 500 Million Global Itunes users “experienced” the U2 album. That’s just 6.7 percent of Apple’s reported consumer base.

So what kind of adoption and conversion rate could one expect from the launch of Apple Music? 10 million paid subscribers? 20 million paid subscribers? 50 million paid subscribers? It’s hard to know, but anything north of 20 million pretty much beats Spotify on paid subscribers.  And if you are looking for the company that has defined a paid music service, who you gonna call?  Apple or Spotify?  Who do you trust going forward?

What if Apple is able to convert 30 million or more consumers to paid streaming in only four months when it has taken Spotify five years to acquire 20 million paid?


BREAKING NEWS AT PRESS TIME. APPLE WILL PAY ARTISTS DURING THE FREE TRIAL PERIOD!
Apple Reverses Course, Will Pay Artists During Apple Music Free Trial | Mac Rumors


Of course, Apple should use a couple of bucks from it’s 178 billion dollars in cash reserves to compensate musicians for the consumption of their music during the initial 90 day launch of Apple Music. This would  incentivized artists to promote the service as being both fair and artist friendly and give Apple the thumbs up from the people that matter the most, the artists themselves. Apple’s purchase of Beats was a three billion dollar acquisition, so surely there’s enough money in those coffers to pay artists something.

To put these numbers into perspective Spotify claimed to have paid artists and rights holders two billion dollars globally from it’s initial launch in 2008 through October of 2014.

Here’s some more perspective from asymco.com: In 2012, global music revenues were reported at $16.5 billion, with $5.6 billion coming from digital music. Of that $5.6 billion in music downloads, Apple paid labels $3.4 billion for iTunes sales, which is about 60% of the total digital revenues industry wide—IN LESS THAN ONE YEAR.

In 2012, Apple’s transactional digital model created more revenue for artists and rights holders in less than a year in then it took for Spotify to earn almost 6 years.

If we want to break the death spiral of unlimited ad-supported free access to on-demand music we have to embrace the trade-off of offering limited free trial periods as an incentive for consumers to make the switch.

And by the way—compare the classy way that Eddie Cue of Apple handled Taylor Swift compared to Daniel Ek who comes off like a semi-stalker.  Who understands artist relations the best?

The problem with ad-supported unlimited free access to on-demand music is illustrated below showing Spotify domestic streams and revenues. It’s just math and it’s time to move on. Apple Music and Tidal are showing us the way.