## New Math \$.00666 : Billboard’s New “Consumption” Chart, Free Streams and the End Of Meaningful Metrics?

The purpose of a chart is to provide meaningful metrics to determine the relative value of a title in the marketplace. The new Billboard 200 “consumption” chart moves away from the traditional metric of album sales. In doing so, the new chart also creates questions about how meaningful this new information will be to artists, managers and labels. As album sales continue to decrease a method of measurement that addresses today’s environment is absolutely important.

The move from a “Sales Chart” to a “Consumption Chart” acknowledges what we already know…  More music is being consumed than ever before and conversely musicians are being compensated less than ever before, for that consumption.

Track Equivalent Album sales for measuring the volume of individual songs by a single artist has been a helpful and accurate method of comparing unit sales in the ala carte song era of Itunes (and others) in that every 10 song sales equal one album. This is easy to quantify as logically ten songs sold at 99 cents really does equal the revenue of one album at \$9.99. So for comparative purposes this makes sense both in terms of the underlying logic and the economic reality.

But the new Billboard chart has a bigger problem when incorporating streams. The new metric of 1,500 streams per album and 150 streams per song would make sense if there were in fact a fixed price point for streams of \$.00666 (as in \$.0666 x 150 = \$.99 and \$.00666 x 1,500 = \$9.99). We’re gonna have some fun with this, stay tuned…

Maybe Billboard has a sense of humor in that the calculation of streams to song and album equivalent’s are \$.00666 per stream?

It get’s worse because we know from our Streaming Price Bible that neither Spotify or YouTube are paying anywhere near those rates on an summed, averaged per stream rate. From what we’ve heard Billboard is excluding plays from YouTube (for now) but we have a feeling streaming from YouTube Music Key will be included just as those are from Google Play.

The problem here is that the free tiers dilute how meaningful this data is actually going to be to everyone. As we pointed out in one data set we reviewed Spotify’s free streams accounted for 58% of total plays, but only 16% of revenue in the USA. On YouTube (by any name) the amount of streams to revenue is likely to be far more extreme.

What’s worse is that we can clearly see that over time, as fixed revenue streaming services scale the per stream rate will drop. The bigger the services scale, the less each stream is worth. This is unless of course the labels demand a minimum per stream rate that actually matches the metric the chart is suggesting (\$.00666 – retail) and no streams from free tiers should be included.

Suddenly, we’re not feeling so lonely on this point, see here:

WME’s Marc Geiger Sides With Taylor Swift, Calls Free Streaming Services ‘F—ed Up’ | Billboard

Add one more name to the list of industry figureheads who’ve sided with Taylor Swift in her battle with Spotify: Marc Geiger, William Morris Endeavor’s head of music, who called the ubiquity of free, ad-supported streaming music services “a f—ed-up, torturous thing for 15 years”

And…

Essay: Why Streaming (Done Right) Will Save the Music Business | Billboard

As the first music-streaming service to be licensed by all major labels — and the No. 2 on-demand music service in the United States — it may surprise you to learn that we at Rhapsody support, and generally agree with, the decision by Taylor Swift and other artists to not make their new albums available on free streaming services immediately after release.

If we can all agree that Free Streams are problematic for the business, why can’t we agree that free streams are bad for a chart?

Combining the free and paid steams defeats the purpose of what the chart is attempting to achieve, a meaningful metric of paid consumer demand.

Free streams must be filtered out of the chart for it to be meaningful.

Giving away a million of something to gain chart positoning is not new and has been controversial. Lady Gaga’s “Art Pop” album benefited from a 99 cent sale at Amazon.com. However albums given away for free by Jay-Z (in partnership with Samsung) and U2 (in partnership with Apple) have not qualified for charting. There is a reason why.

Add to this YouTube views are known to be gamed regularly with many services offering “pay for plays”. We’re also seeing a growth market for services that provide “pay for plays” on Spotify as well. We recognize that in the early days of Soundscan there were attempts to game that system as well by buying off heavily weighted indie stores with free goods, cash or both.

In a digital world where more consumers are streaming on free tiers than paying subscriptions, where the price per stream is falling as services scale, and where there is no fixed price point as a baseline one has to wonder what the true value of the new chart will really be? If it is to illustrate just how wide the gap is between consumption and revenue, then that may be it’s only real purpose.

It’s not like any of this is new, or news. Big Champange, Music Metric and others have been tracking not only sales data but social media metrics for engagement, free streams (youtube and soundcloud) and even p2p filesharing data for years. If we’re going to get honest about “consumption” charts The Pirate Bay has a Top 100 why not include those rankings? To be clear, this is sarcasm, not an actual suggestion. It also illustrates the grossly mislead notion of including free streams in the new chart. It’s not that hard to determine how we are not making money…

REALTED:

# How to Fix Music Streaming in One Word, “Windows”… two more “Pay Gates”…

## USA Spotify Streaming Rates Reveal 58% of Streams Are Free, Pays Only 16% Of Revenue

Since we published the Streaming Price Bible we’ve been getting data submissions to crunch the numbers. According to one set of data it appears Spotify is reporting seven different streaming rates (in a single month). But the most interesting discovery in the data is the percentage of free streaming volume and revenue versus paid streaming volume and revenue.

We knew there were two price tiers (Free & Paid) but we didn’t anticipate discovering the other five tiers, even as limited as they are.

As we had suspected, the majority of consumption is generating the least amount of revenue.

Oh, and for those of you keeping score at home the net summed per stream rate, for all streams divided by all revenue is .00352 in the aggregate. That’s .00169 per stream LESS than reported earlier this year in the Streaming Price Bible of .00521. Just another indication that as streaming models mature the price per stream will continue to drop. Add to this that even Spotify executives have admitted as much.

If you have data that looks different than ours, send it our way and let us crunch it. This is the problem when there is such a profound lack of openess and transparency. There also appears to be an overall lack of consistency. Let’s have some real “disruptive innovation” by “sharing” our Spotify statements and comparing the numbers.

RELATED:

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

## BUT SPOTIFY IS PAYING 70% OF GROSS TO ARTISTS, ISN’T THAT FAIR? NO, AND HERE’S WHY…

Spotify is not paying sustainable rates for the cost of goods. Look – it’s like this, if something cost you \$100 to make, and someone else sells it for \$10… it doesn’t matter that you are getting 70% of the gross, you’re still over 90% unrecouped on a per unit basis. This is the problem with Spotify, is that it undervalues the true cost of goods (including R&D, etc).

Artists agreeing to streaming their music on Spotify are essentially agreeing to sell albums for One Dollar and Songs for Ten Cents… Oh Wait, Spotfiy actually pays way less than that… (calculated on a per stream basis).

This is why arguments about marginal percentages miss the point completely. It’s about simple math and simple economics.

The cost of music is not in the distribution of music (which is cheap). The cost of music is in the human labor of the CREATION of music (which is expensive).

The cost of goods is greater than the marginal cost to distribute those goods. Stop confusing the product with the container.

The CREATION of music is also more than the cost of RECORDING music. The cost of music is in the sustainable needs of the human labor for food, shelter, clothing, etc.

Spotify can not scale and work at current economics… One More Time…

SPOTIFY MATH FOR THOSE OF YOU AT HOME WITH CALCULATORS:

Just show us the math where streaming scales, we’ll wait. Spotify has 3m paid in the US at \$10 each.

\$10 x 12 mos = \$120 per year. Pay out 70% that’s a gross of \$84 per year per subscriber. Simple Math.

That \$84 per sub is in revenue to all artists in rights holders. Times that by 3m and you get a whopping \$252m a year in a \$7b business.

Multiple that by 10, to get 30m subs @ \$10a month and that’s only \$2.5b a year… and that’s a big IF Spotify ever gets to 30m paid in the USA… and IF they do, that’s ONLY 2.5b in revenue against the \$7b now…

So you effectively cut the revenue to everyone by 1/2 to 2/3rds… how does this math work without raising the price of subscriptions? It doesn’t.

It’s just math.

RELATED:

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

## Let The Heads Roll…More Genius From The Record Industry Braintrust or Mark Mulligan Gets a Calculator…

Happy Halloween and welcome to the scary stupid post of the day…

We’ve been saying this for a long time, music streaming math just doesn’t add up. Would someone please buy some calculators for the record industry braintrust that keeps making these stupid deals? Seriously, it’s just math and it’s not that hard… even Mark Mulligan is getting it… no kidding…

\$2.3 Billion In Net Loss To Artists and Labels Per Year

The report extrapolates that YouTube Music Key will generate \$400 million in revenues in its first year. But over the long run it will also be responsible for more than \$2.6 billion in lost subscription revenue yearly. That’s a negative net impact of \$2.3 billion in lost music revenue every year, according to the study.

Ok, that’s YouTube. Let’s revisit how the Spotify math works…

If you own a calculator, let’s just do the math one more time, real slow and simple like…

1) Spotify and former uTorrent CEO Daniel Ek says Spotify only needs 40m paid subscribers for streaming to be sustainable for artists. But that math just doesn’t work.

2) \$10 per month subscription = \$120 per year per subscriber

3) \$120 per year, per subscriber paying out 70% of gross to rights holders equals \$84 per subscriber, per year.

4) \$84 per subscriber, per year x’s 40 million subscribers equals \$3.4b per year in top line gross revenue to ALL rights holders. That’s \$3.4b for labels, artists, publishers and songwriters combined.

5) \$3.4b per year is HALF of the current revenue of \$7b per year where the domestic business has been flat lined.

6) Assuming you could DOUBLE the subscription base to 80m PAID in the USA within two years by dropping the price in HALF to \$5 per subscriber per month you still only gross (wait for it…) \$3.4b a year in revenue.

We know this is shocking to the math impaired, but doubling scale (imagined as it is) while cutting the subscription fees in half, actually nets you the same amount of money. Shocking the things one can learn with a calculator or a spreadsheet.

Maybe we’re all screwed, but we will not go quietly and we’re gonna call it how we see it on the race to the bottom. We will document the stupidity undoing the business. Maybe it’s time for Lucian Grange to get out that axe again and let people know what time it is? #stopthemadness

READ THE FULL POST AT HYPEBOT:

RELATED:

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

## Spotify Doesn’t Kill Music Sales like Smoking Doesn’t Cause Cancer…

This just in from Digital Music News, we’re not surprised. The death spiral towards the \$3b annual record business is accelerating… One word to artists and music executives reading this post… “WINDOWING”…

## May 10th, 2013:

“We have data that’s proving and demonstrating the fact that streaming revenue is additional to actual unit download consumption or physical music sales…”

Katie Schlosser, Spotify Account Manager of Label Relations, speaking at NARM.

## September 12th, 2014:

“Streaming consumers are buying few albums.  30 percent of consumers are music streamers and a fifth of these consumers pay to stream.  Streaming has driven new market growth in countries such as Sweden but in larger markets such as the US it is denting digital music buying.

READ THE FULL STORY AT DIGITAL MUSIC NEWS:

RELATED:

# Merchants Of Doubt in Silicon Valley : What Every Musician Needs to Know About Ad Funded Piracy

## Swimming Against the Stream: Musicians Fight for Their Worth in the Internet Era | SF Weekly

The cops were getting lots of calls. Drivers were worried. There was a woman walking down the road — the narrow part of Highway 1, just north of L.A. And she was pushing a baby carriage.

When the cops found her, it turned out she was not a crazy person. She wasn’t even a mother.

She was a musician on a mission.

The woman was Suzana Barbosa, a longtime Toronto singer and leader of the band Lumanova, who had lately become fed up with the state of the music industry. She’d had it with the paltry amounts paid to songwriters and performers by streaming services like Spotify. She’d had it with our culture’s preference for glamorizing starving artists instead of paying them decently.

Barbosa was so fed up with the music business that she decided to walk some 400 miles, from Los Angeles to the Google campus in Mountain View, to publicize what she sees as an existential threat to the world’s independent musicians.

READ THE FULL STORY AT THE SF WEEKLY:
http://www.sfweekly.com/2014-06-04/music/beats-apple-unsound-spotify/

## Billy Bragg and Beggars Group Rethink YouTube & Streaming… | MusicAlly

We wonder if this is the future of music and artist revenue streams?

While Wheeler was positive about subscription streaming services, he opened both barrels on YouTube. “If YouTube launches a subscription service and it eats Spotify and Rdio, you’ll look back at these times as great days,” he cautioned. “They want to eat all the other music services and our business. That’s their plan.” He said the record industry was “caught out” in the early days of YouTube and didn’t realise the video site would become so big, initially thinking it was just about licensing music for a video of “a cat on a skateboard and then it became the biggest music service in the world”.

Bragg backed him up by saying, “If you want to talk about artists getting angry about the use of their music, YouTube is the place we should be looking at.”

Wheeler concluded, “We got caught out and that needs addressing. Otherwise they will eat our dinner.”

READ THE FULL STORY AT MUSICALLY:

RELATED:

## Nobody should be surprised that Spotify is already planning its IPO| Musically

Watch stories about Spotify planning a stock market flotation this Autumn spread across the web in the coming hours, triggered by a report on tech/business site Quartz.

“The popular music-streaming company has participated in informal chats with some of the investment banks likely to fight for a role in a potential IPO, sources familiar with the process said,” claims the article.

“The six-year-old service may start holding formal meetings as early as next month in anticipation of an offering in autumn. (Though the timeline for a possible IPO could change for a number of reasons, including unfavorable market conditions.)”

READ THE FULL POST AT MUSICALLY:
http://musically.com/2014/03/27/spotify-ipo-planning/

RELATED:

## Beats Music Hires Artist Bully as Artist Advocate

Billboard Magazine is reporting that Beats Music has hired long time artist bully Dave Allen as their so called Artist Advocate.  This is fantastic news for artists rights bloggers and music journalists as they were close to running out of ways to imply Dave Allen is a shill for streaming services.  By taking this job at Beats Dave Allen has made it easy for all of us.  Now we can just come out and say he’s paid by the streaming services!

If you don’t know, Dave Allen is the former bass player for the Marxist Rock band Gang of Four.  Allen has made a name for himself by rudely lecturing songwriters like David Byrne, Thom Yorke and myself on streaming, globalization and the inner workings of free markets. Rich right?

And it looks like he intends to continue.  Check the featured quote from the Billboard story announcing his hiring:

“It is hard for me to understand why intelligent people like David Byrne and Thom Yorke do not appear to understand that we are in the midst of new markets being formed,” Allen wrote. “I have concluded that we can only look to what internet and mobile users are doing or want to do, and then note how their actions drive technologists to provide platforms for them. Put very simply, that is how markets work.”

(Wow.  This is his first day as Artist Advocate? Off to a bad start-Ed)

No Dave.  It’s the opposite of markets.  By Government mandate our songs have been “collectivized” for use by these streaming and webcasting services.  Further government rate courts set the prices.  There is no “market” for songs.  He’s purposely leaving out the part where the government forces us to license our songs to the technologists at below market rates!

Allen knows this.  Everyone in the business knows this.  I mean that’s why  U.S. Rep Doug Collins of Georgia introduced this week this bill to establish fair market pricing for songs!

While we have some generally positive things to say about the Beats service (the lack of a free tier means their effective per spin rate to songwriters and performers will be higher than many other services) we note that the appointment of Allen does not bode well for Beats Music.

This is a ham-fisted move that won’t solve the fundamental PR problem that all streaming services have with the general public: low payouts to artists and a lack of transparency. No amount of shouting and name calling by Allen will fix that problem.  Quite the opposite.

RELATED:

## 7 royalty cheques that’ll make you lose your faith in the music industry | AUX

How little does the music industry pay artists? Shockingly little. Spotify, the dominant streaming music source in the U.S., is leaking money. They reportedly dole out 70 per cent of their revenue to royalties, and while that number seems high, consider this: each song stream pays an artist between one-sixth and one-eight of a cent. One source claimed that, on streaming music services, an artist requires nearly 50,000 plays to receive the revenue earned from one album sale. Ouch.

Indeed, things are getting dire. And here are seven examples of how bad things can get.

READ THE FULL STORY AT AUX:
http://m.aux.tv/news/100455-7-royalty-cheques-that-ll-make-you-lose-your-faith-in-the-music-industry