Average Revenue Generated by a SoundCloud, YouTube, or Free Spotify User: $0.72/Year.

Freemium = ?

Ad-supported, ‘freemium’ music services from YouTube, SoundCloud, Spotify, and others are barely generating any revenue for the recorded music industry.

It feels like free to users, but it’s also generating very little revenue for the music industry.  According to worldwide data released this morning by the global music industry trade group IFPI, the average revenue generated by an ad-supported, ‘freemium’ streaming music fan is 72-cents over an entire year.

That sharply contrasts with a revenue contribution of $29.41 per paying streaming subscriber, per year, according to the same data.  Currently, Apple Music, Tidal, and Rhapsody remain paid-only, with a range of price points and in some cases, bundled plans.  But the largest services — SoundCloud, YouTube, and Spotify — are dominated by non-paying users, with YouTube and SoundCloud almost entirely free access.

IFPI Freemium vs. Paid Streaming User

In total, the IFPI now estimates 68 million paid streaming music accounts worldwide, with Spotify and Apple Music easily accounting for half of that figure.  (Earlier, Digital Music News estimated that number closer to 90 million, though a hefty 30 million Sirius XM Radio subscribers were also included in our tally.)

That 68 million, in turn, accounts for roughly $2 billion in global revenues, according to the estimates, thanks to monthly contributions that often surpass $120 annually (and, in the case of Tidal, as much as $240 annually).  By start contrast, the IFPI counts 900 million ad-supported, freemium users on services like YouTube, a group that collectively contributes an estimated $634 million per year.

The contribution gap between paying and non-paying is shockingly large, and a major source of concern for labels.  According to the data, the average paying subscriber is more than 40 times more valuable to the music and recording industries, part of a ‘value gap’ that the IFPI identified in its report.

Sounds like a problem with a simple solution, but converting freemium to paid isn’t simple at all.  In the case of YouTube, most fans are resistant to paying anything, and accustomed to open, free access to any music video in the world.  And complicating the matter is that YouTube itself is heavily resistant to making users pay.

Even worse for the industry is that YouTube doesn’t have to, thanks to DMCA takedown processes that allow users to continuously upload infringing content without penalty.  Over the years, YouTube has constructed a virtually self-contained copyright system, one that includes ContentID and rapid takedowns, but also generates paltry revenues overall.

All of which introduces the latest standoff between YouTube and major labels Warner Music Group, Sony Music Entertainment, and Universal Music Group, a trio that is now collectively re-negotiating their licenses.  Or, threatening not to renew them at all.

 

Image by Jeffrey, licensed under Creative Commons Attribution 2.0 Generic (CC by 2.0).

13 Responses

  1. Troglite

    Fascinating. Is an average number of plays/steams per free user available? Would be interesting to see it broken out in than manner since many of the discussions about the paid subscription tiers try to express the revenue generated as fractions of a penny per play.

    Reply
  2. Remi Swierczek

    Shazam, which is made to sell music, is not even at 25 cents per user.

    For fifteen years jet propulsion from discovery to FREE.

    Reply
  3. Terence

    Once again the industry is digging for gold that does not exist. They somehow think that slapping a huge new paywall on YouTube will generate billions from people who never paid a dime for anything ever. What’s the real likelihood that it will happen? Zero. What will happen? YouTube will see a huge drop-off in views, including lots of “beneficial” marketing views that help drive music sales from iTunes and Amazon. Viewers will migrate to other outlets that are even less-regulated, but still free. And the music industry will have borked itself once again …

    Reply
    • FarePlay

      Terrence the real question. Have things gotten bad enough that individual artists will respond in numbers large enough to push back objections by Google and others when ‘takedown and staydown’ becomes a bill and moves to the floor for a vote.

      While I acknowledge Springsteen for his actions in N.C., can the same thing happen in San Jose or Washington D.C. next year? The time has come for legacy artists and others who have profited significantly from the music business to step forward and support efforts for copyright reform.

      Reply
  4. Versus

    “Sounds like a problem with a simple solution, but converting freemium to paid isn’t simple at all. In the case of YouTube, most fans are resistant to paying anything, and accustomed to open, free access to any music video in the world. ”

    That is a learned response; time to re-educate listeners.

    “Even worse for the industry is that YouTube doesn’t have to, thanks to DMCA takedown processes that allow users to continuously upload infringing content without penalty.”

    Here is the real problem. The laws have no force without the threat of real penalties. Most people have little conscience, and their morality consists of what they can get away with. The threat of penalty is then the only way to get such amoral persons to behave in a civilized manner.

    Reply
  5. Versus

    Why doesn’t the industry launch its own video channel, and pull all – I mean ALL – music content from profiteering and exploitative YouTube, and require YouTube to use contentID to block all uploads of their music at source, before it is available to anyone?

    The industry would then only allow YouTube to carry their music videos if more reasonable payment and other terms were put in place.

    Reply
  6. Rock&Roll

    As an musician, I’m slowly giving up on music. Why should I work for free? Would you?

    Reply
  7. Rick Shaw

    Looking at an average like this is definitely a way to spin the story as much to the negative as you can. Sheesh. Consider how many bands are on there that really are bad or dormant, for the most part. Try doing an average based upon truly active bands that have something musical to offer.

    Reply
    • Troglite

      How does the “number of bands” impact the average revenue per user??? Or the quality of the media being consumed for that matter?

      Isn’t revenue per user simply “total $ paid” / “total users”?

      Reply
  8. Derek H-W

    This report is kind of deceiving, at least to what I perceive to be a musicians position. How many business report statistics on free advertisements. As a person that enjoys and supports artists (and still purchases an abundance of CDS ), my tally of artists discovers/introduced/suggested via a free medium for me to try their music is endless. I do sympathize with losing a chunk of your bottom line, but if you factor in revenue generated directly and indirectly in: concert sales, CD sales, merchandise, etc, I think that statistic would be increased in both Streamer’s, and Artist’s favor.

    Reply

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