We7’s Ad-Supported Claim: What It Really Covers

  • Save

Ad-supported models are often panned by industry executives, simply because the numbers rarely stack up.

At Musexpo on Tuesday in Los Angeles, the freemium concept was dismissed by several panelists, though UK-based we7 begs to differ.  The service is now claiming that advertising supported “all of its music played in the UK” last month, a somewhat vague assertion.

So, what does that mean exactly?  Are we7’s ads covering on-demand royalties, broader operational expenses, or powering a more successful, break-even or profitable business?

In comments to Digital Music News, we7 chief executive Steve Purdham clarified that ads are now covering royalties (both recording and publishing) and bandwidth costs, but not broader operational costs.  The rest of the P&L is on its own.

Purdham also colored an earlier figure.  Specifically, the company calculated that one million song plays now translate into “payments to the music industry” of between “2,000 to 4,000” pounds, or roughly $3,000 to $6,000.  That is based on per-play rates, not “miniscule or non-existent revenue share” arrangements, and the payouts run the gamut of “unsigned” to “major label”.

Still, this is an early accomplishment, and Purdham noted that growth has been purposely limited. On-demand streams in March were in the “10s of millions,” according to Purdam, but “bigger than 10-20 million,” leaving the total somewhere between 20 million and 100 million.  Dialing down the middle, on a total of 60 million at per-stream payouts of 0.3 pence, the total payout in March would be 180,000 pounds, or $274,000.