If You Stream a Song Once a Day, When Does It Pay the Same As a Download?

During Congressional testimony on Wednesday, songwriter, producer and recording artist Jimmy Jam offered an interesting comparison between an Amazon MP3 download and a Pandora stream.

Using a royalty payout of 1/10th of a penny for a Pandora play, Jam calculated that if a fan listens to the same song once a day, it would take roughly two years for internet radio royalties to equal a download in terms of royalties (full testimony here).

But how does that compare to other formats?  Here’s a breakdown of how different streaming, radio and download formats compare to a paid download – assuming the song gets played once a dayevery day.

The methodology.

(i) Paid Download. Applying a standard 70 percent content owner payout on a 99-cent download.
(ii) Rhapsody. Based on artist testimonial, shared royalty reports.
(iii) Spotify.  Based on artist testimonial, shared royalty reports.
(iv) iTunes Match.  Also, shared royalty reports.
(v) Radio Station Internet Simulcast.  Based on Congressional testimony of Michael Huppe, president, SoundExchange. 
(vi) YouTube.  Based on inputs of several YouTube content creators and artists to Digital Music News.
(vii) Pandora. Based on Congressional testimony of Jimmy Jam.
 

24 Responses

  1. Avatar
    HansH

    The big difference is that with streaming you can listen without paying upfront. There is a way bigger audience for that. This graph below created by Spotifyclassical.com shows how much bigger the potential audience is.

    • Avatar
      I don't get it

      How does this show how much bigger the audience is for streaming? Seriously, I’m not being snarky. How does one interpret this stacked list?

    • Avatar
      hippydog

      @ HansH Quote “how much bigger the potential audience is”

      Potential..
      meaning non real number we hope might happen..
      A FM radio station in a medium/small sized market has the POTENTIAL to play a song to 1 million people, but we all know thats meaningless as each station only gets a ‘market share’.. so the REAL NUMBER might be only 50,000 ..
      Its the REAL WORLD numbers people are interested in..
      Saying (paraphrased) “there might be 800 million music listeners, so if we reached every single one of them your song could potentially make you 1 milllion dollars”
      sounds great.. except that number is COMPLETELY MADE UP, and not even achievable, now or in the future!!!
      just sayin…

  2. Avatar
    Casey

    I can’t help but think while it is nice Rhapsody pays more than other services, they do it for nothing. No artists ever seem to appreciate it. They deny them the same music they deny from other streaming services that pay less. They group them into the same group of companies every time they complain about streaming. Honestly I feel sorry for the company. They truly do a pretty good job at bringing in decent royalties, by not having a free service, by having a $15 per month plan, and only allowing existing customers access to the $5 per month plan. And it is hurting them more than it is helping them.

    • Avatar
      Happy

      For whatever reason or reasons Rhapsody has been this marginal player for more than 10 years. They got a million subs finally after ten years and a big acquisition but no one’s heard of them and they never got out of the US. Maybe the top guys pack up and leave at 6 PM every day who knows.

      Spotify on the other hand is BIG, global, financed, 5-X the subs in 1/5th the time. They aren’t trying to survive they want to take over the world and don’t mind if there’s an EPIC fail on the way.

      So Rhapsody pays more in this closed insular pod of theirs but it really doesn’t mean that much and the first decision on streaming has to do with Spotify.

  3. Avatar
    travisbernard

    I don’t understand the iTunes Match part. You’ve already paid for the download, so how does it re-pay for itself? Can someone explain this part?

    • Avatar
      Visitor

      Presumably it’s based on an illegal download which is then uploaded into your itunes match account where it then begins to generated royalties.

      • Avatar
        paul

        That’s sort of the idea I was going for with that. In many (or, I’d argue most) cases, the download was not paid for. So, I separated the iTunes Match money from the iTunes Store upfront payment (if there was one).

        Now, in the case where it is an iTunes Match payout based on an actual iTunes Store purchase (or Amazon MP3 or otherwise paid for track), the analysis gets a bit convoluted, I understand. But hopefully that separates out some of the assumptions and nuances on that part of the graph.

        The broader analysis on all of this is interesting, as well: the Apple rhetoric on iTunes Match is that it’s all extra, a token sprinkle that all artists should appreciate. I think that story is a bit of a stretch, though Apple did pay for those rights and is paying money.

        /paul

  4. Avatar
    hippydog

    I would be interested in seeing RDIO and slacker radio on that chart

    • Avatar
      Casey

      Slacker would be very difficult to calculate. They have at least 2, possibly 3 or 4 royalty rates that they pay.

  5. Avatar
    Visitor

    Paul,

    I challenge you to post a story that HansH and Casey don’t comment on.

    Apparently these two either don’t work (common in the music business) or their jobs are so insignificant that they can waste hours a day commenting on DMN without any negative side effects.

    I know it’s a tough challenge.

    • Avatar
      paul

      As Chingy once said,

      “Don’t trip on my people, just hop in my Regal”

      /paul

    • Avatar
      HansH

      Visitor. Let me tell you, it’s real easy! Avoid the words streaming and Spotify. It’s my job to comment these posts, you could have guessed that by now. Spotify pays me a decent salary for this. Fun job I can tell you!

    • Avatar
      Visitor

      Most of the musicians and engineers on this board are probably chained to their computers all day long.

      Posting here is a nice break.

      Now, I don’t agree with HansH or Casey on anything — but everybody should be heard. That also goes for the occasional torrentfreaks posing as mad artists in favour of death penalty for pirates.

      • Avatar
        HansH

        Thanks for your support. There must be someting we agree on…. Like posting here is a nice break maybe 😉

  6. Avatar
    Visitor

    Slickly from the standpoint of a song, there is a bogus comparison going on here.

    A download – where a copy of the recording is permanently transferred to the user’s device – is the same as a record sale… The compulsory royalty rate set by law is .091.

    But Pandora is a streaming service that follows strict DMCA rotation rules and does not offer permanent downloads … So, it is more akin to radio.

    Additionally, Pandora does not offer ‘on demand’ streaming … you can’t call a specific song you want to hear it.

    Both Rhapsody and Spotify offer ‘on demand’ streaming and pay a higher rate to do so because, in theory, being able to hear a song when you want to eliminates the need to purchase a CD or a download.

    Therefore, with respect to Pandora – and again, I’m only talking about the song … not the recording of that song … only a performance right is involved and performance fees are calculated on a different basis than download fees.

    There are so many configurations and separate fees related to each configuration that comparing them all to the straight download rate of .091 makes no sense at all and is a complete waist of time.

  7. Avatar
    Dubist

    As I have pointed out before, there is no one comparing these to terrestial radio. For fair perspective, it would be important to see where radio fits in.

    • Avatar
      GGG

      I’m on board with that argument going around, as well, but there is a difference for some. If you listen to terrestrial radio you have to listen to (or turn off) whatever’s on. You have no choice or say. You do on some online companies, as well. Pandora for the most part.

      Other sites, like Spotify, is all choice. People are choosing exactly what they want to hear. So that argument isn’t really valid across the board.

      • Avatar
        paul

        On that point, it’s actually quite difficult to distill a per-play penny-rate on terrestrial radio. Keep in mind terrestrial radio DOES pay rights owners, just not recording rights owners. So there are streams going to ASCAP, BMI, SESAC, often in substantial quantities but they are typically formulas and percentages based on station revenues and gigantic pots of distributed cash.

        There’s actually a similar dynamic going on with satellite radio (ie, Sirius), and Pandora loves to compare the percentage of its total revenue to other formats like satellite, terrestrial streaming, etc. The place where that breaks down is that Pandora’s revenues themselves are challenged, so the comparison can be extremely misleading. In testimony from SoundExchange president Michael Huppe, terrestrial radio streaming had double the per-stream negotiated payout, for example.

        /paul

    • Avatar
      Casey

      I think it was mentioned to represent illegal methods of aquiring music rather than simply bittorrent. It could say Grooveshark if you want to stick strictly to streaming, but it would have the same outcome.

  8. Avatar
    Paddy

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