Metallica: When Streaming Hits 20 Million Subscribers, It Will Pay Better Than Downloads…

Is there an imaginary sweet spot where it all makes sense?  Yes, according to longtime Metallica manager Cliff Burnstein, who recently orchestrated an exclusive deal with Spotify.  Burnstein postulates that once streaming subscription services hit 20 million subscribers, payouts to artists will suddenly make sense — even if iTunes downloads get completely wiped out.  “There is a point at which there could be 100 percent cannibalization, and we would make more money through subscription services,” Burnstein told the New York Times.

“We calculate that point at approximately 20 million worldwide subscribers.”

Early stats show a rather immediate cannibalization effect following Metallica’s Spotify ingestion late last year.  But insiders say Metallica, now independent and in control of their masters, definitely isn’t getting screwed by its recent Spotify deal.  In fact, Spotify likely added substantial sweeteners to the deal to secure Metallica’s exclusive participation.

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But what about those that are less fortunate?  This is the point where Spotify (and Pandora, and other streaming) executives might want to consider things carefully.  An angry comment section on Digital Music News is one thing, but now, massive outlets like the New York Times are taking notice (yeah, they have internet access, too).  “But as the companies behind these digital services swell into multibillion-dollar enterprises, the relative trickle of money that has made its way to artists is causing anxiety at every level of the business,” Times journalist Ben Sisario wrote.

“In the new economics of streaming music, however, the river of nickels looks more like a torrent of micropennies.”

Indeed, Sisario was interviewing industry-influential musicians like Zoe Keating, whose paltry payouts have ignited a discussion about what’s fair.  “In certain types of music, like classical or jazz, we are condemning [musicians] to poverty if this is going to be the only way people consume music,” Keating starkly warned.

The question is whether this leads to more mainstream awareness of the payout problem, including the inconvenient truth that many artists never get paid – at all.  Coverage by mega-papers like the New York Times could snowball, and shift the discussion entirely for millions of existing and potential subscribers.

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The State of Music Subscription, January, 2013…

There’s also another inconvenient truth: the industry is closer to 20 million than you might think.  According to a tally compiled by Digital Music News earlier this month, worldwide streaming subscription numbers are already comfortably over 10 million, and quickly careening towards the 15 million mark.  Which raises the question of whether 20 million is a happy tipping point, or another dissillusionment waiting to happen.

30 Responses

  1. jw

    Of course there is, otherwise there wouldn’t be a point.

    For Metallica it might be 20m, but for others it’s going to be a lot higher. And for Metallica it will grow higher as physical sales continue to fall off.

    Averaging subscriptions at $90/yr, 20m is only $1.8b. I think it’ll look good to everyone around 80m.

    • Visitor

      It’s not mathematically possible at 20m subscribers.

      If there were 30 Million Paid Spotify subscribers in the USA, that would only generate 2.5 billion dollars in revenue to rights holders if paying out 70% of gross (3.6 billion).

      Today, there are only 1 million paid subscribers in the USA for Spotify. 1/30th of what most agree could be their high end subscriber base.

      On a per play analysis, One Hundred Billion Plays ( 100,000,000,000 ) on Spotify only generates five hundred and fifteen million dollars in gross revenue ( $515,000,000.00 )

      Given simple math when calculating the numbers, streaming does not actually appear to be mathematically possible of generating the revenue many are claiming is possible unless 1) the monthly subscription triples, 2) the per play payments to artists at least triples (if not more), 3) massive infusions of advertising revenue to be redistributed and 4) all the above.

      People can be at war with math, but that would be silly and irrational.

      • jw

        Since when do “most” agree that 30m “could be their high end subscriber base?” I’d love to know who “most” are. I just don’t see that ceiling. But what it comes down to is that I believe in streaming like I believed in the iPod or the cell phone or even Napster, & that sort of product doesn’t follow predictable trends because trends are based on current behavior, & those types of innovations change consumer behavior.

        And per play analysis is useless in predicting future revenue. If 30m consumers are paying $10/mo, that’s still going to be $3.6b generated, whether there are 100 plays or 100m plays, it only affects how the money is distributed. I just don’t see how that’s relevant to the conversation.

        Really it comes back to that 30m ceiling, & I’d love to see that substantiated.

        • Visitor

          @ JW how many does paid subscribers does netflix streaming have?

          • Visitor

            Netflix has ~25m subscribers total. I wrote a long response about how “If Steve Jobs taught us anything it’s that your market, & the price you can charge for your product, is only limited by your ability to communicate the value of your product” & about how Netflix is only one piece of a multi-pronged approach to distribution by the film industry & how films lend themselves to a tiered system of distribution because they are active, self-contained experiences, whereas music is, by-and-large, a passive, modular experience that demands a single repository of content & therefore takes the place of multiple prongs in the film industry’s approach & therefore has a much higher equivalent market & a much higher value proposition & all of that.

            But all of that is predicated on entertaining this 30m subscriber ceiling. But, in reality, that number, 30m, is a joke. An absolute joke.

            Here’s what doesn’t seem to be understood… streaming is not a niche, streaming is the evolution of the music format. Anyone who doesn’t understand that, who thinks that mp3s are going to be relevant 5 years from now, or that everyone is going to pay to replace their mp3s with lossless files, or whatever comes after that, probably never thought that mp3s would rival cds, & just plain doesn’t get it. If you think 30m is Spotify’s ceiling, you’re clueless.

            Even if they aren’t willing to pay, years from now everyone will be streaming. So we can sensibly take the free streamer to premium subscriber ratio & multiply that by everyone who listens to mp3s, because everyone is eventually going to convert, & extrapolate a ceiling that’s much, much higher than 30m. But between commercials & the value of streaming lossless audio (when it becomes practical to impliment) versus 160kbps audio, plus mobile streaming, streaming in their automobile, etc, the ratio of free to premium is going to change dramatically.

          • Visitor

            math says it don’t work at 20m subscribers and it don’t work at 30m subscribers… the only way it works is if the revnue is “in addition to” not “instead of”… if Spotify is to represent “instead of” it can’t work, but if it’s “in addition to” than carry on.

            we don’t know yet, but anyone claiming streaming is the future can’t do math because 2.5b does not replace 8.3b

          • jw

            I agree that it doesn’t work at 20m or 30m. If you’ll read my comments I suggested it wouldn’t really start making sense until around 80m.

          • steveh

            “anyone claiming streaming is the future can’t do math because 2.5b does not replace 8.3b”


            This thread is notable because it makes clear for the first time what some of us have been saying for years – the numbers for Spotify do not make sense!

            Here’s the reality:- at the moment the smallish but not insignificant income artists/labels derive from Spotify is certainly “better than a kick in the face” – but scaled up it just does not replace the lost income from the inevitable cannibalisation.

            I think Metallica should get rid of that manager guy because he fails at first grade arithmetic!

            Spotify is a Ponzi scheme.

    • Mike

      The paradigm has changed and artists won’t make the same kind of money they made digital. The creative ones will find alternative revenue streams. Others will fail to engage their audience, and will fall by the wayside.

      Either way, I have to give credit to Metallica for helping lead the charge here. Especially since they’ve been so negatively viewed due to the Napster crap….which oddly enough, they were actually correct about: Napster won’t hurt them, but it will prevent new bands from being allowed to find their footing because it will be more about the bottom line.

      Sad but true.

    • metal dude

      metallica took their huge advance from spotify and ran.

      sold out.

  2. Visitor

    20 million is of course rubbish. Like you say, we’re almost there today.

    20 billion might be slightly interesting.

    • Visitor

      Ted Cohen is closer:

      Ted Cohen On Music Tech And The Music Industry [INTERVIEW]

      Do you still favor subscription over advertising-based music services?

      Yes, I do. I don’t think that the advertising model so far has proved to be sustainable. I think that we have undervalued subscription. I am paying $150 a month for cable. I watch 20 or 30 hours of TV a week. I probably listen to 50 to 60 hours of music a week. I’d argue with you that music is worth more than $10 a month subscription service.

      The labels were so concerned about (piracy)—and I was there at the time—that we had to come up with a price that was just a little bit more than free to convince people that they should pay. So far, we have not been able to raise the price. I think that music is worth at least $20 or $25 a month.

      • Casey

        Let’s make a correction. He is not paying $150 for cable. He is paying $150 for his double or triple play package with taxes. Cable is not $150 per month anywhere in the US. Cable is realistically about $50-80 per month for most people. What does that get you? It gets you content fed to your home by physical infrastructure or extremely expensive satellites. That infrastructure costs a lot to maintain. The TV content it carries buries music in both expense to produce and perceived value by customers.

        Music simply isn’t worth that much to most people. Music subscription companies are having a hard enough to getting people to use their $5 or $10 per month services because they traditionally don’t pay $60-120 per year for music. $20 will never happen. Rhapsody tried $15, and it got them no where with customers and even further nowhere with artists. Heck, Spotify is having trouble getting people to use their free service.

  3. Visitor

    Don’t you just love this line from the New York Times story:

    “The only time I download anything on iTunes is in the rare case that I can’t find it on Spotify”

    That should end all Spotify discussions here & elsewhere. 🙂

    • MSchruers

      Anecdote is not data. My personal experience is contrary; the only music I buy these days are tracks I hear on my Pandora stations. But why resort to anecdote at all: there is actual research undermining the notion of streaming “cannibalization.”

      Back in November Sisario himself reported for the NYTimes that research showed that Pandora users bought 29 percent more music than they did last year.

      And there is also data showing that digital sales were up 6% in 2011 – the year Spotify was introduced. (The Dow Jones, incidentally, flatlined over the calendar year.) The data supports the argument that streaming services are discovery engines that provide exposure.

      • Faza (TCM)

        Whilst I can’t speak for Pandora, I do know that digital sales have been rising year on year – and generally by more than 6% – ever since it became possible to buy music files online, so that 2011 data re: Spotify isn’t exactly very relevant.

  4. charmtrap

    There’s certainly plenty of delusion out there among musicians about what one play of a song is “worth”. Just how much does Zoe Keating think she should be paid for 131,000 listens?

    • Econ

      For comparison’s sake, 131,000 listens is equal to ONE play on a well-rated radio station in a major market. Radio only pays songwriter royalties, and those rates are going DOWN, not up.

      • Visitor

        Very true. Won’t matter soon. Clear Channel is going to fail under their debt. CBS is trying to offload their radio. Cumulus is unstable at best. Once the big goys fall, radio will go down with them.

  5. BT

    More subscribers doesn’t mean more revenue necessarily. If Burnstein thinks that way, either he doesn’t know how to read the deal, or he does have a totally diferent deal from other labels, including majors. In streaming payout models you always have to take into account, 2 things (mainly): Nr. of subscribers, label share on total streams on a given month. A simple example:


    20 million subscribers (100 million USD to labels)

    2 billion streams

    Metallica’s Label share: 1% (20 million streams) = 1 million USD


    10 million subscribers (50 million USD to labels)

    1 billion streams

    Metallica’s Label share: 4% (40 million streams) = 2 million USD

    I don’t know Metallica’s Blackened Records deal with Spotify, but it works like the above to most of the content owners who have a deal with any streaming service.

    Another worst case scenario: 80 million Indians subscribe Spotify. In general they listen to bollywood. This would have a huge impact on Metallica’s share.


    100 million subscribers (500 million USD to labels)

    10 billion streams

    Metallica’s Label share: 0,4% (40 million streams) = 2 million USD

    (the same amount has in example b. which had 1/5 of the subscribers)

    • Visitor

      @BT – Correct. More subscribers means a larger revenue pool, but the amount paid (should) always be 70$ of gross… so there will be winners and loosers.

      If there are way more plays than the per stream amount can cover at 70% of gross, you will see the per stream amount to back into that number.

      there is no “magic money” this is simple math.

    • Mike

      It’s safe to say that being it’s an exclusive, Metallica’s deal with Spotify isn’t standard.

      • BT

        Yep, safe enough to say that. 🙂 But I think that the payout formula, remains basically the same. I think what isn’t standard in this deal, is something like a good chunk of upfront or annual upfront, for a catalogue of just one Band. Just me speculating…

  6. musicBuyer

    i only listen to underground electronic music, and spend about USD300-600/year on tracks that decide i want to have on my computer and accessible to my dj-ing apps. this is far more than i make dj-ing, and ~80% of the tracks i buy, turn out stale after i hear the whole track. yes, i know about pulselocker etc.

    here is what i would like to see as far as a music delivery service:

    TierA: pay 5/mo flat fee, to be able to hear any track, in full lenght, 2 times each. desktop & mobile.

    TierB: pay another 10/mo to hear any track, unlimited number of times, above the 2 times covered in tier A. desktop & mobile.

    TierC: pay 0.50/track for downloads to my computer (for use in my dj-ing apps). drm is fine with me.

    in other words – if i have “radio” mode on for an entire month, and tracks played, do not catch my attention to get added to my own playlist, i did not get much from the music anyway.

    • Casey

      DRM is fine until you get down to your last activation. Then it is lose your music of break the DRM. Circumventing the DRM may be illegal, but I don’t know too many who are willing to lose their music they legally bought.

      DRM has its place. But once it gets in the way of legimate use then it needs to go.

  7. AnAmusedGeek

    I’m a bit confused how people think adding a few million more subscribers is going to change things ? I would imagine that those subscribers would come with there own costs (servers, bandwidth, etc), and would increase the total number of streams per month (lowering the average per stream)…

    The net effect would seem to be that the per stream payout would stay relatively close to where it is…

    My understanding was musicians needed orders of magnatude more revenue from these services ? (Ie going from $3/month in royalty to even $30/month isn’t gonna help much? )

    • Casey

      The average per stream wouldn’t really drop. It would probably stay about where it is now unless the new subscribers were formerly free users, in which case the revenue per stream might increase a bit.

  8. $1 million USD

    How many streams would it take to get $1 mil from Spotify?

    Assume that Spotify pays on average $0.006 per stream and you own the rights to your music.

    $0.006 x 166.7 million streams = $1 mil

    If you have 36 songs, each song need to be streamed 4.63 million times on average in order for you to get $1 million.

    It might be easier to sell 1.3 million Itunes download.

  9. FarePlay

    There are a number of ways to respond to this post, it depends on the context.

    First, and this is historical and biographical, Lars Ulrich was basically the poster child as “rich, successful, greedy artist and outspoken opponent of free file distribution and Napster specifically.

    Fast forward 13 years and Ulrich’s band Metallica and their manager are now outspoken supporters of Spotify.

    The context: Sean Parker.

    Now from a reality perspective. Clearly Metallica, like the labels, received a preferential deal and at 20 million subs perhaps Metallica can be profitable. I have to agree with jw on this one, the number is probably closer to 80 million and even at that point based on cost analysis I’ve seen; I’m not sure it works.

    If we’re basing this on “increased’ payouts as Spotify claims, the likelihood of this happening, especially after an ipo, is extremely limited at best.

  10. and sometimes Y

    Ben Sisario (NY Times author) and Paul Resnikoff (who is the guy at DMN) are friends. So I’m not surprised to see this Times angle now.