There’s a reason why the Eagles didn’t remain on streaming platforms, after all. But streaming cannibalization isn’t a debate — in any way, shape, or form — according to Spotify. Here’s what one Spotify executive told an audience at NARM when the testy topic came up.
Audience Member: “Would you guys say places like Spotify and streaming services are better for up-and-coming artists than more established artists? So say, Lady Gaga may release something, but she may not want to do it on Spotify because she’d be losing sales, giving it away for free.”
BFM Digital founder Steven Corn (moderator): “It’s a good question; are Spotify and other streaming services better for up-and-coming artists as opposed to those with a certain amount of exposure?”
Spotify Account Manager of Label Relations Katie Schlosser: “That’s a really layered question to answer. For a larger artist like Lady Gaga, you can’t think of your unit consumption in the same way as your streaming consumption. Streaming is all about the Long Tail value proposition of each individual user.
“So in the lifetime of a consumer on Spotify – there’s an inflection point where the download of one individual track is overtaken by the actual amount of streaming that an individual user does on that track over time on a streaming music service.
“And then the payouts they outweigh each other and streaming overtakes that individual download.”
“But it’s hard to shift a business and an industry that’s so geared towards first-week sales [towards] the thinking of the long term potential that this new platform, this new model of business is going to be bringing to the industry.”
Corn: “Great answer —”
Schlosser: “Trust me when I say we’ve done extensive research and analysis on this exact question that you’ve raised, whether or not it’s the right move to withhold music from Spotify. There’s been some – there’s been in the past, some big name artists that have taken that path, Coldplay’s latest album, Adele 21 for a while was off of the service.
“We’ve luckily been able to counteract that with the data that’s proving and demonstrating the fact that streaming revenue is additional to actual unit download consumption or physical music sales, and we’ve asked every single label partner that we have, who have artists that have chosen that strategy what they saw.”
“So in the lifetime of a consumer on Spotify”
A funny thing to say about a service that may very well be dead next year.
Looks like wishfull thinking to me.
It’s that old question:- would you prefer your week’s wages this week or split into weekly micropayments spread over the next 30 years?
I think most people would prefer their week’s wages this week.
“I think most people would prefer their week’s wages this week.”
Certainly. And especially in this case, where said income is necessary to pay for new productions.
No wages? No music!
I do know of an artist who had blocked their music from Spotify in one set of territories and not others.
Guess what, there were greater transactional sales in the territories where their music was NOT on streaming services…
I don’t know about that. She is basically saying free on-demand subscribers would never pay for on-demand content. I mostly disagree. These on-demand subscribers are more actively engaged in music then the radio listener therefore are more willing to pay if piracy was under greater control, which is completely possible despite claims from self-defeating pessimists.
Besides, indie artists and labels receive only 55% of Spotify stream revenues versus 70% download revenues from Apple and Google. Why? Because the major labels who are major shareholders in Spotify dictate how much indies(55% = 25% market share) and majors(75% = 75% market share) receive. Rhapsody pays 70% to indies and majors alike. I’ve already explained the math on this site. Will only explain it again to people capable of understanding if they ask.
You are making an equally giant assumption. That people engaged on Spotify were equally as engaged music consumers beforehand. It’s entirely possible the fact Spotify is free and has such a huge catalogue has given people a reason to be more engaged with more music. While it may to hard to prove either way, thinking a spin on Spotify would equal a purchase if Spotify did not exist is just silly. I buy more music than the avg person for sure, and I’ve spun hundreds of songs/artists/albums on Spotify I would NEVER have purchased otherwise. Many of them, I may not have even heard at all.
Are there some? Of course. People that once took a chance on a record now have a place to test it out. I highly doubt it’s heavily weighted one way or another, though.
Going to explain why or just take your cowards way out?
Also, you are already wrong because I prove you wrong literally every day. I listen to music on Spotify I 100% would never have and never will purchase. And I am by no means so unique outlier of a music consumer.
I’ve already explained myself, no need to repeat.
So you think I would have bought all the music I stream on Spotify? Amazing how you know me better than I know myself!
GGG don`t bother engaging Yves. he is not really part of the biz. just a wannabe with some rather stange personality traits.
Better explain again. Makes no sense at all. True majors get paid on market share (unless per stream revenue is higher, the greater of…) Indies get paid per stream, not based on market share.
70% = normal payrate, average pay rate
3 = 75%/25% = market share ratio
5% = premium requested by major labels
75% = 70% + 5% = major label payrate
55% = 70% – 5% X 3 = indie payrate
(78.57% or 55%/75%) X USA Rhapsody stream rate = USA Spotify premium stream rate, roughly.
Mental Typo. Should read 55%/70%.
That is what you call a delusion. Get mental help.
Will only explain it again to people capable of understanding if they ask.
What kind of idiot are you? Go away please!
Hello, I’m the kind of idiot that forces you to think of the solution before you ask. Have a nice day.
Isn’t hard to prove a negative like this?
Couldn’t a major label say: Spotify can not demonstrate that releasing a single on spotify and download simulataneosly is good for sales of downloads? or some other blatant conjecture?
Don’t bother using logic with Yves. He will just call you a drug pusher or criminal or pedophile.
That’s a weird and totally irrelevant comment, GGG…
Although I don’t believe your comment was intended for me, I totally agree with you, Visitor. It’s called “delusional Spotify-speak to fool the masses”.
Perhaps I’m in the minority but I find myself buying more music because of my Spotify subscription. I notice that I’m checking out more artists with a lower barrier of entry, then I’ll buy the album because I want it on my iPod for the gym, car, etc.
I believe you are in the minority but on-demand streaming subscribers tend to be more engaged in music than the average radio listener or music consumer. Also, on average as we age, we spend less on music. At that point in age is spending $10 per month worth it for the average music consumer? I strongly doubt it.
The top two discovery methods are by far radio and friends while access subscriptions like Spotify are near the bottom of this list.
The average person is not engaged in music like on-demand streaming subscribers are, that’s why the latter will pay big bucks for the all-in access convenience. They’ll pay more than $10 per month if told to, despite their claims they would not pay more… Just empty threats to keep prices undervalued based on the amount of streaming/consuming they do regularly.
If a subscriber is not actively streaming then they should consider if it is actually worth it, as they were likely caught up in over zealous hype when they joined.
I find your logic worthless. Streaming just one album is worth it to me. That’s $10 or more I would have paid to buy the cd and listen to it. Listening to more than one album on Spotify, and I’m getting even more value for my $10 a month.
People were willing to pay $15 for Rhapsody and Zune until Rdio/MOG/Napster flooded the market with those $5 subscriptions and $10 mobile. Then Spotify came with the free service making people not even want to pay $5.
It’s also worth noting that the value of streaming services to consumers has grown immensely over this period. In a non-smartphone, pre-iPad world, subscription services like Rhapsody were largely playing on one desktop or laptop.
On top of that, rich WiFi wasn’t easy to grab on-the-go (in a local coffeehouse, Starbucks, or even a friend’s place). Therefore, the proposition was largely a massive selection at a modest price, but real music fans invariably had to complement that with an iTunes+iPod collection, CDs, satellite radio, or other physical.
There’s also the mood of the licensors to consider. Up until the last few years, labels – major labels in particular – were quite wary of subscription, for reasons that of course revolved around money. Reality kept creeping in, and the majors seemed to have figured out a way to tweak their game of demanding massive upfront licensing costs (and now, percentages) often at great risk to the licensee.
Major labels are more willing to license and support (and now have a stake in the game); but like before, the chances of survival for the licensee(s) are shakey (at best).
Spotify could IPO and mint billions, of which the majors (and Goldman Sachs) would all get a piece. Or, maybe it goes ‘pop’ before that point, and collapses under its house-of-cards financial weight.
All of that shifts the discussion around Rhapsody a bit: you could argue this company was simply too early back in, oh, 2003, and perhaps simply unable to properly capitalize on the current shifts (of the last few years).
Perhaps that colors in the pricing shifts a bit.
Let’s face it, this debate is interesting, but the writing is on the wall. Paid downloads will not be here forever. Streaming is just a much better value proposition for the consumer, and no supply-side resistance will ultimately overcome this demand-side flood that is building.
And with the ability to download to authorized devices being a part of most subscription services (I’m not sure about Spotify, but I know you can on Rhapsody), buying the music is getting to be obsolete – a constant connection is not necessary. What reason would you have to buy the digital file? To “own” it? That’s silly when the cost of owning an album is substantially higher than the cost to access it, especially when it can stil be downloaded with your subscription.
So unless you’re just into playing vinyl, paid downloads are doomed. Maybe not next year, but most certainly by the next decade.
Yup, you are in the minority. The rest of us are streaming Spotify Premium on our ipods in the gym, car, etc.
Difficult to generalize based on anecdotal examples. I’m sure there are some who, like you, buy more music as a result of streaming sales. Equally there will be many like me who buy less. My own personal experience is that it’s those artists that I would normally have been on the fringe of buying that are losing my money. Not every band can be our favourite act; most of my collection is made up of albums I quite like and dig out only occasionally. There were several albums this year I fully intended to buy based on a single Soundcloud track or the Amazon preview clips. But thanks to listening on Spotify Free, I instead decided that for these albums, a handful of ad-supported listens was enough. Good for my wallet, not so good for the bands in question.
Again, as I said initially, difficult to generalize based on anecdotal evidence. But if, as the article headline indicates, the chap from Spotify truly believes no one has lost sales from streaming, I can send him a list of the albums I didn’t buy this year thanks to his free service.
Listening to an album in entirety before purchasing is absolutely essential to solidifying a full-length purchase.
Odd to think there were stores back in the late 80’s using the German ‘Lift’ merch system that enabled that. Absolutely everyone walking in to a store left with something then because they could always find an album that they liked from track 1 to the end of the album.
As a companion to straight-up retail, Spotify makes sense. Why they don’t get into CD sales with a simple click-through to Amazon for example, seems like a no-brainer. They could call it NTR (non-traditional revenue) for their business model. Pandora certainly takes advantage of that.
There was never a need in the past for most consumers. The same is true today. I think most of us trust our instincts with 30 to 90 seconds full album previews or 2 radio hits. Don’t know what you are looking for or avoiding that isn’t in the preview? Whatever it is, only a minority do the same as you.
One of the ads on Spotify Free for Spotify Premium here in the UK actually says, “You’ll never have to buy music again!”
It’s difficult for Spotify to maintain that streaming doesn’t cannabalize sales when their own ads are selling their service on precisely that.
“One of the ads on Spotify Free for Spotify Premium here in the UK actually says, “You’ll never have to buy music again!””
And as all professional songwriters/musicians/producers/mixing-engineers and mastering-engineers know:
You can not finance professional music production from streaming revenues.
So it’s finally out in the open:
Spotify’s goal is to destroy music!
I hope artists all over the world will return the favour and make it their goal to destroy Spotify.
Waste of time. Streaming has already won. It’s what the customer wants. Better adapt and find a way to make streaming work for you.
“It’s what the customer wants.”
Um, why this interest in what customers want?
They also want free cars, eternal life and sex with Justin Bieber.
Guess what they get.
One big difference. You can get streaming but you can’t get free, cars eternal life (yet) etc. As for Justin Bieber I’ll pass.
In the end the customer decides. They will only pay for what they believe is worth paying for. Within a few years virtually nobody will want CD’s and downloads. Be prepared or be doomed.
$16 billion =2012 music industry revenues
2.5 billion = Internet users (man, woman and child in household)
1 billion = Internet Households
$6.40 = Yearly music spending per Internet user.
Your forecasts are very unlikely unless the music industry embraces free streaming at very low revenue rates, among other unlikely notions…
If free Spotify streaming has been available for many years now, why haven’t the People embraced it? As per you belief, there should be a Gold Rush to Spotify Freemium. YouTube delivers a much greater need but still at subpar industry revenue needs. I don’t see the labels dropping the CD or download models in favor of free YouTube or free streaming altogether.
If the consumer doesn’t want to pay the price, they won’t receive the product. Consumers will always want good music. Unless you are a self-defeating pessimist, you will correctly believe that piracy can mostly be controlled.
If you think piracy can be controlled at all, you don’t know how the internet works. If the Silk Road, a large underground, online drug trafficking ring can exist, I think people will figure out how to steal a Daft Punk record.
Mainstream piracy is hardly a mainstream consumer issue, though. Who do you think pirates more; the type of person who would search Google for torrent links or a person who doesn’t. (spoiler: it’s the latter.) Child pornography is far from eradicated. Ever hear of 4chan? Drug and human trafficking happens online, as well. Every fucked up thing imaginable has links online because people are always one step ahead and know how to game the system. I have no idea how to access the darkest parts if the Internet but there’s plenty of info out there on them. Whether its simple things like using Tor to constantly redirect your IP address or joining these fucked up circles, if people want to steal they will steal.
Unless, again, there is an alternative that these people accept. I think cheap streaming is a/the good place to start.
“If you think piracy can be controlled”
Sorry, but you’re living in the past, GGG. It’s very easy to stop mainstream piracy.
Google & the ISP’s can do it tomorrow. Just like they already block child pornography.
Sure, they’ll whine a bit. Piracy is their main source of income, after all.
But they’ll come around.
“One big difference. You can get streaming”
Not sure what you mean — I don’t stream my music.
But you can do it if you want to. You have a choice. If you want to live forever you cannot.
Are you nuts? 🙂
Why would I want to give away my property?
Huh? Giving away? I was talking about listening. And since when is streaming giving away? You get paid for it.
“And since when is streaming giving away? You get paid for it.”
Excellent James. Your two comments hit the nail on the head and they directly relate to the theme of this article.
Agree — especially regarding that extremely offensive ad:
You’ll never have to buy music again!
Hundreds of thousands artists are not on Spotify!
In their war against these artists, Spotify explicitly now asks us not to buy their songs.
If we wish to hear these songs anyway, we are to assume that Spotify wants us to download pirated versions.
Let’s hope this is Spotify’s suicide note!
Very good points.
I would not count on it If I were you. Artists fighting streaming are like lemmings
“Lemmings became the subject of a popular misconception that they commit mass suicide when they migrate. It is not a mass suicide, but the result of their migratory behavior. Driven by strong biological urges, some species of lemmings may migrate in large groups when population density becomes too great. Lemmings can swim”
Nice try. But you know what I mean. Smart ass replies cannot change what is real. Streaming is what the majority of people wants. Even if most of them don’t know it yet.
Read this report?
“Streaming is what the majority of people wants. Even if most of them don’t know it yet.”
Oh, I see…
No you don’t. That’s the problem
If the ad is true, sales cannibalization is not possible because people who use Spotify wouldn’t buy music anyway. So it actually fits well into what Spotify is saying in this article.
If this is the case: it also means from the point of the industry as a whole (except maybe the majors) Spotify may be very bad for business.
But! From the point of any individual artist’s business, having your music on Spotify always a net gain.
So what does this mean? This is a textbook case of the tragedy of the commons.
Very hard to follow your reasoning.
I’ll pass on it.
I thought that I would chime in with my perspective on streaming services. While I won’t say with 100% certainty that there is no cannabilization of download sales, for our distributed labels and artists, I haven’t been able to document any appreciable affect on download sales. In fact, for many of our labels, Spotify has become a significant revenue stream that can’t be ignored. It seems to me that it’s plausible that some artists will have a demographic that can be diverted from downloads to streams. But the streaming services, at least for the time being, seem to be cumulative revenue.
As a distributor, I have the benefit of having larger numbers than any of our individual labels. For us, Spotify has grown to be a top 5 revenue stream even as a la carte download sales have also continued to grow. If I look at the past 2 years, the market share BFM derives from streaming services as compared to download sales has remained remarkably consistent.
During this panel, I queried the audience as to what music services they used. It was interesting to me that most everyone used at least 2 music services and some used more. I think that that is going to be the case for years to come. If I look to other types of consumer markets, I see a lot of different businesses competing with each other offering very different types of consumer experiences…and many thrive quite nicely.
I’m hoping that this is the case with the music biz. I want to see a diverse landscape where many different types of music services succeed and create a multitude of revenue streams for labels and artists.
Thanks for this. I think people have such an issue with Spotify’s lousy payout to artists (and understandbly so) that they just assume everything about it has to be bad.
I think there are absolutely people who don’t buy albums because they streamed them, though perhaps it’s negligible if that’s what your data says. But I’m glad you brought up the 2 services issue because that’s been my train of thought for a while. Yes, you can make a personal library on streaming services, but until these services phase out buying downloads (if they do), and get much more popular (which they probably will) I think Spotify is more of a supplemental listening tool to people’s offline music library. Because a music collection, whether it’s on vinyl, CD, iTunes, iPhone, HTC, whatever, is a pretty personal thing. Many people still want a specific collection, not necessarily all music, which is daunting to even comprehend. And their library is probably their go-to place to listen to music. Spotify is just as much a tool to build that as it is a tool to replace it.
And having just said that, the way tech now influences how we do things, it would not surprise me one bit if that completely changes in the next few years, especially with the generation that grows up on Spotify.
“I won’t say with 100% certainty that there is no cannabilization of download sales”
Of course not.
Consumers obviously don’t buy songs they can stream for free — why would they? 🙂
Nobody says it better than Spotify:
You’ll never have to buy music again!
Paul, don’t you think there’s a story in Spotify’s slogan:
“You’ll never have to buy music again!”
It is the first time Spotify admits that streaming cannabalizes sales!
Anyone got a screenshot? Throw it in the thread or email me (paulr … at … digitalmusicnews.com)
Some do. I’ve done it. As I said above, there’s still a difference between having a song/album in your personal music collection and it just being on your Spotify radar. However, as I also said, I fully expect these numbers to shrink as streaming becomes more popular and people use the libraries inside those services to save their music.
The problem is download sales could have been greater if not for streaming. This is where your analysis breaks down, seriously… and I believe you are already aware of it.
I am not interested in supplying music to unlimited free streaming services.
I have no data to back it up, but it is very likely there are many Spotify subscribers, freemium or premium, who have purchased my music, in the past, present and going forward, though it’s not on Spotify.
My specific beefs with Spotify are the following:
1- free streaming with payouts that differ from premium streaming
2- an unfair 55% indie percentage payrate
3- major record labels are major shareholders
4- Daniel Ek and Sean Parker have a history of advocating for piracy and have little ethics on how they make a profit
5- They make grandiose forward-looking claims that could never materialize I.e. “50 million USA subscribers in 12 months from the start of the USA launch”, etc
As for your music.. well I will let that be.
1) Payouts for free differ from paid for a reason. Why is that a problem?
2) Your 55% percentage is a delusion. Indies get paid per stream. The % percentage for big labels has little effect on the payout per stream. Work with the numbers and you will see.
3) true. If not Spotify would not be able to offer thier music. Live with it.
4) Come on
5) What’s the point? You of all people should know that you can make mistakes. Once you released your music on Spotify.
Let me know as soon as you have done the math with the streams so we can discuss that further.
Disagree with all points.
My math is solid, please refer above. There is a good reason why indies aren’t told their percentages. It’s called “Spotify 55%” and indies receive different percentages depending who is their distributor.
If you are desperate to show your math, then by all means show us.
Once and for all Yves. Indie labels don’t get percentages. They get a rate per stream. Trust me, I know.
You math is solid as a jelly fish, shaking all over. So stop spreading this 55% bullshit.
Come to think of it. No one here is taking you serious anyhow, so why bother fighting your stupid ideas. Waste of time.
I’m taking a guess you work for or head a major label and performing deflection duties today. Just a guess.
“The problem is download sales could have been greater if not for streaming. This is where your analysis breaks down, seriously… and I believe you are already aware of it.”
How do you know this? Source? You cannot presume a Spotify stream equals a purchase any more than I can presume it doesn’t. People’s listening habits are not as black and white and you seem to think they are.
Disagree all you want, but you’re wrong. Case in point, I am listening to an album this very moment that I would not even be hearing, let alone purchasing, if I didn’t have Spotify. And I’m not some unique snowflake of a consumer in that regard.
Disagree with all points.
So this is your new thing? Coward.
1. I am not a fan of this myself, but artists and labels do get to choose whether or not to license their music to Spotify knowing this is a Spotify business practice.
3. Unfortunate, but unavoidable. Spotify needed licenses and capital. Equity was all they had to offer.
4. Perhaps. But we could say they same thing about practically every company’s executives. Steve Jobs had a very colorful history.
5. It’s hard to fault them here. Whether or not they truly thought they could achieve their high numbers we may never know. But they have definitely tried. They expected people to fall all over them like they did in Sweden and underestimated the competition here in the US. Pandora especially. They expected people to flock from Pandora because it wasn’t on-demand. But they didn’t understand that many of Pandora’s listeners are passive-listeners using mobile devices or web players at work, which Spotify didn’t offer. After nearly 2 years they are still playing catch-up.
1- Agreed. I’ve made my decision.
3- In my opinion, it was avoidable. They’ve had lots of VC backing even in those days to pay for upfront advances. Sean Parker knew what heart strings to tug so he would have the labels eternally on his side.
4- I trust Steve Jobs over Daniel Ek and Sean Parker. Not afraid to admit it.
5- That wasn’t the only outrageous thing they said. Something was said recently that artists will never have to worry about rent when Spotify becomes huge.
5 cents per stream, and stream #7 converts you to ownership of the tune for unlimited streams thereafter!
Both Spotify and Deezer can modify the system and add “stream counter”.
Simple and honest to all.
Otherwise Spotify will spotify industry out of cash – we will see no growth or actual declaines at iTunes, Amazon and Google.
Come on already. Do the math.
How many times have you heard your favorite song? Now divide that by the number of records on the album you purchased that this song was on. So $12.99 and the album had 10 songs. $1.299 now take that number and divide it by the amount of times you listened to it over and over and you have your rate on what you paid the artist for the song you love for the amount of times you listened to it… not to mention that you will still listen to it more.
Revenue stream is a revenue stream. Stop trying to get rich fast or you will die tryin’. …
There is a common misconception that a song has unlimited shelf life. This is false, meaning there is a maximum number of times a person is willing to listen to a song.
Good songs have greater shelf life. Also, one’s trash might be someone else’s gold mine.
Of all the dumb, weird things you’ve said on here, this might take the cake.
You can mathematically prove how many times I’m going to listen to A Day in the Life? Please, do tell.
So you can’t prove it? So you’re admitting that post is BS?
Cool. Glad we finally agree on something!
Also, $1.29 is the average cost of a song on that album. Your favourite song will be worth a lot more than the average price.
Speaking from the view of a minor indie label.
Our revenue coming from Spotify and related services and rising to 10% of our income in 2012. While the is no evidence of incline in direct sales (mp3’s) because the majority of people willing to buy the music is fans who want the liberty to actual have the music ofline (in our case mostely DJs).
This is the future of music, if the major labels cant see this, its because their sunglasses need less dark glasses.
And to completely agree with @GGG, you are not the only spotify user like this. I act the same way, listening to a lot that i did would not have bought nor listened to otherwise. And I run a label.
Ever consider that music industry types are more inclined to listen to and spend more on music? Most people reading DMN are industry types.
The truth of the matter is most music consumers are passive thus not interested in discovering music beyond a favourite radio station and friends. Also not interested in having unlimited access to a library that will never be popular and played on the radio.
For some, the truth hurts. The hardest thing to do is to change our way of thinking.
“For some, the truth hurts. The hardest thing to do is to change our way of thinking.”
This is great coming from the guy who wants to act like it’s 1998…
Look, I don’t disagree with you that the avg person listens to less music that the avg person on this site. But you also underestimate how much the current music culture encourages finding new artists. The growth and popularity of indie music and Pitchfork is a testement to this. The growth and popularity of Pandora is a testement to this. The growth and popularity of US music festivals are a testement to this. Those things are not nearly as homogenous as terrestrial radio and even some satellite stations.
You also say “not interested in discovering music beyond a favourite radio station and friends.” OK, well, unlike you most people have more than 1 friend. People have hundreds of “friends” on Facebook, and many people love sharing stuff. I’ve discovered countless bands from posts by people on Facebook I literally have not spoken to in almost a decade.
I see your FB page is up to 1600. Congrats. Most popular city is in Sri Lanka? How much money have to dropped buying “likes?”
Disagree. If you believe I am breaking FB rules then report it to them and they will disable my page, otherwise you have no case to support your allegations. It is against the rules to “buy likes”.
Facebook also removes all Likes it perceives were bought.
Facebook does investigate all reports of alleged abuse.
Do Sri Lankans buy a lot of your records?
The country that bought the most music from me to date is the USA.
Colombo, Sri Lanka, the city with the most likes to my page, may represent as little as 2 Likes.
You are making a bad assumption.
There is no assumption there. I asked if Sri Lankans bought your music. That’s called a question.
LOL. I love it: disagree
I love the % everyone is using. The fact is, Indie artists get something like .00012 cents per play from Spotify. A million spins yields nothing close that can even begin to pay for the cost of making the music.
On a million spins, for those of us that have been in the industry, we could count on significant revenues from publishing and from physical sales. Now that physical sales are toast, there must be some realistic revenue share created that allows artists who make the music, to be paid fairly. With Spotify the Major labels get an access fee which has NOTHING to do with streams, then they get a per spin fee which is shared in some way. None of this accounting is public.
The majors are to blame here, they are no longer in the music busines, they are in the pop promotion business and a platform that provides promotion (and gives dividends) is what they need. Spotify is just the latest nail in a coffin that was built a long time ago when the Majors failed to grasp the new economy. Now we are facing new challenges to get diversity in music and have to fight major media companies in addition to the normal harships of competitive markets and changing technology…
.00012 cents per play is definitly not the standard rate fo indies. On average the pay out per stream to indie artists is 0.5 cents.
Here is proof:
Since Freemium subscribers outnumber Paid subscribers by at least 3 to 1, the average stream rate is closer to .1 cent (the Freemium rate roughly) than 1 cent (the Premium rate roughly).
Hans, I never trusted your info since you operate a Spotify-specific blog.
Think of it what you want Yves. I don’t care what you believe or not. Reading you above comments I can hardly take you serious.
All the statements are 100% genuine I garantuee.
My blog is Spotify specific, true but what’s wrong with that? Makes me sort of an expert. But you probably disagree. Doesn’t come as a surprise.
To quote another visitor: “Villeneuve is eneuve” 😉
To be more precise:
.325 Cents = ((.1 x 3) + (1 x 1)) / 4 = avg Spotify stream rate (roughly the maximum)
This excludes any assumption that the Spotify Hybrid subscription (.5 cents roughly) represent half the Paid subscriptions.
When Hybrid assumption is taken into account then the average Spotify stream rate is roughly:
.2625 cents = ((.1 x 3) + (.5 x .5) + (1 x .5)) / 4
Looking at my statement now. Avg appears to be .00370000.
As you know I am a major Spotify sceptic.
But our indie label has maintained our releases on Spotify and we currently get an average of around 17,000 streams per month.
I don’t often agree with HansH but in this case he is right.
Our grand average, combining ad supported, medium subscription, and premium subscription – and after deduction of aggregator percentage – is currently, in fact, in excess of 0.6 US cents per stream.
Europeans get better percentages than Americans while Swedes receive the best percentages. One of reasons there is a lack of transparency and the hype is mostly centered in Sweden and Europe.
Just curious, have you weighted your average? Do your weights correspond with the Free to Paid ratio. If not and your average represents reality then Spotify is counting inactive Free Accounts as active similar to Paid accounts.
I’ve no idea if we are typical or not, but we get nearly 3 times more high rate paid subscription streams than we get low paid free streams.
ie. of the 17,000 per month roughly 12750 are paid and roughly 4250 are free.
Thanks Steve. If your streams are typical than Spotify is falsely quoting active free subscriptions. Should be claiming 25% of paid subscribers as being active free subscribers.
Sorry, should have said 33% of paid subscribers…
25% of active Spotify subscribers are Freemium subscribers.
What I’m saying is, if your average represents reality then Spotify has much less number of Active free subscribers then it claims to have. Maybe 66% less what is claimed.
It is very possible that Premium users simply stream more per month per user on average than free users. Outside of the US and Asia, Spotify limits free users to only 10 hours per month, which many supposedly do not reach. I imagine the majority of Premium subscribers listen a lot more than 10 hours per month.
This is complete speculation but I’m assuming the vast majority of people who pay for Spotify essentially don’t buy any music anymore. This is true of the few people I know who pay. So you wouldn’t be crazy to think they stream a ton more music than a free user.
So what you’re saying is a freemium subscriber that streams one song per month should be included in Spotify’s metrics? Sorry, but that is truly deceiving.
So far, SteveH has given us the best evidence that Spotify is severely overstating its active Freemium subscribers.
Decieving it might be, but that is common practice. Most likely if a user simply logs in Spotify will include them in their metrics. I am sure it is all automatically pulled from the database based on last login. If you have Spotify software installed on your PC, it will login and join you to the P2P when you start your computer even if you are not using it.
So we agree, when Spotify reports its active subscribers base we can both dismiss it as misleading and instead refer to SteveH’s streams as better evidence of activity.
This may help in explaining the difference in revenues between the US and Europe.
I was speaking in terms of percentages that increase revenues for Swedes and Europeans thus creating greater hype in those regions.
There is no such thing. It’s the percentage of users that is higher in these countries.
Thanks for your support Steveh. I sure can use it in this discussion.
What would be interesting to know is how many times, on average, a user streams a particular song in Spotify. There is clearly a tradeoff between distributing music through Spotify and iTunes where in the long run, an artist could make more money from royalty checks using streaming platforms, but only if their songs are listened to beyond the break-even. Some simple math allows us to calculate how many songs are necessary to get past this point. A $0.99 download on iTunes nets the rightsholders roughly $0.70. From most accounts I’ve read (and please correct this if it is inaccurate), Spotify is paying roughly $0.005 per stream. So at half a cent per stream, a rightsholder would need their one song streamed 140 times to earn the equivalent royalty check from one iTunes download. Go to your iTunes and count up the number of songs you have that you’ve got over 100 plays for. Then do it for 140 plays. Not a lot.
It takes years and years for a single fan to get beyond that break-even point and beyond a few years is the music still relevant to the fan? Are fans even listening to much of the same music? Except for those special artists and only certain songs for those artists, I think its a rare case where a single song hits more than 100 spins for an individual fan.
Of course you don’t listen to tracks over 140 times! The big difference is that with streaming you can listen without paying upfront. There is a way bigger audience for that.
It’s easier to reach 140 streams than to score one paid download Also take in mind that even partial streams over 30 seconds get paid as a full stream.
Eh…I dunno if I’d go THAT far in saying 140 streams is easier than 1 download. But there are certain points where getting streams will be good supplemental revenue as opposed to nothing.
Maybe not (yet) in the US but in countries like Sweden it sure looks like it’s easier to score 140+ streams than a iTunes download. The graph above says it all.
HansH you make way way too much of Sweden.
It is a small market where iTunes never got off the ground.
In you own chart you can see that in UK and Germany the download market dwarfs streaming. There is no sign if this changing very much at present.
Germany and the UK are part of Europe as well. They are large markets.
Population of UK:- 63 million
Population of UK:- 81 million
Population of Sweden:- 9.5 million
The population of Sweden is just 6.5% of the combined population of UK and Germany.
Do you get my drift?
HansH you make way way too much of Sweden.
It is a small market where iTunes never got off the ground.
In your own chart you can see that in UK and Germany the download market dwarfs streaming. There is no sign if this changing very much at present.
Germany and the UK are part of Europe as well. They are large markets.
Population of UK:- 63 million
Population of Germany:- 81 million
Population of Sweden:- 9.5 million
The population of Sweden is just 6.5% of the combined population of UK and Germany.
Do you get my drift?
Of course it can’t be proved on a large scale. Can you prove that an apple a day really keeps the doctor away? I don’t know if you can really collect data on what doesn’t happen, in these circumstances.
From my experience, though, when I recommend an album to friends, they used to go listen to some samples and buy it if they liked what they heard, because they trusted my opinion. Now I’ll recommend an album and the same friends will say, “I like this, I’m saving it.” They’ve replaced buying an album with saving it on Spotify to stream later. In cases like this, yes, the availabilty of streaming services like Spotify have prevented a sale.
no supply-side resistance will ultimately overcome this demand-side flood that is building.
I don’t believe it’s just a supply-side resistance but rather a supply-side flood that has met a demand-side wall.