Music Streaming Now Generates Trillions Of Plays -- But Are Royalties Keeping Up?

Next Big Sound tracked an incredible 1.03 trillion streams in the first half of 2015. Many weren't monetized.

Billions were too small to measure the number of streams tracked by Next Big Sound in the first half of the year. In its mid-year report issued this week, the music analytics company says it tracked a gigantic 1.03 trillion music streams from a host of popular streaming services.  

"The mission here is full transparency in the music industry," writes Next Big Sound, smartly acquired by Pandora three months ago in its report of social data on the music industry, in a report describing the growth of music streaming and social media's impact on the business. (On being bought the company writes that its response "is a self-satisfied grin... we now have the most comprehensive overview of the industry we've ever been able to deliver.")

The headline number in the report is 1,032,225,905,640, or 1.03 trillion, the number of song plays on Pandora, Rdio, Spotify, SoundCloud, Vevo, Vimeo and YouTube that the company tracked in the first six months of this year. It's a startling number, much larger than anything we've seen before it.

What makes 1.03 trillion so important isn't just its size. The number is also a rare measure of the world's appetite for (legal) music streaming services. It's not a perfect measure, but it provides a great deal of insight.

Think about the size of that number. It's massive. Nielsen's mid-year tally for U.S. on-demand streaming was 135 billion, and it included services like Rhapsody and Google Play that weren't tracked by NBS.

A number that surpasses one trillion is exactly what the music industry needs. That kind of number is needed to turn streaming into a major revenue stream. More on that below.

NBS's tally is global; Spotify, YouTube, Vevo, SoundCloud and Rdio are available throughout the world (although not all of them are available in every country). NBS does omit some large streaming services like Deezer, Slacker and Rhapsody, however it tracks two major services not included in Nielsen's figure (Pandora and SoundCloud).

Pandora represents an incredible amount of streaming activity. Neither NBS nor Pandora reveal the number of songs Pandora streamed in the period. A rough estimate is possible because Pandora reveals the time its listeners spent on the service. According to its second-quarter earnings release, Pandora had 10.6 billion streaming hours in the first half of the year. At 3.5 minutes per song, and accounting for no commercials, Pandora would have streamed about 182 billion songs.

SoundCloud figures are also an important part of the report. Based on information provided in the report, Billboard estimates SoundCloud had 26.5 billion streams in the first half of the year. (The streaming service grew to 4.9 billion streams in May from 2.5 billion in June 2014. That's an average of monthly increase of about 192 million streams over that period. At the same rate of growth, the service will have 60 billion streams in 2015.)

So what's the value of all this streaming? That depends entirely on the different royalty rates across the globe. For the sake of argument, let's say the royalty rate is half of an all-in rate for Spotify. At 0.35 cents per stream, 1.03 trillion streams are worth $3.6 billion. Double that number for an annual rate of $7.2 billion.

The challenge -- and opportunity -- will be monetizing these streams at a good royalty rate.

It's safe to say not all 1.03 trillion plays were royalty-bearing streams. Some had a royalty in the 0.05 to 0.1 cents per stream range typical of subscription services. Many of the Pandora streams had a U.S. statutory rate for pure-play webcasters of 0.14 cents plus a smaller amount for publishers (some Pandora streams had a higher royalty applied to streams by subscribers). And SoundCloud, a new entrant to licensed, monetized streaming, most certainly had many non-monetized streams. 

Clearly there's room to improve. Last year's global streaming activity generated $2.2 billion for record labels, according to the IFPI (that covers many services not tracked by NBS). The streaming activity is already there. Now the dollars must follow.