Most Musicians Don't Get More From Streaming Than Other Revenue
Don't be suckered into believing a Telegraph headline, possibly rehashed without thought by a blog, that musicians are getting more from online streaming than other revenue sources. The claim has a sliver of truth but requires a few dozens asterisks and footnotes for the necessary clarification.
The headline twists this quote from Beggars Group chairman Martin Mills: "Some of our catalogue artists earn more from streams than downloads of individual tracks [or] any other format." Mills continued to say that physical is important but digital is vital because it allows content owners "to strike a balance between giving people what they want on the one hand and actually being a business."
This is a good opportunity for a reality check. Let's look at the first quote and see what Mills, who is based in the U.K., actually said while taking into consideration revenue from the U.K. recorded music market in 2011.
Point #1: The main problem here is the Telegraph took a very limited statement about a particular group of artists in a single label group and (incorrectly) extrapolated it to the entire record business. Mills didn't say all artists, all Beggars artists or even most Beggars artists make more from streaming than other formats. He referred only to "some" "catalogue" artists, or artists that don't have current releases. Older releases are less likely to have either digital or physical sales (brick-and-mortar stores are unlikely to carry a typical catalog title on an indie label) and their songs aren't likely to get much radio play. Depending on the song, however, they may get some sync royalties from use in commercials, TV programs or movies.
Point #2: Revenue from purchases far exceed streaming revenue. Let's look at the revenue breakdown of the U.K. market in 2011: 58% from physical purchases, 32% from digital sources, 8% from performance royalties and 2% sync royalties. Within the digital bucket, 85% of revenues came from downloads and just 8% came from subscriptions. Those numbers don't show what actually gets paid to artists (see below) but they make very clear where the money was last year. Not much will change next year in the UK, either. By the end of this year, download revenue will dominate subscription revenue even if subscription services double or triple.
Point #3: Differences in royalty rates don't make streaming royalties greater than download royalties. Artists tend to make a lower royalty from downloads than they get from streaming: downloads are treated as purchases and streams are treated as licensed media. Assuming artists get an 18% royalty on downloads and 50% of streaming revenue, total artist revenue from downloads still outweighs subscription revenue by almost a factor of 6 ($69 million to $12 million).
Point #4: UK artists got more from sync licenses than subscription services in 2011. UK labels got $35 million in sync revenues in 2011, according to the IFPI. Artists get half of sync royalties paid to record labels and would get half of the royalty paid to the publisher if they wrote the song, too. Total subscription revenue was only $24.3 million. Half, or about $12 million, went to artists.
Points #5: The second part to Mills' quote is very important. Streaming is quite important even though its revenue lags behind other sources. Beggars and other labels have found they need to offer their music in a mix of formats and at a variety of services. People expect to legally access music at streaming sites as well as download stores and brick-and-mortar stores. Labels need to balance consumer expectations -- which may not lead to much revenue -- with their need to generate a profit. In fact, this balance has been in the news quite a bit this week. NBC's Olympics coverage has sought a balance between unrivaled online access and broadcast TV revenue. Although NBC has been pilloried by the digerati for its broadcast strategy, it has put up strong primetime ratings even though many people already know the outcomes. The message is clear: you can't buy Olympics rights for $1.18 billion, give people everything they want and still turn a profit. ( The Telegraph)
CD Baby Jumps Into Rdio
CD Baby's catalog is now available at subscription service Rdio. Such a big hole in a digital service provider's catalog is not unusual but is becoming more rare as the weeks and years pass (Rdio launched in August 2010, so it's not exactly new to the game). And the CD Baby-sized hole that used to exist in Rdio's catalog is a reminder that not all music is available when and where customers want it. Some people may use this as an excuse for file sharing or widespread piracy (people will steal what they cannot buy or access legally, the thinking goes). No matter. Labels are going to continue to work collectively (through rights groups or distributors) so they are well represented in negotiations with retailers and services. It's efficient for both sides of the tranaction. But it also means catalogs will have the occasional hole (or a big hole in the case of Google Play and Warner Music Group). ( Rdio blog)
Facebook's Downward Slide Continues
Facebook's black eye just gets bigger and darker. The company's stock dropped to an all-time low of $19.91 and closed down 4% at $20.04 after Facebook disclosed that 8.7% of its accounts -- over 83 million of them -- are either duplicates (4.8%), user-misclassified accounts (2.4%) or undesirable accounts (1.5%) that violate its terms of service. That's up about 30 million accounts from the company's last estimate in March.
Of course, none of this means much to artists, labels, brands or other parties who use the social network for engaging fans, posting audio and video and even selling concert tickets. Even as its market value falls and reputation takes a few hits, Facebook continues to be the world's biggest social network with 955 million monthly active users and an Open Graph that's used by many music companies. Tumblr can't match it. Twitter can't match it. ( CNET)