The news from the annual MIDEM conference indicated streaming is the future of music. Deezer expanded to new countries. Rdio launched free tiers in new countries. Online video is a growing portion of revenue for record labels and music publishers.
But a report this week in the New York Times shows minds are hardly made up. The article detailed the per-play royalties paid by on-demand subscription services and Internet radio services, something that should be familiar to Billboard readers by now.
The short version: Pandora pays 0.11 cents per stream; Spotify about 0.4 cents per stream. An independent artist (like Zoe Keating, whose royalty statements are used as examples here) who owns his or her recordings and get 1.5 million streams on Pandora can earn about $1,600. Spotify has far fewer users and is probably going to result in lower royalty checks, as was the case with Keating.
Although the general consensus in the music industry is that streaming is the future, people can’t seem to decide on just how sustainable it will be. BMG Rights Management CEO Hartwig Masuch doesn’t exactly come out in support of streaming royalties.
“No artist will be able to survive to be professionals except those who have a significant live business, and that’s very few,” Masuch told the times, suggesting a wide chasm between superstars and hobbyists.
An independent record owner writes in the comments section the label has boycotted all streaming services as “a matter of dignity.” A professional musician writes in the comments section, “it was immediately clear to me that Spotify was not going to be good news for artists when it first appeared a few years ago.” And yet many labels have been very supportive publicly and very pleased privately with the progress and revenues of subscription services.
The size of the opportunity was underplayed in the article. This tends to happen in discussion about streaming royalties. A lot of attention is given to per-stream royalties and little to the relatively small size of the streams in today’s immature on-demand subscription market. Only Cliff Burnstein of Q Prime Management addressed the concept of quantity. He estimates subscriptions will sustain a total loss of purchases at 20 million global subscribers. Some quick math: Spotify has 5 million, Deezer has 3 million, Muve Music has 1.1 million and Rhapsody has about 1 million. Those total roughly 10 million subscribers. Set aside the hundreds of thousands — if not over a million -- of subscribers of Rdio, Mog, Simfy, WiMP and Sony Music Unlimited. If the world’s subscription market grew by just 100%, which would equal 20 million global subscribers for those four services alone, would a total loss of CD and/or download sales be missed?
Tomorrow's streaming royalties could be an improvement over what artists and labels get today, attorney Donald Passman tells the Times. Speaking specifically about subscription services and not Internet radio service like Pandora, which is attempting to lower its future royalty rates, Passman says, “[a]rtists didn’t make big money from CDs when they were introduced, either. They were a specialty thing, and had a lower royalty rate. Then, as it became mainstream, the royalties went up. And that’s what will happen here.”