Business Matters: Beggars Group's Claim That Its Artists Earn More From Streaming Tracks Than Downloading, Unpacked

Business Matters: If Big Radio Had Pandora's Royalty Rate, It Would Owe Billions

Business Matters: If Big Radio Had Pandora's Royalty Rate, It Would Owe Billions

Download revenues continue to rise, but streaming revenues are starting to take up a surprising portion of digital revenues.

Beggars Group founder and chairman Martin Mills told the Guardian that 22% of the label group's digital revenues came from streaming in 2012 and the majority of its artists now earn more from streaming than from downloads. Those numbers may have surprised some people, and they're proof the industry is doing a better job at monetizing consumers' love for streaming media.

Look at streaming revenue's share here in the U.S. In my recent post " A Better Look at the Digital Pie," I estimated 2012 U.S. revenues for digital tracks, albums, subscriptions and performance royalties based on RIAA data through 2011 and rough estimates on the growth of the market last year. Based on those estimates, here are the shares of the digital revenue for each of the four categories:

- Tracks: 41.9%
- Albums: 30.7%
- Subscriptions: 13.1%
- Performance revenues: 14.3%

Streaming, which includes both subscriptions and performance revenue in this case, amounted to over 27% of RIAA member labels' revenue in 2012, according to these estimates. The streaming share of digital revenue is actually greater because the RIAA data does not include revenue from advertising-based, on-demand video services like YouTube and Vevo.

Whether or not an artist generates over half of total revenue from streaming will depend on a number of factors, such as (and most importantly) contract terms and geography. Beggars Group gives its artists half of streaming revenue, thus treating streaming like licensing revenue (which is split between artist and label). Not all labels will offer these terms.

In addition, the country or countries in which an artist is popular will impact the digital share of revenue. A Swedish artist is likely to generate a high share of digital revenue from subscription given the shape of that market. Artists popular in America will have a different mix given the popularity of both digital downloads and Internet radio in this country. Other countries have download and subscription growth but lack the explosive Internet growth seen in the U.S.