Business

Twitch Makes Its Case: Artists Can Earn 3-15 Times More Using the Video Platform

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Courtesy of Twitch

         

The livestream platform is claiming to be the next frontier for creators using an analysis by former Spotify chief economist Will Page.

Can Twitch revolutionize the music industry? The Amazon-owned livestream video platform is making its case with a new microsite examining data from its users, showing artists on the platform can earn 3 to 15 times what they would get from Spotify and similar platforms.

In what’s basically a white paper called “Twitch’s Rockonomics,” former Spotify chief economist Will Page makes the case that Twitch is the next, great hope for creators to make a decent living from streaming music.

“Change has been a long time coming,” writes Page, referring to the two decades of various streaming platforms (Rhapsody launched in 2002, Spotify in 2008) and do-it-yourself tools that aimed to give artists a direct path to fans (the dearly departed Topspin Media and MySpace, for example). Using Page’s analysis of data from MRC Data and Chartmetric, Twitch makes the argument that change is coming from its live streaming platform -- a perfect place for long-winded acoustic sessions or multi-hour DJ sets that wouldn’t fly on platforms like Spotify or YouTube.

What makes Twitch a different kind of platform is how the money flows in and out. Much of online media lives in an attention- and advertising-based economy. Most streaming royalties come from subscription revenues like Spotify, which calculates royalties in a way many artists say unfairly favors the most popular tracks and artists. Twitch exists in an engagement economy. Money flows into Twitch through users’ subscriptions to creators’ channels at $4.99, $9.99 or $24.99 per month. (Twitch is owned by Amazon and Prime Gaming members get to subscribe to one channel for free.) Creators can also earn money from Bits, a paid virtual good that allows a buyer to support a streamer. Artists can employ mid-roll advertisements to Twitch viewers that average 15.8 hours per week, far more than Spotify (6.4 hours), YouTube (5.7) and TikTok (1.9), according to MiDIA Research. Finally, creators can direct viewers to third-party platforms such as Patreon and PayPal.

The way money flows out of Twitch, as royalties to rights holders, is also different from legacy businesses like broadcast radio and more nascent platforms like Spotify. To the point, Twitch can pay artists 3 to 15 times what they would get from Spotify and similar platforms, according to Page’s calculations.

Twitch must obtain blanket licenses from the appropriate “collective management associations” to perform songs in their repertoire. For live performances, Twitch contends it does not need a license from a record label — there’s no recording to license, although labels have argued otherwise — or publisher. (A recording of a live stream requires a synch license from a publisher and possibly a label. It’s not uncommon for an artist to archive Twitch performances. If that happens, the rights owner can demand Twitch remove the infringing file per copyright law.) That allows Twitch to avoid the high royalty costs of an on-demand platform like Spotify.

So, what’s in it for the artist? Plenty, Twitch argues. Interaction with fans, which isn’t possible on audio streaming services, makes engagement more valuable than attention or subscription economics, the thinking goes.

Page lays out the familiar example of a recording artist who receives a 20% royalty for an on-demand stream worth about 0.3 cents per stream (a common rate at Spotify). Assuming 17 songs per hour, Page calculates a creator’s revenue per hour works out to 0.1 cents an hour paid to the artist by an on-demand platform. (Of course, an independent artist that owns the recordings will keep all the royalties, five times what the artist signed to a record label would get.) Twitch is three times as valuable as Spotify per hour streamed for an independent artist and 15 times for an artist on a label. And established channels “can see revenue per hour north of 25 cents, with some scaling up to 75 cents,” according to Page.

A potential problem hangs over these calculations: does Twitch cannibalize time spent on other streaming services? No, fans’ time spent on Twitch is additive, not decremental. What’s more, an artist signed to a label isn't necessarily free and clear from their recording contracts and could be required to give their labels a share of their Twitch income.

An artist that has strong engagement and can accept fans’ patronage can squeeze a lot from those relationships. For example, composer Laura Shigihara’s Twitch income was 10 times her traditional streaming income -- and with five times the monthly consumption hours -- even though Twitch and streaming services had similar numbers of users (150,000 for streaming vs. 200,000 on Twitch), writes Page. On a per-listener basis, Twitch was worth 7.5 times as much as streaming services, by Billboard's estimate. (Note that Shigihara is an independent artist, so record label royalty calculations do not apply to her.)

More case studies show off the value of engagement. Austin, Texas duo Aeseaes received 70% of their earnings from Twitch in 2019 and 2020, compared to 6% from streaming services and Bandcamp and 17% from Patreon and Kickstarter. Their hours-long sessions include performance components, but often focus more on interacting with viewers. Matt Heafy of the metal band Trivium makes about the same from Twitch, where he usually does two shows five days a week, as from streaming services even though the band’s 10-album catalog is larger and more successful than the average, up-and-coming artist’s case study. The producer RAC turned to Twitch when his 2020 concerts were canceled and made more from Twitch and Patreon in 2020 than he would have earned from his tour.

Early in the presentation, Page references the 2008 manifesto “1,000 True Fans” by Kevin Kelly, which became a sensation in certain music circles. Before Patreon and Kickstarter existed, Kelly spread the notion of online patronage and encouraged artists to build relationships with the fans most willing to spend money. “1,000 True Fans” has a simple argument: make $100 of profit from your 1,000 biggest fans annually and you’ll make $100,000 each year, a comfortable living for an independent artist. For a true fan, $100 per year isn’t necessarily out of the question. Twitch makes a similar argument about its ability to bring patronage -- and advertising -- to live streaming.

“If you can find your ‘true fans’ and get them to engage with you on Twitch,” Page argues, “then you can burst through the streaming ceiling and potentially monetize them more effectively.”

That’s something creators have wanted from streaming services for more than a decade.