What happens when you press play on a music streaming service? It depends on the service, but in any scenario many different parties end up splitting fractions of a penny. Here we look at Spotify and Pandora, two of the most popular music streaming services in the United States. Spotify had 4.7 million subscribers in the U.S. at the end of 2014. Pandora has about 80 million monthly listeners, nearly all in the U.S. And we look at typical streams on both services. Spotify has both a free and paid tiers. Pandora gets most of its streams from its free tier. These numbers reflect the royalties that can be expected from a typical stream.
But, as with anything in the music industry so nuanced, there are exceptions.
Looking at the flow of royalties carries extra importance right now. The last few weeks have been filled with controversy over Apple's proposed royalties for the just-launched Apple Music. The company wanted not to pay royalties during the three-month free trial. Rights holders protested -- so did Taylor Swift -- and Apple agreed to pay a discounted rate during the trial. The companies seen here have attracted criticism, too. Many rights holders and creators are unhappy with the royalties they receive from Spotify's free tier. Some, mainly music publishers, are unhappy with rates they receive from Pandora.
This infographic shows the reality of today's music business: billions of streams, each one requiring precise metadata and tracking, that pay fractions of a cent to rights holders and even less to creators. We're not in a transition of dollars to pennies. Today's digital music business is collecting as many fractions of pennies as possible.
Graphic by Ady Chng, with additional reporting by Ed Christman.