Tuesday, November 20, 2012

Spotify Says 200 Streams Equal One Download

Spotify logo image from Bobby Owsinski's Music 3.0 blog
Spotify seems to be taking off is so many ways, with a service that now features over 20 million songs that's now available in 17 countries. With the company valued at just over $3 billion (!!, that's a little high to say the least), it just scored another cool $100 million round of venture funding. All this for a company that sports just a little over 4 million subscribers world-wide (although 15 million are said to use the free service each month), according to the latest estimates.

There's been a lot of speculation regarding how much an artist actually makes from the service that's getting so much traction, and Spotify's founder and CEO Daniel Ek didn't help the situation the other day when he stated in an article on Quartz:
“They’re saying, oh, they’re just paying a fraction of a cent every time someone plays a song,” says Ek. “And then you compare it versus the download revenue. Well, I can tell you it will take you 200 song listens before you make the same amount of money [as a download]. But because the consumption behavior is entirely different, and the revenue then increases in perpetuity, it’s not even a question of if this model is better, it’s just when in the lifecycle it’s better.”
So that means that on a 10 song album, you'd need 2000 streams to equal one download, right? It appears that there's a lot of BS being thrown around here. By most other calculations, Ek has his numbers very wrong. It's looks like the numbers are closer to almost 48,000 on Spotify, although it's been calculated that it takes over 300,000 plays on Pandora to equal a single album download. This was all illustrated quite nicely in an article by Damon Krukowski on Pitchfork a week or so ago.

So as Pandora beats up Congress for a royalty recalculation to a lower rate, the poor artist in the middle is making even less than before.

OK, here's the secret that no one has been talking about. All of the streaming services have already paid huge chunks of change to the labels for the rights to use their songs, but most of it goes right to the label's bottom line and not much ever reaches the artist. What's more, Spotify is partially owned by the major labels. Is that a conflict of interest or what?

Now there are a lot of artists that are outraged by the situation, and by all rights they really should be, but here's the bottom line. If we go all the way back to Sinatra, Elvis, The Beatles and up through today, 95% of a hit artist's income came from sources other than recorded music. That means that most of the a hit artist's income comes from touring, merchandise, licensing and publishing, and not recorded music.

It doesn't matter where you're at in the music artist food chain - your music is your marketing! If you're a new artist, it's more important to get your music heard than to make money from it (it won't be much anyway). If you're an established artist, it's more important that you stay alive in listener's minds so they'll pay to come and see you live and buy your merch. If they can't hear you, you're forgotten. Your music is your marketing. Remember those words.

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