Monday, May 25, 2015

What's A Music Stream Worth?

Streaming math image
You might wonder how the music industry determines how much a stream from a major service like Spotify or Pandora is determined. Unfortunately, that's a wildly moving target so no one can exactly say, and here's why.
  • The different tiers pay differently. A free tier has a different royalty rate from a paid tier.
  • Interactive vs non-interactive streams. Spotify is an interactive service because the user can select the song she wants to hear so it pays more than Pandora, which is a radio-like service and is therefore non-interactive.
  • Different countries pay different rates. The US pays a different rate than the UK, which pays a different rate from Sweden, which pays a different rate from Korea, etc.
Because there's no way to determine the exact amount that a stream pays out, the industry has come up with something called a "stream equivalent album (SEA for short)." The way this works is that 1,500 streams at an average of $0.005 (a half-cent) each equals $7.50, which is the wholesale price for a CD. Therefore, 1,500 streams = one album.

Billboard began using this figure last year to help determine chart position, and the music industry has adopted it as a general sales metric.

That said, that 1,500 figure is subject to change. It was 2,000 streams in 2013, so it may be different next year as well.
Stream Equivalent Album graphic


Peter McDonald said...

I noticed you use the term stream equivalent album a few posts back. Wondered what that was.

Bobby Owsinski said...


1500 streams = 1 album or the equivalent of $7.50 = stream equivalent album or SEA.


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