What's A Music Stream Worth?

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.

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