Streaming Music Primer: The Different Types Of Streams

Now that it's pretty apparent that the music world is increasingly centered around streaming music distribution, many artists, bands and managers still have no idea how streaming pays and why the royalty is frequently much less than expected. Here's an excerpt from the latest edition of Music 4.0: A Survival Guide For Making Music In The Internet Age that provides a basic primer on the two types music streams.

"What most artists and bands don’t realize is that there are two different types of streaming services, and they each operate differently, and therefore pay at a slightly different rate.

Non-Interactive Streams

The first is called a “Non-Interactive” stream and this is either from a platform that acts as an online radio station like iHeart Radio or any traditional broadcaster with an online presence (like your local radio station), or a service like Pandora where the user has a certain amount of control over what plays, but  can’t directly select a song or make it repeat. Streaming platforms in this category include services like Pandora, Last.FM, and iTunes Radio.

Radio broadcasters with terrestrial radio stations pay $0.0023 (.23 of a cent) per stream. Non-interactive platforms like Pandora pay $0.0023 per stream from a paid subscriber, and $0.0013 per stream from a non-subscriber, which increases to $0.0014 in 2015.

This money is paid directly to Soundexchange and is paid out at a rate of 50% for the owner of the copyright (which could be the record label or could be you if you’re DIY), 45% to the featured artist, and 5% to unions that represent the musicians that played on the recording.

If a services like iTunes Radio also provides advertising, it pays out at a slightly different rate as a percentage of the ad revenue is added as well (pro rated of course). In the case of iTunes Radio, that rate is 15% of ad revenue until September 2014, when it increases to 19%.

Interactive Streams

Interactive or on-demand streams are treated different from the radio-style streams in that the rate is considerably higher (between $0.005 and $0.007, depending upon how much the listener pays per month). Services that provide interactive streaming include Spotify, Rdio, Mulve, and Slacker.

The downside here is that if you’re signed to a label, the money is paid directly to them first. You’ll then be paid based on the royalty amount negotiated in your agreement. For instance, if you’ve negotiated a 15% royalty, then you’ll be paid 15% of $0.005, or $0.00075. If you’re not with a label, the money will be collected by Soundexchange or an aggregator like Tunecore, Ditto Music or CDBaby if they’ve distributed you songs to the online streaming services.

On top of the royalty paid to the artist and label, there’s also a publishing royalty that varies yet again from the above rates, which we’ll cover in the next section.

You can see why artists, bands, musicians and even record labels can be confused about how much they’re receiving from streaming. As The Temptations once sang, it’s a “ball of confusion.”

That being said, every artist should register with SoundExchange, a service created by the US Copyright Office to collect performance fees for musicians featured on a recording and a song's copyright owners. SoundExchange collects money for the actual performers on a recording, not the songwriters. Go to soundexchange.com for more information."

To read additional excerpts from the Music 4.0 guidebook and my other books, go to the excerpt section of bobbyowsinski.com

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