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The Problem With The Money Per Stream Conversation

November 6, 2020

The music industry has been enamored with streaming rates pretty much since Spotify's inception. And it makes sense, given how streaming now dominates the recorded music market. 

In fact, you might remember several years back when a site launched purporting to calculate money per stream rates for different platforms. (It's still up, but we're not going to link to it, because that's irresponsible and belies the point of this article).

You've probably also seen various infographics that get shared time to time from different sources doing their *best* to aggregate what they believe is an accurate money per stream rate.

And in turn, you end up with a bunch of articles about fractions of pennies. They talk about what's fair and what isn't. They lead to (admittedly funny) Onion articles about Spotify celebrating its one hundredth dollar paid to artists. 

To add to the fray, Spotify recently unveiled a new program where they'll allow artists to kickstart a song's algorithmic love for a reduced per-stream rate. Which basically means for certain songs and certain kinds of streams (like radio streams and streams that occur after a playlist is over), an artist can elect to receive less money per stream in exchange for Spotify putting that song in front of more listeners. 

We're cautiously optimistic about the program's implications for artists still looking to find their fans at an affordable rate. But we also know it's only going to add more confusion in answering, "How much am I actually getting paid?"

And that's in part because we're looking at this "money per stream" conversation all wrong.

Not Everybody Gets Paid What You Get Paid

That's right. Actual "per stream" rates are different for just about everybody, often times to the sixth decimal place. And they're different for you, too, from month to month. 

That's because a lot of things factor into how much a stream is worth. Let's take Spotify, for example. A lot of people like to say that a single Spotify stream is worth $0.004, or just under half a cent. But that's a gross oversimplification. 

For instance, you get paid much less if the person who listened to your song is a free user. You also get paid less if that user is based in a country where Spotify earns less revenue from advertising — say, South America or parts of Europe and Asia. Likewise, if the user is a premium user, it depends on what kind of premium user.

Are they a single user? Family plan? Get their subscription bundled with something else? Are they a paid user in a country where subscriptions are worth less when you factor in the exchange rate?

All of this comes into play when determining your streaming rate. And as the people who listen to you change over time, so too does your Spotify money per stream rate. And that's just for one of the streaming services. 

Some Streaming Services Are More Complicated Than Others

Part of the reason services like Apple Music and TIDAL typically pay better than Spotify or Deezer is because they don't really offer a free version. There are free trials, sure, but no strictly ad-supported method. And TIDAL is one of the few services that has a membership level above $20 for a Hi-Fi experience. So when the average value of a user is higher, so too is the average value of a stream.

Meanwhile, Amazon Music doesn't offer ad-supported streams, but they do offer different types of access. There's Amazon Music Unlimited, which is a separate paid service, but there's also access to a much smaller library provided to people with Amazon Prime memberships. 

Things are going to get increasingly complicated with Apple Music, too, as we see more bundled options roll out for users who want to purchase multiple Apple services at a discounted rate. 

What about YouTube? Well you've got the money you typically make from ads, which are technically for your videos and not your songs — so those don't count as part of the per-stream rate. But! Songs within those videos also get a cut of revenue. And then there's YouTube Music and YouTube's paid, ad-free services. 

And don't forget there are dozens of streaming services. These are just a half dozen or so of the more common ones. 

Why Does A Streaming Service's Price Structure Matter?

Yeah, great question, right? Well, right now streaming services pay out on percentages of revenue. For instance, Spotify pays out about 70% of its revenue to copyright owners (master owners get the bulk, while publishing owners get less). Apple Music reportedly pays a little more than that, at 71.5%. 

So, as you can see, the more money a service makes, the more it has to dole out to content providers. But that doesn't mean you'll always get an equal share of increasing revenue. It still ultimately depends on where your streams are coming from most. 

This is why some demands to set a consistent per-stream rate from every service are essentially a pipe dream. But it could lend at least some credence to the concept of paying artists a bigger share from individual paid users. What do we mean?

The "Pay The Artists I Listen To" Concept 

Basically, it's the idea that if Jane Smith pays $10 a month and 10% of her listens that month went to streaming Marilyn Manson, then our pal (and yours) Marilyn would get 10% of the net profit from Jane — or for the sake of easy math, $.70 (assuming Spotify still paid out 70% of profits). 

Let's say Marilyn normally did get $.004 per stream, Jane would need to stream Marilyn 175 times that month to give him the equivalent of $.70. That's about six Manson songs per day which, while not completely unreasonable, probably isn't happening for the average casual consumer. Because if 6 Marilyn Manson songs per day is 10% of her consumption, that means she's listening to 60 songs per day on average.

Spotify said in 2016 that the average user listened to 2.5 hours of music per day. Independent analysts put the figure around 25 hours per month. But let's go with Spotify's number just to be friendly to Spotify. 

That's 150 minutes of listening per day. If we assume each song is on average three minutes and thirty seconds, that's about 43 songs per day — well under the mark of 60 on average Marilyn Manson would need to secure Jane's $.70 in the current model. 

In other words, even if Jane is a Marilyn fan, she probably isn't streaming Marilyn enough for him to get her $.70 a month right now. (Sorry, Marilyn). But in a consistent percentage of listenership model, it wouldn't matter. Jane could listen to only 100 songs all month and if 10 of them were Marilyn Manson, he'd get that cool $.70. 

Thank you for going on this slight back-of-the-napkin-math journey with us. The point is, paying artists a percentage of a user's money based on listening time might be the most fair way to reshape the payment landscape. 

But for now, we're stuck with trying to decipher per-stream rates from a big pool of cash.

Why Does It Matter? 

Couple of reasons. Using these blanket infographic numbers is bad for projections. You might look at them and assume that because you've got 100,000 Spotify streams this month, you can expect $400 from your distributor in a few statements. But then you check in a few months and you're staring at $210 trying to figure out what happened.

Some of the more dishonest streaming companies will use these figures to basically tell you that spending money on their campaigns is a net positive. But in a lot of cases, when you buy a Spotify playlister's service, you're getting garbage streams from free accounts in cheap countries that not only tank your algorithm but pay maybe 20% of what you'd expect. Yeah, we're talking less than $.001 per stream. 

Also, if you're distributing through a company that takes a percentage of your royalties, there's a chance your numbers are skewed by their accounting practices. Because not all companies report what the streaming services paid them — they only report what they're paying you. That makes it harder for you to understand exactly how much your distributor is taking from you. The royalty rate they report might not actually be the money per stream your song makes — just the money per stream they pay you.

Finally, understanding how and why these services pay differently can help you prioritize which services you prioritize. We all know that Spotify dominates the market in terms of artist attention, and for good reason. But don't sleep on the services that pay you on average 2 to 3 times as much per user. In the end, it may be more worthwhile for you to find the fans who use these platforms (or ask your fans to listen to you there).

How Can I Determine My Per Stream Rate?

We're so glad you asked! Right now, it's a lot of distributor spreadsheets and math. But we're working on a very easy way for CODa to help you do it. Expect to see it in the not-too-distant future, and go ahead and make your free CODa beta account right now so you're ready when we release it!

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