Home > Uncategorized > Shootout at the Fantasy Factory: What’s the Value of a Stream?

Shootout at the Fantasy Factory: What’s the Value of a Stream?

October 17, 2014

The erudite Harley Brown reported in Billboard about Spotify’s artist relations charm offensive in New York that:

[Blake Morgan’s] main complaints were manifold, but two were based on the meeting’s central tenets: that the per-stream rate is never going to go up (70 percent of revenue goes to royalties) and 100 song streams equals a sale on the Billboard charts and the U.K.’s Official Charts Company. With regard to the former, both [Mark] Williamson [of Spotify] and [Paul] Pacifico [of the Featured Artist Coalition] stress that Morgan (and a few other malcontents) didn’t pipe down long enough to let Spotify help the uninitiated artists in the room understand their position.

“What I was trying to explain,” Williamson says, exasperation emanating from his voice over the phone, “Is that we’re a revenue share model. How do we increase the amount of revenue — the pot of royalties — which increases the amount we pay out?”

While the insiders may have wanted Blake to “pipe down,” they seem to have overlooked how Blake is in an economically different position from an artist signed to a major label.  While signed artists may have a legitimate beef that they should get a bigger share of Spotify revenue from their respective labels, Blake owns his own recordings so he gets 100% of the Spotify revenue.

Which still sucks.

But what is also interesting about this is the chart formula.  If 100 streams equals 1 permanent download for chart purposes, why doesn’t the same ratio hold for royalty purposes?  Hmmmm?

So how would that work?  Let’s rely on high school algebra.

What’s the value of a download in pennies?  Usually a wholesale price of $0.70.  So 100x = $0.70.

Solving for x, we find that it is equal to $0.007.  Not rounded, not estimated, exactly $0.007–gross revenue.

Does Spotify pay $0.007 per stream?  Not even close.  Now you can say that the Spotify sound recording revenue is net of publishing, so let’s deduct the minimum U.S. statutory rate of $0.091 from that $0.70 and solve for x again:  $0.609/100 = $0.00609.

Does Spotify pay $0.00609?  Not even close.  (See Part 2 of this post for more detail.)

So why do 100 streams equal one download for chart purposes?  I’m sure there’s an answer for this, but I wonder what it is and why the royalties are so far off.

  1. David
    October 17, 2014 at 16:58

    I’m confused. According to Spotify, (in their statement ‘Spotify Explained’) “Recently, these variables [as explained in their statement] have led to an average “per stream” payout to rights holders of between $0.006 and $0.0084”. Which is indeed very close to your calculation of $0.007 per stream. Are you suggesting that Spotify are lying? Heaven forbid!

  2. AudioNomics
    October 18, 2014 at 13:33

    look at any artist who is brave enough to post their royalty sheets [zoe keating] you will notice there is a big difference between reality and spotty-fried spin.
    Remember, it doesn’t take much discrepancy to make a huge difference at this level. If you’re gettin on average 0.0041 for instance, http://thetrichordist.com/2013/02/08/music-streaming-math-will-it-all-add-up/ , that can be the difference between actually reciving 16k rather than 33k… one you are in poverty for the year, the other you can scrape by with.
    Add in expenses, paying the band, paying the bills, etc and in one scenario (reality) the electric company is shutting off the lights…and all this to make one person ..danny ek.. rich beyond belief.
    If someone came up to you with a business offer and said I’ll pay you somewhere between 12 thousand a year and 60 thousand…all based on the same work.. you’d want something in writing, else your head examined.

  3. Huw Morris
    October 21, 2014 at 09:56

    So what is your estimation of the amount Spotify are paying per stream if it’s “not even close” to $0.00609? Be good to know how you have calculated it to understand the discrepancy (if any).

  4. Chris Castle
    October 23, 2014 at 08:13

    See part 2

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