The Streaming Economy of Scale

Adapted from Chapter 14: A Bigger Piece of a Bigger Pie

Before streaming, the use of “million” had long been associated with RIAA platinum sales certifications, or a "million-aire" award for one million logged radio performances under the BMI airplay survey. As applied to streaming, however, the use of “million” was on a totally different economy of scale. One stream entailed one device receiving one transmitted song once in real time, whether on-demand or as part of a playlist. Total streams tracked by Nielsen in 2019 surpassed 1.1 trillion. 

Although one million streams sounded like a lot, there were 1.1 million sets of one million in 1.1 trillion. In June 2019 data aggregator soundcharts.com reported on a study by artist rights blog The Trichordist analyzing rates paid by different DSPs to a mid-sized indie label with over 1.5 billion streams in 2019. Spotify averaged $.0035 per stream over its three tiers, while Apple Music, with only a premium tier, paid $.0068. The same study had YouTube’s freemium tier “which for this label accounts for 51% of streams but only 6% of revenue, at a per-stream rate of $0.00022.”* The Trichordist also reported that for the same label YouTube’s Red premium tier delivered $.01.09 per stream.

General consensus across the industry was that the average payment on one million streams in 2019 was in the $6,000 range. The approximately 70 percent share of streaming service revenue paid to rightsholders, including the publishing share, originated with Spotify’s initial 2008 label licensing agreements. This rate mirrored what Steve Jobs had negotiated for iTunes downloads, which itself replicated the then approximate ratio between wholesale and retail prices for physical sales.

According to RIAA data, 85.4 percent of 2019 streaming value came from 60.4 million paid subscriptions. Ad-based tiers accounted for over 45 percent of the total, but generated only the other 14.6 percent of streaming revenue. In 2019 the premium services transmitting CD or Hi-Res files, paid per-stream rates as high as 1.1¢. Ad-based tiers and services paid lower rates with some under .1¢, corroborating the study done by The Trichordist.

Advanced metadata technology enabled Nielsen to track and account for over a trillion individual streams as they were listened to across the globe at the average rate of over 125 million streams per hour. They were instantly sorted and transported for payment through their ISRC and ISWC digital identification numbers to reach the proper royalty recipients as long as those recipients had registered their works with their collection representatives. Streaming had replaced the generations-old brick-and-mortar distribution network with immediate, totally mobile access to an even wider and more diverse audience. Even with the major labels’ economic advantage, indies had captured 40 percent of the market.

Combining this increased market share, worldwide growth in subscriptions, and more services with CD or Hi-Res quality at higher monthly rates, the economic future for artists everywhere was looking better all the time. However, for the creators and rightsholders it is crucial to properly register their works with all copyright agencies and organizations that are the administrators of these rights to ensure proper collection and payment.

From Chapter Thirteen - Publishing & Copyright - the Digital Effect

Footnote:

* Soundcharts Team, “What Music Streaming Services Pay Per Stream (And Why It Actually Doesn’t Matter),” soundcharts.com Blog, June 29, 2019. Streaming Payouts [2020]: What Spotify, Apple, & Others Pay (soundcharts.com)