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Summary:

Major labels may be hoping that new-wave digital music jukeboxes can make up for slowing downloads growth. But a drip-drip of labels pulling…

Major labels may be hoping that new-wave digital music jukeboxes can make up for slowing downloads growth. But a drip-drip of labels pulling out of the services in protest at low fees is continuing, and may grow to more than just indies.

ST Holdings, the distributor for drum ‘n bass act Blu Mar Ten on Tuesday became the latest to pull its content from streaming services including Spotify, Rdio and Napster, joining Projekt Records, Prosthetic Records, Century Media and Metal Blade Records so far this year.

Consumption through these services is booming. ST Holdings says 82 percent of listens to its songs this Q3 was through Spotify, Rdio, Napster and Simfy. But just 2.6 percent of its revenue came from these services. In particular, for 750,000 Spotify streams, it got just £2,500, it says. So ST Holdings has pulled from streaming services music from 234 of the 238 labels whose work it distributes; four of the labels want to stay online.

European royalty collector PRS For Music licenses on-demand digital music operators using a clearly laid-out industry rates structure that, in the UK, requires either 10.5 percent of their gross revenue or 0.085 pence per track streamed.

But, unlike transparent operators like We7, which is only too happy to talk about the rates it pays, every time I have asked whether Spotify is paying industry-standard rates, both Spotify and the industry’s PRS For Music have clammed up, including the latest time I asked just last week. The lingering, unanswered perception is that Spotify, part-owned by the labels themselves, enjoys more favourable rates than its competitors.

Spotify tells paidContent: “I’m afraid we can’t give any detail. It is important to note that Spotify does not have a direct relationship with artists – we pay revenues to the rightsholders, and the authors, composers and musicians they represent.” Rdio, too, says it cannot talk about rates thanks to confidentiality clauses in label deals.

In this vacuum, irate artists and labels like Uniform Media are creating their own disclosure by posting their royalty statements. Projekt founder Sam Rosenthal recently wrote: “5,000 Spotify plays generates around $6.50. In comparison, 5,000 track downloads at iTunes generates $3,487.”

Against the industry’s hush-hush, everyone is trying to figure out why artists are feeling aggrieved by their new income, and potentially misleading maths like those in this infographic are allowed to proliferate.

Not everyone feels the same. Indie labels’ Merlin representative group points out that, of the many hundreds of indies across the globe, only a handful have balked. It is also entirely logical that an ephemeral stream should command a lower fee than a permanent download, and that these streams will grow in to more meaningful revenue for all concerned as streaming consumption grows. Legal streaming services are also helping reduce piracy whilst reintroducing a paid consumer culture.

Are artists just grumbling about the relative value of a stream versus a download? Analyst Mark Mulligan recently wrote on paidContent: “Average pay-out per activity for streaming services (premium ones included) is over 300 times smaller than the average pay out per activity on iTunes.” Or is money being withheld from artists elsewhere? One possibility is that, compared with downloads like those from iTunes Store, labels are keeping a larger portion of the money they get from streamers, and giving artists a smaller share. But, in lieu of some openness, it’s hard to know for sure.

But music streamers’ silence risks them getting their knickers in a twist. Against a 2010 report that one million Poker Face plays earned Lady Gaga just $167, Spotify countered that the figures were partial, misleading and out of date. But it has not fronted up with explicit logic to the contrary.

Spotify told paidContent today: “We have driven over $150 million of revenue to the music industry since our launch three years ago.” But it is unclear how much of that total has ever found its way back to artists, without which there would be no industry to speak of.

But the incongruity has reached an effective crescendo with one of the world’s biggest groups, Coldplay, contrary to its labelmates, withholding now its latest album, Mylo Xyloto, from streaming. When you scale up streaming rates to an act as big as Coldplay, it seems to throw the gap to actual purchase in to stark relief. And that could redefine what streaming is actually for – for actual consumption or for promotion?

There is no risk of major labels pulling out of Spotify. But if their individual acts like Coldplay can win opt-outs, the landscape could get fragmented indeed.

So what do the industry’s power brokers have to hide? If the rates really are fair and have merit, it would serve everyone better to get them out in the open now.

NB. Leo Wyndham, one third of Blu Mar Ten, is European director of music for iTunes, a rival to streaming services like Spotify. Blu Mar Ten co-founder Chris Marigold tells paidContent Wyndham is no longer an active band member and has no influence over its public stance toward streaming services. Marigold also says this week’s decision of its distributor ST Holdings to withdraw from streaming services was taken independently of Blu Mar Ten itself, which itself nevertheless pulled most of its music out of streaming services long ago.

  1. “Are artists just grumbling about the relative value of a stream versus a download?”

    it sounds like they’re grumbling about streams cannibalizing downloads to me, not the straight comparison

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  2. “everyone is trying to figure out why artists are feeling aggrieved by their new income”

    But the answer is simple – the “income” from Spotify is MISERABLE and it also cannibalizes download and CD sales. Why in God’s name is this difficult to figure out??? It’s bloody obvious to artists and has been from day one.

    “One possibility is that, compared with downloads like those from iTunes
    Store, labels are keeping a larger portion of the money they get from
    streamers, and giving artists a smaller share.”

    NOT TRUE!!! we are a label and we see cleary in our monthly IODA statements that the income one Spotify stream is 2-300 times smaller than from one iTunes purchase.

    Why are you trying to defend the indefensible??

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    1. Idiotic statement. The alternative to Spotify is illegal downloads,

      But answer is simple, yes. It’s record labels accounting and ridiculous contracts.

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    2. “We are a label and we see cleary in our monthly IODA statements that the income one Spotify stream is 2-300 times smaller than from one iTunes purchase.”

      That should be fairly obvious and expected to anyone. What you really should be looking at is Revenue per user per song. So say you as a label get $0.70 per track from iTunes (or other download style services) and you get $0.0031(Your 2-300 times lower) per track per stream from Spotify. What you need to do is track that individual users streams of your song over the lifetime use of the service to be able to compare the two values.

      So

      User A downloads your song, loves it and listens to it 20 times a day for a month (30 days).
      You get $0.70 per user per track

      User B Streams your song, loves it and listens to it 20 times a day for a month (30 days).
      You get $1.86 per user per track

      Now lets see, which you gives you more money per track… Lets do a little math…Right it is the streamed service. Now if you were getting “Industry Standard” rates according to this article ($0.085/stream) in the exact same situation as above you would get $51 per user per track.

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      1. How many tracks do you listen to 600 times in a month? You have quoted a wildly extreme example.

        Supposing the track is 6 minutes long – your 600 listens would take 60 hours! That’s 2 hours a day every day for a month – listening to the same track. I’m not saying people don’t ever do this – but this has to be an a-typical example.

        In fact a study has led to a general idea that on a global average people listen to a track 10 times in its lifetime – this is averaging out tracks you’ve bought that you listen to once or not even once to tracks you love and listen to dozens or hundreds of times.

        Spotify income varies between 0.1cents and 0.4cents a stream – and iTunes income per track (after aggregator commission) is 59cents. Hence the Spotify stream income is 2-300 times per stream less than one iTunes track purchase.

        Now for the true mathematical extrapolation, based on the global average of 10 plays per track. Even at the best Spotify rate of 0.4cents a track you are getting 4cents for the average 10 plays. Now compare that to 59 cents. The income equivalent is 15 times lower with Spotify than with iTunes. And with iTunes you get the income in one shot than having it build over time.

        Now please try to understand why artists are deeply concerned about Spotify. Thankyou.

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        1. Nice to know my guesses were not too far off from what you really get. And yes I understand why Artists are concerned and fully support them getting paid a reasonable amount.

          I will admit my 600 times a month example is extreme (Though I have done that on occasion). I would like to see that study since according to last.fm the average plays per track per user is 180 per year. But still you would only make more if you were on the high end of the Spotify pay scale (0.0033/play), though you would make about twice that if they pay what this article calls “Industry Standard” pricing (0.0085).

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      2. riiiight. so it’s just a coincidence that the data shows the streams appear to be eating into revenue, badly. ok then.

        also – who the hell is going to listen to your track once every hour for 30 days? Probably average once or twice a day at most. Assuming they did that constantly without stopping, at £0.003 per play from spotify it would take almost a year to make the equivalent of 1 sale from itunes.

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  3. Totally justified call to action, but let’s not overdo the slowing download growth. Tracks up 15% yoy and bundles up 50%….

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  4.  ,
    “Why are you trying to defend the indefensible??”
    I’m certainly not. I raised the notion that labels are not fully channeling through to artists payments they do get from services, which is one complaint that’s often been mooted.
    I don’t have all the answers. And I’m very happy that you’re helping shine light on them.
    Thanks.

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    1. We are an artist-run label. How can we possibly not be”fully channeling through to artists payments they do get from services” – we’re the artists!!

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  5. Are streams eating into revenue? So far I have never seen any proof of this. The data available so far show that streams generate additional revenue. Check http://www.side-line.com/news_comments.php?id=46705_0_2_0_C

    And will everyone please stop comparing streams with sales! A sale is a one time event. Few people buy but almost all people listen and they will keep listening for years in a row. Streaming is the future. It may not generate much now, but it the long run it will.

    And what Co£dp£ay does is a disgrace!! One of the most popular bands in the world. These guys are loaded. And they don’t want their album on streaming services because it may hurt sales!! . 

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    1. try reading the data in the article


      * Q3 was the first full quarter supplying content to all the above services. * Overall digital revenue for the quarter was down 14%. * iTunes EU Q3 revenue down 24% * This is the first time ever our digital revenues have fallen * Spotify / Simfy / Rdio / Napster accounted for 82% of all tracks ‘consumed’ in Q3 * Spotify / Simfy / Rdio / Napster generated just 2.6% of Q3 revenue * Spotify / Simfy / Rdio / Napster revenues are tiny.

       

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      1. Read it, but what does it prove? The downfall in iTunes revenue could be due to numerous of other reasons. Still doesn’t prove that streaming is the main cause.

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  6. Two items to address 1) Which comes first, airplay for exposure or revenue from song sales and streaming? 2) Why are streaming royalty payments the same for Coldplay and an artist who is trying to get noticed?

    Without the exposure through airplay a musical group cannot reach a point where the value of their work is an audience-draw for the streaming service. Music is everywhere. Remove any band’s distribution channels and, we’ve seen it often, the artist slips into oblivion.

    If I operate a music service – or online radio station – the worth of an artist’s song (or an artist’s presence on my stream) is in proportion to the previous amount of airplay/exposure it has received. Popular acts are worth more to me in keeping/building an audience than a new artist looking to build their career. The latter is more a detriment, one I’ve taken a chance that they won’t cause audience tune-out. Is it fair for the same royalty payment to be made to both acts?

    To uncover the area where artists are shorted, get the labels to show how much of these royalties make it into the bank account of the band. That’s where more transparency is needed.

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  7. All the artists and labels unhappy with Spotify or other low-return services are more than welcome to join BuyMyPlaylist.com. We pay decent rates.

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  8. Two items to address 1) Which come first, airplay for exposure or revenue from song sales? 2) Why are streaming royalty payments the same for Coldplay and an artist who is trying to get noticed?

    Without the exposure through airplay a musical group cannot reach a point where the value of their music is an audience-draw for the streaming service. Music is everywhere. Remove its distribution channels and we’ve seen it often, the artist slips into oblivian.

    If I operate a streaming service – or online radio station – the worth of an artist’s song (or presence on my stream) is in proportion to the previous amount of airplay/exposure it has received. Popular acts are worth more to me in keeping/building an audience than a new artist looking to build their career. The latter is more a detriment, one I’ve taken a chance that they won’t cause audience tune-out. Is it fair for the same royalty payment to be made to both acts?

    To uncover the area where artists are shorted, try getting major labels to explain how much of these royalties make it into the bank account of the band.

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  9. Subscription streaming could be guilty of eroding download sales but some streaming, especially Psonar Pay Per Play, lets people listen to complete tracks with minimal financial cost while still paying out to artists and incentivising download.  After all, why keep paying 1p to play a track you like when you can download it and own it to play with no recurring cost.

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  10. If we are to receive increments of pennies on the dollar I would rather control our own Gang of Four catalogue and give away MP3s to fans both new and old. I believe that companies like Spotify enriching themselves on our catalogue in return for a pittance in royalties is neither fair nor ethical. 

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    1. You hit the nail on the head there Dave.

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