iTunes downloads versus Spotify streams, a comparison continued

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A few weeks ago I posted a back-of-the-napkin comparison of the effective rate paid per listen for digital downloads (like iTunes sales) versus that paid for music service streams (like Spotify, MOG, Rdio, Deezer listens).  This post got a bit of attention from sources like MusicAlly, The Music Void, slammed by the Musical Disconnect, and the debate still continues.

I figured I would respond to some of the comments and criticisms, however.  Frankly, I appreciate both.

Your estimate of Spotify’s pay rate is off, no one is getting $0.0033 per stream:

I employed only the effective rates that had been posted publicly by a variety of sources. I was trying to work with an effective rate per stream (recognizing that deals may not be per stream rates, necessarily).

Those sources:

PaidContent reported that STHoldings claimed $2500 from 750,000 plays, which works out to about $0.00373 per stream. ST Holdings removed the post with this claims (I believe) as well as their content from Spotify for the reasons of the payout levels.

Gizmodo published a post from Uniform Motion who reported receiving $0.0029 Euros per stream ($0.00386 at present exchange rate or $0.0041 by Gozmodo’s calculations). reported that Mode records calculated receiving $36.98 for 11,335 stream = $0.0033 per stream.

Digital Audio Insider reports average payout of $0.002865 per stream.

DigiMuziek offered up screenshots of their payments, which were increasing from EU0.0019 to EU0.0022 from September to October 2011. The last rate works to about $0.0029 per stream.

Some Artists/Labels in the US are reporting lower amounts.  These per stream rates seem to be clocking in closer to the $0.0013 per stream that Sam from Projeckt Records is reporting.  I am looking into these lower rates to try to understand them and the differences.

Let’s be clear, however.  Different people appear to be receiving different effective rates.  That difference matters.

Spotify does not really pay a set per stream rate:

OK.  But I was trying to compare an effective rate per listen for both downloads and streams.  To do this I had to estimate something akin to a per stream rate.  Your contract may not say “per stream rate.” There still would exist an effective rate per stream (dollars received divided by number of streams).

Spotify (unlike some other music services) would like to operate by paying artists a percentage of revenue rather than a set rate per stream.  I tried to do the same thing with a music service more than a decade ago.  This sort of structure “makes sense” from the point of view of the service.  It may not make the same sort of sense for rightsholders.

When the rubber hit(s) the road, I think its worth debating whether certain rightsholders are seeing guarantees or minimas that present services such as Spotify with essentially fixed-rates in some cases, fixed portions of subscriber fees in other cases, and just raw % of revenue in others.

250 listens to a track over the lifetime is too high:

I may have overestimated that.  But to be clear, I was comparing purchased track downloads to music service streams.

The feedback I got was that the average is quite different if you look at single track downloads you purchased (higher range average listens), albums you purchased that have tracks you never wanted in the first place (middle range average listens), and giant music collections the bulk of which you simply obtained and maybe did not acquire (low range average listens).

Comparing CD sales to Music Services streams:

Some people responded by comparing CD sales to Spotify streams.  CDs have ten or more tracks on them.  So a single CD sale is actually 10 (or more) track sales.

CD/Track sales equate to millions of Music Service streams:

You will unquestionably find that CD sales in the near term are equivalent in dollar terms to millions (if not tens of millions) of streams on a music service.

I wasn’t denying this difference.  The different was the point of the analysis and estimates.

I was trying to understand whether these amounts were that different if you considered them in equivalent terms—payments per listen.

To be continued…