US Radio versus Music Services: A comparison of the value of spins versus streams
Following on a estimate of the music industry collections from UK Radio stations, I have done my best to estimate effective per spin per listener rates collected from US Radio stations. [NOTE: these estimates date back to 2011]
Importantly, the goal here was to estimate the effective value of each radio spin *per listener* so that rate can be compared to not only that rate being observed for the effective value of a stream on music services (e.g., Rdio, Rhapsody, or Spotify) per listener, but also those rates applicable to webcasting streams.
First, a quick clarification: Most chatter about radio royalties hinges on the value of a spin, and yet the chatter about music service royalties hinges on the value of a stream. However, this comparison between spins and streams is not usually/always equivalent. Why?
The usual “spin” value often refers to a radio play on a station or syndicated show that was experienced by a large audience (sometimes millions of people).
A stream payment usually refers to a play/stream by a music service experienced by a single listener (or at least a single subscriber account).
Therefore, I am trying to compare spins and streams on equal terms by converting this spin-to-millions value from Radio to a value per listener, as is the case for music services. Please scroll to the end of this post for an explanation of the per spin/stream per listener comparison in the context of licenses based upon percentages of revenue or blanket fees and advances.
Now for the numbers…
The Short Story:
Just the calculated rates and none of the overly numerical explanations…
Important: In the US, radio stations pay royalties for only those performance rights carried by the Musical Work (the lyrics/composition), and do not pay for performing rights to the stakeholders of the sound recording. As a result, effective rates below are estimates of amounts paid only to publishers, songwriters, and lyricists—the various stakeholders in a Musical Work.
Taking a stand:
$186.00 to $372.00 <- per 1,000,000 listeners in the radio audience
$0.0002977923 <- Estimated effective rate per spin per listener*
$0.0000992641 to $0.0005955847 <-Range**
at 15 songs per hour
$0.0003722404 <- Estimated effective rate per spin per listener*
$0.0001240801 to $0.0007444808 <-Range**
at 12 songs per hour
$0.0004963206 <- Estimated effective rate per spin per listener*
$0.0001654402 to $0.0009926411 <-Range**
at 9 songs per hour
$0.0013 <- Effective rate per stream per listener on music services
$0.000300 to $0.0015 <- Range
estimated through songwriter reports, musical work only
The Long Story (with the Inputs):
The effective rates paid by radio and music services in the US are less directly comparable to those rates paid in the UK. Unlike in the UK, radio broadcasters in the USA pay royalties to only one set of music rightsholders: those with an interest in the musical work [the publisher(s), lyricist(s), and songwriter(s)]. Music services in both countries, on the other hand, are paying both sets of rightsholders.
I will begin with the total Dollars collected from Radio by the three performance rights collectives in the US: ASCAP, BMI, and SESAC. While ASCAP openly discloses its domestic collections from Radio, BMI only discloses these values indirectly (in its annual report)—reporting the proportion of total collections that are not international, and that proportion of domestic collections that are from Radio. I had to estimate SESAC’s collections. Being a private company, SESAC does not publicly disclose its collections.
I will then break down this total value of collected Dollars on a daily, hourly, and finally per spin basis (for the set of music tracks hitting the ears of listeners at any moment in time in the US across all music radio stations).
Since not all radio stations are playing music (predominantly or exclusively), I have chosen to follow the royalty dollars to the radio-listening audience, through the tracks plausibly heard by only this audience.
Finally, I arrive at an effective range of the per spin per listener value through a set of estimates of the average size of only the music radio listening audience during the day in the US.
The overly numerical banter:
(A) $230,881,000 <- Dollars collected from Radio by ASCAP (pdf)
(B) $198,303,000 <- Dollars collected from Radio by BMI (imputed)
(C) $42,918,400 <- Dollars collected from Radio by SESAC (estimated)
(A)+(B)+(C) <- Dollars collected from Radio by the Collectives
$472,102,400 <- Estimate of Total Dollars collected from Radio in the US
/ 365 <- Number of days in the year, resulting in per day payments
/ 24 <- Number of hours in the day, resulting in per hour payments
$53,892.97 <- Dollars collected per hour from US Music Radio
So, if music royalties were measured like a taxi meter, the meter would rack up royalties at a rate $53,892.97 per hour.
/ 12 <- Number of songs played per hour, resulting in per song payments
$4,491.08 <- Dollars collected per simultaneous spins across entire US Music Radio
The meaning of this $4491.08 is simple. PROs collect royalties from the performance of about X songs per hour (where X might be 12, or 15, or 9) across all music radio stations. $4,491 is simply the Collections per Hour divided by X, if X were 12 songs per hour.
Note: That figure—$4,491.08—is not the value of a spin on a single station or show, like Jack FM. It is an estimate of the average total value of all spins across all music stations in the US given some number of songs played per hour. A source like Jack FM would be one of the shows/stations playing music at any time. If, however, I reckoned that any station/network were 10% of the listening audience at some point in time, the value of that spin on that single station might be around $449.11.
Some might disagree with the rate of 12 tracks per hour (or about 36 minutes of music). And so I also ran estimates asserting 15 tracks per hour (about 45 minutes of music) and 9 tracks per hour (24 minutes of music).
We need to divide $4,491.08, however, by the average size of the US radio audience throughout the day that is listening to music radio to get an estimate of the value of each spin per listener. Essentially, if I could flip a switch and know how many people were listening to music on the radio at any moment, how many people (on average) would I find to be listening?
Unfortunately, such a switch does not exist. But a variation exists in the form of Arbitron’s estimates of the radio audience.
In the US, Arbitron estimated that during the most recent quarter approximately 241,300,000 people over the age of 12 listened to the radio at some time. This estimate is not the same as an estimate of the average size of the listening audience, however. In particular, it is not that portion of the audience that is listening to music (on the) radio at moments in time.
Arbitron estimates Hour-by-Hour listening as a proportion of its quarterly radio audience. In their 2010 Radio Today report (page 89), these ratings throughout the day range from a high of approximately 17% of quarterly listeners to a low of around 1% of quarterly listeners. The average across the 24-hour period appears to be in vicinity of 9.5%.
241,300,000 <- Arbitron estimate of quarterly radio listening audience, Q3 2011
$4,491.08 <- Dollars collected per spin if across entire US Radio audience
/ 6,032,500 <- approximately 2.5% of the quarterly radio audience
/ 12,065,000 <- approximately 5% of the quarterly radio audience
/ 24,130,000 <- approximately 10% of the quarterly radio audience
/ 36,195,000 <- approximately 15% of the quarterly radio audience
Dollars collected per spin per listener for Radio in the US for various estimates of the average listening audience:
At 15 songs per hour
$0.0005955847 <- if the average listening audience is 6,032,500 people
$0.0002977923 <- if the average listening audience is 12,065,000 people
$0.0001488962 <- if the average listening audience is 24,130,000 people
$0.0000992641 <- if the average listening audience is 36,195,000 people
At 12 songs per hour
$0.0007444808 <- if the average listening audience is 6,032,500 people
$0.0003722404 <- if the average listening audience is 12,065,000 people
$0.0001861202 <- if the average listening audience is 24,130,000 people
$0.0001240801 <- if the average listening audience is 36,195,000 people
At 9 songs per hour
$0.0009926411 <- if the average listening audience is 6,032,500 people
$0.0004963206 <- if the average listening audience is 12,065,000 people
$0.0002481603 <- if the average listening audience is 24,130,000 people
$0.0001654402 <- if the average listening audience is 36,195,000 people
Finally, and importantly, I realize that Radio stations in the US do not pay royalties on a per spin (and per listener) basis. Instead, these Radio royalties are calculated by such means as a percentage of revenue, or as a result of a negotiation over a blanket fee.
I also realize that music services—such as MOG, Rdio, Rhapsody, and Spotify—are not—by default—paying royalties on a per stream (per listener) basis. Instead, these royalties may be calculated through a number of means, none of which can be openly discussed due to the joys of non-disclosure clauses.
However, the resulting pool of money from Radio can be and has been counted. And various sources have reported online their payments from music services. As a result, nerds like me can try to estimate some effective rate given the size of the pools, the rough number of tracks played, and the number of listeners.
The estimates above are a function of considering the average music radio listening audience (across moments in the day) to be 5% of the estimated quarterly radio audience as reported by Arbitron. For comparison, Arbitron estimates the average size of US Radio (all formats) audience to be approximately 9.5% of the quarterly audience. I worked below this number given (a) not all stations are music stations and (b) Arbitron may be overestimating the size of the Radio audience.
The ranges above are a function of considering the average music radio listening audience (across moments in the day) to be 2.5%, 5%, 10%, and 15% of the estimated quarterly radio audience as reported by Arbitron. For clarity, the smallest assumed listening audience will lead to the highest estimated rate per stream per listener in the ranges.