INDUSTRY OPINIONS – Streaming Royalty Rates
This week we take a look at the ‘hot topic’ of the moment of streaming rates and whether they are fair and equitable. We managed to source a wide variety of the stakeholders involved in the debate including, Spotify, Projekt Records, Kudos Records, PRS for Music (the UK performing rights society) and Merlin. We did approach two major labels but received no response from either. Without further ado comments from our esteemed industry executives regarding the following questions are provided below.
“Are streaming royalty payouts to artists fair and equitable when compared to other royalty pay out rates? Or should streaming royalty payouts be increased?”
Steve Savoca, Head of Content – Spotify (US)
“It’s an apples and oranges comparison. Unit sales are finite purchases, whereas streaming transactions can occur countless times over a much longer period. It is not possible to compare royalty payouts on unit sales v streaming in a fixed period of time.
Furthermore, streaming appeals to a younger demographic who have never legally consumed music and has greater potential to reach a presently un-monetized mass market. We believe in the enormous potential benefit of bringing greater numbers of music consumers back into a legal and monetized environment.
We strongly believe that any debate about streaming royalties being ‘unfair’ is wholly unfounded, and a number of articles have recently attested to this fact. A recent blog by Washington & Lee University’s assistant professor of business David Touve concluded that streaming services actually paid more per stream than iTunes. And Martin Mills, the chairman of Beggars Group, commented about streaming services: “Every play is a pay – and 200 plays will earn you more than a sale.”
Sam Rosenthal, Founder – Projekt Records (US)
“In the world I want to live in, I envision artists fairly compensated when the audience listens to their creations. Spotify and the other streaming sites are not offering rates that respect the artist’s passion, dedication and expression. Their rates are not fair and equitable, thus I removed Projekt’s music from these sites. Music cannot be the chum to line their pockets and fuel their eventual IPOs. I agree that streaming royalties should be increased, but it will require a different model. Free is not a price point that works for creative endeavors. I envision a world where the artists I love receive fair payment for creating ephemeral objects that enrich our lives. I am glad people are having these conversations and asking these questions. Thank you for supporting artists with your digital and physical purchases.”
Charles Caldas, CEO Merlin
“Revenue from our streaming services is showing massive growth, with Spotify obviously leading the way by a very very long way. That service in particular is a major revenue stream for our members. We are yet to see any tangible evidence from any member that streaming services cannibalise other forms of consumption. Additionally we see very little analysis that looks at this issue sensibly. If someone plays a download 50 or 100 times over its life, what is that worth per play, and how does that compare with streaming services, or radio play, or YouTube for that matter? Finally, I suspect the issue of artist royalties on streaming service is much more a matter between artists and their labels than between services and labels.”
Danny Ryan, Founder – Kudos Records (UK)
“First of all, I can only really comment on streaming royalties paid to distributors and labels. The share an artist eventually earns depends on their individual contract with their label. So, as far as streaming payouts to distributors and labels, my view is that comparing them directly to download royalties is a bit pointless. You need to turn the question on its head.
• Streaming technology exists, and for the most part it’s being provided by licensed services (in contrast to the early days of downloads).
• Given a chance to sample the service for free, the consumer seems to like the technology, and judging from conversion rates, £10 per month seems to be the sweet spot.
• If legal streaming services didn’t exist you would soon see an abundance of unlicensed services filling the void.
As I point out in my blog post, conversion from ad supported to premium and bundling will eventually improve per-stream rates, Personally I also view the current share we receive from many of the new digital services as a transitional rate. Once these services start to scale to a point where they cover their own costs we would expect to see an improvement in revenue share.”
William Booth, Director Of Licensing – PRS For Music
“A lot has been written recently about streaming services and in particular Spotify and the royalty rates they pay songwriters, composers and performers. From our perspective at PRS for Music, Spotify is one of a number of new digital streaming services at the forefront, along with download services, of providing a legal alternative to piracy online. Spotify has always done the right thing and worked with rightsholders to ensure their music offering is fully licensed before launch. Our writers and publishers are earning royalties from digital music and this is a growing part of our business; we all need to support these services that are giving users a legal, virus free and high quality alternative to peer-to-peer sites and generating an additional income stream for creators. Comparisons with radio or TV broadcasts that may have millions of listeners or viewers are difficult and not always either accurate or appropriate.”
It seems that as an industry we need to see how this plays out over the medium term. But it is TMV’s view that any revenue that is coming in from any services that are offering an alternative to piracy at the same price point of ‘free’ whilst paying out something to labels and artists is a good thing for the industry as a whole.
Readers please do feel free to leave your own views in our comments section…