Digital Purchase vs. Streaming

Source: Spotify Doesn’t Sound So Great to Some Artists

The article talks about how major acts from major labels refuse release their new albums on Spotify despite of big advances labels took. Also at the end the Author mention how artists are losing a source of income to Grooveshark and Torrents illegal downloads.

Probably all you can think is lady Gaga and $160 check she got from Spotify for 1 million plus plays. Here’s some things you need to know. She did not get paid as the artist. She got paid a as a writer. Even as a writer, she is a half owner of the song. On top of this, publisher took a good chunk of her royalties too.

Now let’s talk about some numbers between Digital Purchase vs. Streaming.

When it comes to iTunes sales…
Writers get mechanical royalties same as CD sales, which is a great thing, however reason why labels prefer actual CD sales are the money they get is much higher. They dont’ have to pay Apple, distributer/aggregator (when it is a CD sales major labels own distribution channels), and all of the above that takes money away. Label gets less than a half of $9.99 an album sales. It looks pretty bad, right? Streaming is even worse.

When it comes to streaming…
Here it gets interesting. It starts from how much revenue a streaming service generate that month, quarter, an year. From the revenues, they will take out all expenses (staff, servers, buildings, and etc), divide all that into how many songs have been played. Then pay aggregators, and pay to the labels according to their royalty deals. How much labels get paid? A fraction of a cent. Per album, they would get paid few cents. So how much do artists get paid? A fraction of a fraction of a cent. I am talking here with paid subscribers. With freemium users this number gets even worse.

Plus Spotify will never release exact figures how much they paid royalties to who. Why? The deal between Spotify and each labels are different.

My Thoughts…

If you are a label or an artist, which one would you prefer? Isn’t the answer too obvious? Would you think label would encourage artists to promote and embrace streaming when both of them knows digital sales will pay them much more? Are they really losing a money to illegal downloads and torrents? I bet illegal downloads are and will happening no matter the songs are available right away on any streaming services.

Streaming services can be a future, however,t as of now it is a very poor business model for labels and artists. Sure, labels have stakes in Spotify and got advances already meaning they got money already whether their songs are played or not. Unless it was written on the contract that the labels must make any music their artists release available on Spotify, they are not doing any wrong here. Spotify subscribers can complain all you want. If you truly support your artists, simply purchase their songs.

Music Labels are not stupid, yes they are behind of technology in many aspects, but I am confident that they can can calculate how much money they can lose and gain from releasing albums to spotify early even with the risk of torrents and grooveshark. So let’s not cry over the songs get delayed to be on Spotify.