This week, the government is holding a hearing on the financials of the music industry, specifically around revenue from streaming compared to other forms of remuneration. This article from Sky News caught my eye, with Gary Numan unhappy that his streaming revenue for 1 million plays was only £37. I suspect that artists and others have a challenge understanding the mechanics of streaming versus radio and other revenue, so I thought it worth having a dig into the details.
Let’s start by comparing radio with streaming. The revenue generated from radio stations is naturally a closely guarded “secret” and available to only those who are members of PRS. However, this article references some numbers for the BBC. Cars and other Numan tracks are likely to be played on Radio 2, which in 2018 paid £22.77 per minute, or around £70 per track.
Radio 2 listeners are estimated at 14.44 millon over the course of a week. It’s difficult to translate that figure into a number that represents the average listener count, but taking this data into consideration, the average could be between one and two million.
Streams vs Plays
So, a single play on Radio 2 could reach between 1-2 million listeners, for which the royalty is £70 (approximately). This compares well with a return of £37 for 1 million plays. The content is reaching a similar audience size, with similar revenue returns, although we don’t know exactly how the BBC royalties are divided up. It could be that £37/million is a good figure for royalties received by streaming.
Part of the challenge here is understanding the concept of big numbers. Receiving £70 for one play on Radio 2 seems great; receiving £37 for a million “plays” on a streaming service seems terrible. However, the two are not directly comparable, because reach is different.
If we look at the most popular streaming service, Spotify, the numbers are huge. The company boasts 320 million active users, with 144 million subscribers (the remainder receive adverts), with access to over 60 million songs.
Assuming every active user streams for one hour a day (or 20 songs), that represents 6.4 billion downloads, or every track played 100 times a day. if that were true, every track would only be downloaded less than 40,000 times a year.
Now, we know that averages never work. In reality, the 80/20 rule generally applies and some songs will receive many more downloads, while others might never be accessed. The average user can stream perhaps 240 tracks a day (20 per hour) over a 12-hour period – from a collection of 60 million. Getting any plays at all is still a remarkable achievement, with so much competition for air time.
The move to streaming represents a change in technology and commercials. As co-founder of a music company, I regularly produced PRS reports and paid royalties. The process was torturous, with so many companies and individuals claiming ownership of music rights. Much of this was based on geographies, specific albums and recordings and sub-licensing. Spotify must have a Herculean job in reconciling who is owed what money.
The entire music industry has changed since Gary Numan first released Cars in 1979. At the time, people purchased albums and played them forever. Fans invested time in their favourite bands. Today music has become almost throw-away and many artists treat their fans the same way. Music is a truly commercial enterprise.
It’s testament to the quality of songs like Cars that they continue to get plays and downloads year on year. However, with every year that passes, the collective back catalogue of music grows and makes it ever difficult for any one track to stand out. Music artists, like everyone, need to be continually re-inventing and refreshing their music, rather than resting on the laurels of a track written 40 years ago. Streaming services are not unreasonably penalising artists. They offer access to hundreds of millions of listeners, in return for a cut of the profits. Try doing that yourself in this media noisy world and see how hard it can be.