Streaming Economics: How Many Streams Equal a Sale?
In today’s music industry, streaming platforms have revolutionized how we listen to music by offering unlimited access to vast libraries with just a few clicks. But behind this convenience lies a complex question: How many streams equal a sale? This misunderstanding lies at the heart of artist remuneration like yours. Let’s explore together the economics of music streaming.
How are artists compensated on streaming platforms?
Streaming platforms compensate artists based on various criteria, with the most crucial usually being the number of streams of their songs. However, the exact amount an artist receives per stream can vary significantly from one platform to another. Generally, artist revenues primarily come from user subscription fees, as well as advertising revenue for free users.
But why is it so difficult to know how artists are compensated by streaming platforms? Because contrary to what one might imagine or occasionally read, there is NO fixed, unique, and definitive figure. In reality, artist remuneration depends on a calculation method.
There are 2 sources of revenue for streaming platforms: paid subscriptions and advertising.
To help you better understand how many streams equal a sale on streaming platforms, we offer you to look at the following 5 examples.
Detail of the different platforms and their remuneration policies
Spotify
Spotify uses a remuneration model based on a “pool” of revenue, where money from subscriptions and advertising is pooled and then distributed among artists based on their share of total streams on the platform.
Apple Music
Apple Music offers artists slightly higher remuneration per stream than Spotify. The service also distributes revenues based on the percentage of streams an artist generates compared to total streams on the platform.
Deezer
Deezer offers a model similar to Spotify, where revenues are pooled and distributed to artists based on their streams. However, the platform emphasizes transparency by providing artists with tools to track their revenues and performance.
Tidal
Tidal stands out by offering artists a slightly more generous remuneration model. The platform highlights its commitment to fair artist compensation, although its overall impact on the industry may be limited due to its smaller user base.
YouTube Music
YouTube Music compensates artists through a complex model based on advertising revenue and premium subscriptions to YouTube Music Premium. Artists can also earn money through advertising partnerships and views on their music videos.
How many streams equal a sale: concret examples
To better understand the impact of streams on artist revenues, let’s look at two contrasting scenarios:
You are on Spotify: The more tracks are streamed, the more remuneration increases. Remuneration for each stream on Spotify varies depending on several parameters:
- The country of broadcasting
- The subscription chosen by subscribers: Free, Trial, Premium…
- The duration of the stream
Spotify pays artists between $0.003 and $0.005 per stream on average, with slightly less than 23,000 streams of your tracks needed to receive $100. So, one million streams on Spotify is equivalent to about $2144, or about 500 streams to earn $1.
You are on Tidal: Tidal ranks higher than Spotify and Apple Music in terms of royalty rates and direct payments to artists available on the platform.
Artists received around $0.013 per stream on average in 2023 on the streaming platform. This means you would need 80 streams to earn one euro, and 80,000 streams to earn $1,000.
Now imagine you’ve got 1 million streams on Tidal in the same month. With a slightly higher remuneration rate per stream, for example, $0.012 USD (according to Tidal’s claims about fair compensation), you would earn about $12,000 in the month.
Calculation of equivalence between streams and sales: understanding the impact of streaming
One of the most pressing questions in this new digital world is: How many streams equal one sale? This question lies at the heart of understanding the economic implications of streaming for artists, labels, and the industry as a whole.
Factors influencing the calculation
Several factors come into play when determining the equivalence between streams and sales. These factors include subscription models, ad-supported free listens, song duration, and the nuances of royalty rates. Subscription-based streaming services like Spotify and Apple Music offer artists royalties based on their share of total streams, while ad-supported platforms may offer lower rates or rely on complex algorithms to calculate payments. Additionally, the duration of a song can influence its number of streams, with longer tracks potentially requiring more streams to generate the same revenue as shorter ones.
Studies and analyses
Numerous studies and analyses have attempted to quantify the average number of streams needed to equal one sale. While the exact figure may vary depending on the methodology and dataset used, these analyses provide valuable insights into the economics of streaming.
For example, a study conducted by industry analysts found that it takes an average of approximately 150 to 300 streams to generate the same revenue as one digital download. However, this figure can fluctuate depending on factors such as the artist’s popularity, the streaming platform used, and the region in which the music is streamed.
If you are interested in these studies, here are two that might interest you:
“The Immaterial Value of Music Streams: A Comparison Between Spotify and iTunes” – This study conducted by academic researchers examined the revenue differences between streams on Spotify and downloads on iTunes. Researchers analyzed data from multiple artists and albums to determine how many streams were needed to equal the revenue of one download.
“The Economics of Music Streaming: A Comparative Analysis” – This research, conducted by a group of economics consultants, compared the economic models of streaming with those of physical sales and digital downloads. The study examined costs, revenues, and consumption trends to assess the financial impact of streaming on the music industry.
Comparison with other distribution methods
Historically, music sales were primarily generated through two main channels: digital downloads and the sale of physical formats such as CDs and vinyl records.
Digital downloads, once the undisputed leader in the digital music market, offer an à la carte purchasing experience where consumers buy individual songs or albums to own permanently. Artists generally receive a share of the set selling price for each download, which may vary depending on agreements with digital distribution platforms.
The sale of physical records, although declining in recent years, remains a significant source of revenue for many artists, especially in certain genres and geographical regions. Vinyl records, in particular, have experienced a resurgence in recent years, attracting both audiophiles and vintage music enthusiasts. Artists receive royalties from physical record sales, typically calculated as a percentage of gross or net sales.
Compared to these traditional distribution forms, streaming presents both unique advantages and challenges for artists. Although the payment per stream may seem low at first glance, the scalability of streaming to reach a global audience and generate recurring revenue over time makes it an attractive option for many artists. Additionally, streaming offers greater accessibility and a more immersive listening experience for listeners.
Perception and critique of the current remuneration model
As streaming becomes increasingly dominant in the way you consume music, it is crucial to examine the perception and critiques of current remuneration models.
Perspectives of industry players
Labels also have their say: Universal Music Group signed a licensing agreement with Spotify, sparking debates about market shares and royalties. Conversely, independent labels like Sub Pop Records have taken a more collaborative approach with artists, offering more equitable and transparent streaming contracts.
On the fans’ side, opinions vary. Some see streaming as a convenient and affordable way to access a vast music library, while others worry about the financial impact on their favorite artists. Movements such as #IRespectMusic have emerged, calling for reform of the streaming remuneration system to ensure fair compensation for music creators.
Debate on the value of streaming listening
But what is the true value of streaming listening? Some believe that each stream should be significantly compensated to reflect the creative work of artists, while others argue that the current remuneration model does not take into account the promotional aspect of streaming.
And you, what do you think?
Get onboard !
Don’t miss any blog post we share, unlock premium content, receive insider tips, and enjoy exclusive perks within our Newsletter.
