IFPI: Ad-Supported Streaming Services Contributing Little To Bottom Line
April 13, 2016 at 12:53 PM (PT)
Yesterday's IFPI annual report showed how digitial streaming has just surpassed physical sales on a global basis (NET NEWS 4/12), but it also pointed out how little ad-supported, "freemium" music services like YOUTUBE, SPOTIFY and SOUNDCLOUD are generating less than 75 cents per user to the music industry revenue pie, according to a report in DIGITAL MUSIC NEWS.
According to IFPI, the average revenue generated by an ad-supported free streaming music fan is 72-cents over an entire year.
That sharply contrasts with a revenue contribution of $29.41 per paying streaming subscriber, per year from services such as APPLE MUSIC, TIDAL and RHAPSODY.
In total, the IFPI now estimates 68 million paid streaming music accounts worldwide, with SPOTIFY and APPLE MUSIC accounting for half of that figure.
That 68 million accounts for roughly $2 billion in global revenues, according to the estimates, thanks to monthly contributions that often surpass $120 annually. IFPI counts 900 million ad-supported, freemium users, a group that collectively contributes an estimated $634 million per year.
That large contribution gap between paying and non-paying is a major source of concern for labels. According to the data, the average paying subscriber is more than 40 times more valuable to the music and recording industries, part of a "value gap" that the IFPI identified in its report.
YOUTUBE has been fingered as the worst offender, thanks to DMCA takedown processes that allow users to continuously upload infringing content without penalty. The big three, UNIVERSAL MUSIC GROUP, SONY MUSIC ENTERTAINMENT and WARNER MUSIC GROUP are now in the midst of collectively re-negotiating their licences with GOOGLE. Expect it to be a fraught process.