Report: Streaming Can Make More Money Than Sales ... Over Time

Small Change Now, Bigger Change Later

One of the more prevalent complaints about music streaming services is that the royalty payments to artists are essentially infinitesimal -- especially compared to digital track and CD sales. Yet a WALL STREET JOURNAL report not only disproves that notion -- over the long term -- but it goes against the common perception of labels focusing almost all of their promotional and marketing muscle on the first, out-of-the-box week of sales.

When SPOTIFY recently disclosed on its website that its average payments amount to tiny fractions of a cent per song, more than a few observers opined a SPOTIFY user could never listen to a song or album often enough to generate the same revenue that a download sale would. Not necessarily so. The WALL STREET JOURNAL cited data that showed one major label makes more per year, on average, from paying customers of streaming services like PANDORA, SPOTIFY or RDIO than it does from the average customer who buys downloads, CDs or both.

Apparently, the label made about $16 year from the average "premium" subscription customer in the U.S. -- but only $14 from the average buyer of digital downloads or physical music. Other data from the same label showed that over time, even many individual albums eventually make more money from streaming services than they do from downloads.

Granted, it can take a LOT of time of time to do that. And sometimes, it can't do that at all.

In this study, all of the surveyed acts -- identified only with generic descriptors -- made more money from download or physical sales than from streaming when their albums first hit the market. Over time, however, that changed. One particular "modern male R&B rapper" started to make more money from streaming than from sales after just four months. For an  album by an "indie rock/pop group," however, it took almost three years -- 34 months to make more money from streaming than from sales. In both cases, as download and traditional sales revenue declined over time, streaming revenue continued to climb as people kept listening to the music.

Maybe not coincidentally, pop acts -- usually the most marketed and single-driven upon release -- were the least likely to see the revenue from streaming services exceed sales revenue. Why? Because online listening, much like sales, tended to level off over time for songs that can be largely disposable.

In SWEDEN, streaming subscription services are significantly more profitable than downloading/sales. An average premium subscriber there is worth about $17.75 to the label, versus less than $4 for the handful of people who still buy music.

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