Can Music Streaming Ever Be Profitable? [INFOGRAPHIC]

Some musicians and labels complain about the size of their check from Spotify. Others say, be patient, these services just needs to grow.  But will music streamers - particularly those based on the freemium model like Spotify and Pandora - ever be profitable?  These two charts from Statista explore the past and future of music streaming growth and profitability.  What do you think?

Comments

[Spotidj]

I believe they can. Even next year if they want to. The loss is due to the royalties they pay. Drastic but efficient method: lower the rates a bit and the service is profitable.

But maybe it is better to wait for the services to scale?;)

[Maurice DeNoble]

Lower the rates, lower the royatlties, is that what you are talking about? Are you out of your frigging mind? You want the artists and label to sacrifice their royalty stream even further because your business model doesn't work? You greedy bast**ds; all you guys at Spotify want to become part of the 1% off the backs of the artists' creativity. Your business model is broken, it is unsustainable. It will never work. Move aside; YouTube, iTunes and Amazon are doing it correctly and paying labels and artists a fair royalty rate. Streaming is devaluing the copyrights. Furthermore, this is a shrinking business. There is room for only so many players. I can't wait for the day Spotify becomes the next Myspace....

[Justice Aaron]

If you are in for the long haul, it can be profitable. I am not disappointed when I receive payouts and/or new fans from streaming services.

[Corey Tate]

The view on streaming always seems to take the wrong path. It's the new radio, not the new download. Radio plays paid artists nothing, streaming pays money, albeit small. Maybe artists need to admit their payments are based on performance, and that contributes to small payments, meaning not enough people are listening. Focus on selling downloads, extras, live shows, and whatever else you can think of. Your an artist, be creative.

[Paul Soproniuk / NuPlays]

Totally agree with Corey. Streaming is new radio, because it doesn't give fans one but very importanting thing: the ownership of music. People like it becouse it's somehow better than radio (you can play whatever you want) but on the other hand there's still PLENTY of opportunities. Sell experiences, not files.

[Spotidj]

Ease up man. I was joking. I'm not affiliated with Spotify so don't call me greedy. I just happen to like the service as a consumer.

About fair royalty rates, how fair is the rate you get from YouTube? Why is that more fair than Spotify, Deezer or Rhapsody?

[Spotidj]

I don't think streaming is the new radio. It's somewhere in between radio and downloads. For some it replaces radio for others (myself included)it replaces downloads. It's a league of its own.

You are right about the performance part. Small payments because not enough people are listening. That's partly because there are not that many users yet. Streaming is still in it's infancy

[Paul]

Itunes doesn't give peoplr either!

[Paul]

Sorry, Itunes doesn't give people ownership either!

[AlexmDrums]

It's easy for people to jump on the bandwagon for badmouthing streaming music services, but they need to start focusing on the long tail, and stop comparing it with iTunes. No matter how you look at it, $10 a month is nowhere near enough to fairly pay the hundreds of artists that a single (premium) user listens to in any given month. Factor that in with the other 80% of users that are not premium users, and it makes sense that the royalties are so low. Compared with Pandora, Spotify's royalties are roughly 10x as much, but no one seems to be attacking Pandora for this.

The reality is, streaming music services are not meant to replace stores like iTunes- instead it's a monetized alternative to P2P software, which the majors should have jumped on immediately after the release of Napster. Anybody can get music for free now, so companies need to be able to compete with "free." By using a subscription model, users pay a fee, but it feels like free when it's a low amount that isn't charged on a per-play basis. Just like cable TV, you pay a monthly bill, but when watching an episode of the Office, customers don't think about how much that episode costs- it feels free.

I've written more on this subject on my blog, but the main point is that today's artists cannot sustain a living through album sales alone. This is different than the model from decades ago, and it's not fair to compare that model to the industry today. Digital music made music worthless (in a monetary sense), but has gained ease of exposure. That's what streaming services are all about, and it's unfair to place the burden of making real money off of album sales on Spotify, especially when it's a standard that no longer exists.

[Maurice DeNoble]

The new radio? You don't have a say in the content radio programs. It is a take it leave it situation, move on to the next station. For over 70 years radio has proven itself as a promotional tool in selling product. 10 years plus down the road with the Digital, where is the proof (hardcore data) it can sell product, sell tickets (as opposed to facilitating a sale) etc. Bottom line, this industry is making 50% less money than it was making 5 years ago; every segment of this business is down, so clearly the "new models" are not working. Is the idea to ultimately take this industry into the abyss? Alexmdrums says "Digital music made music worthless (in a monetary sense), but has gained ease of exposure." So if digital has made music worthless, what is the value of the exposure? Vanity for the less talented?

[Richard Borsboom]

Maurice Please wake up. The world is changing and streaming will be the next generation music distribution. And you know the most beautiful thing is, you do not sell your product anymore. You give each time again the right to use it only once.

That this will bring less money per stream seems to be normal, but as Corey also said make sure as artist to be visible and influence the number of times consumers want to listen to you, it is back in your hands how much money you make!

I do not believe as Alexmdrum says "Digital music made music worthless (in a monetary sense), but has gained ease of exposure." Digital is showing the really consumer value towards music. On an average each legal copy has 99 illegal copies. So if you sell a download "worth" US$ 0.99 the real value is only (for each download) US$ 0.0099, which is JUST a little bit more as you get of each time your songs is being played on a streaming service.

Also do not forget this is now a recurring revenue business instead of selling, so you will indeed get your money over time. And it is up to you or it is less or it is more.

Artist should be happy with the legal streaming services and should hope that this will bring the distribution of music back under control.

[Mojo Bone]

I think a lot of folks have misidentified the problem with digital music distribution; it's not the music that has become virtually worthless in the new 'attention economy', but the distribution of digital music. After all, it's the distribution of works that has become essentially free, not the production, and not the licensing.

Radio is not going away, but downloading likely will, because collectors tend to want a physical thing, a tangible representation of the music they love, to interact with and display as a status symbol. (or, at least in Bruce Willis' case, bequeath to their children) It won't be long before the tour T-shirt you buy at the gig can play back the concert as well as show your musical allegiance to friends and strangers, so physical distribution will likely remain viable and valuable.

Folks who aren't so invested and listen only to environmental or 'wallpaper' music will be perfectly happy with ambient and streamed content, so long as it's curated in some way, either by their social groups or by major media.

On-demand streaming serves the needs of the more adventurous ears as it's a vastly more efficient means of music discovery than radio. I feel confident it can earn its place in the new media paradigm.