A Brief Overview of Monetizing Music Streaming Services

Updated On
21-Jun-2020
By
Ken

This is a guest post from Consumers Advocate. Since many of our readers are recording musicians, this information on how you can monetize your music is super useful.

The music streaming market experienced significant growth in 2019, rising to a record  £1 billion for the first time in the United Kingdom. According to the Entertainment Retailers Association (ERA) year-end report, music fans spent on popular subscription services from the likes of Spotify, Apple Music, Amazon Music, YouTube Music and Deezer as just 5 years ago. That’s a booming 31 times the level of what the market looked like in 2010!

With a growth of 23.5% compared to 2018, the report found that streaming services delivered record labels a fifth successive year of growth in the UK. As for the US market, Nielsen Music revealed that audio and video on-demand streams surpassed an impressive 1 trillion for the first time as well.

 “As more and more people sign up to streaming services, it obviously becomes a challenge to maintain the same rate of growth, but the fact is UK music fans spent £190m more on subscription streaming services in 2019 than they did the year before – that’s more than twice the value of the entire vinyl market,” said ERA Chief Executive Officer Kim Bayley in a statement.  

By 2030, Goldman Sachs predicts that there will be up to 1.5 billion paid subscriptions generating up to $27.5 billion at a global level.

Nielsen Music revealed that the UK was ahead of other countries in terms of listeners opting for music streaming services

Neilson Music Streaming Services Report 2019

According to the Nielsen’s Global Growth Areas report, the US, UK, Japan and Germany may be some of the world’s biggest music markets, each with musically diverse tastes. As for the UK, genres such as pop, rock, oldies, easy listening, and singer-songwriter hits were ranked as most popular among music lovers. - Courtesy of Nielsen Music 2019 Year-End Report. 

So what do monetizing opportunities for artists look like when it comes to music streaming?

As streaming services go, one of the biggest faults in the music industry are the payment methods that streaming companies use for their artists and songwriters. For example, it wasn’t until 2018, that amateur musicians and podcasters began receiving royalties for streaming on SoundCloud. 

Royalties are paid following one of two models: a service-centric (pro-rata) approach or a user-centric approach. 

In a pro-rata system, monthly royalties are determined by taking the total revenue generated by the streaming device, dividing that number by the overall number of all artists, and multiplying it by a specific artist total number of streams. When you think of big names such as Ariana Grande competing with upcoming voices or independent artists that doesn't feel like such a fair model right?

Now think of it in terms of two different types of streams – non-interactive and interactive listening. On-demand or interactive streams tend to generate more money, and thus pays more.

These are people that actively search for an artist, a specific song and play it as many times as they want on platforms such as Spotify. 

A non-interactive listener would lean more towards streaming services such as Pandora, where the server creates its own shuffle algorithm and the listener just sits backs and enjoys the tunes. 

There are also two tiers for each stream, premium or paid subscribers versus freemium or ad-supported subscribers. Naturally, the paid level tends to generate more money.

Furthermore, there are also different breakdowns for artists signed to different labels such as those signed onto indie labels, artists affiliated with major record labels, or self-releasing musicians.

For an artist to make roughly $25.20 from, for example YouTube, they would have to rack up 36,000 plays. 

Here’s a useful royalties calculator (ed. comment: you need to scroll down to almost the end of this article) you can use to compare the number of streams needed across various platforms such as YouTube, Spotify, and Apple Music to make a profit.

music streaming comparison

According to the editorial team at ConsumersAdvocate.org, Soundcloud was rated the best music streaming site for independent artists from all music genres. The platform is a great venue for people looking for music that’s waiting to surface and it’s perfect for artists that want to gain new audiences. 

Musicians over 18 years or age can gain pay-per-stream royalties on Soundcloud, but must be subscribed to the Pro or Pro Unlimited Plan.

What makes Soundcloud’s premier services so great is that artists can also track the song’s streamings statistics, post new tracks instantly, and interact with their audience in real-time. As for monetizing streams, 1 million streams would average around $1,300. 

So can an independent artist actually make a profit out of streaming their music?

That’s a tough one, like we mentioned racking up several million streams to make a decent living isn’t easy. However, the advantages of streaming your music can give you the space to gain a following, get your music out there, and increase business prospects. So why not do it? 

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