Here’s a good question, how many streams does it take to make the same amount of money as a single download of your song on iTunes? Here’s an even better question, how many streams does it take to generate a single iTunes download?
According to Spotify the average royalty per stream payout is $0.006, so the answer to the first question would be 166 streams. It would take 166 streams to generate the $0.99 that could be earned with a single iTunes download. Looking at the second question, can you say that every 166 streams of your song results in a sale?
In my Soundcloud stream I have artist that have accumulated over 20,000 streams within the timespan of two days. If these were Spotify streams those artists would have earned at least $120. In order to have earned as much in iTunes downloads they would have needed to sell 121 singles. The decision of what’s more profitable for you has a lot to do with the likelihood of you selling 121 singles out of 20,000 streams.
A mistake a lot of artist make is in considering every listener as an interested buyer. Songs that go viral online tend to do so as a result of social media; people sharing to Facebook, Tweeting on Twitter and Retweeting, etc. the people they’re exposing the music to are interested listeners but not buyers. They’re people curious about your song that want to hear your song so they can find out what it’s about it.
Take Rebecca Black’s song Friday for example. The song was streamed over 30 millions times on Youtube and at one point had an 87% disapproval rating which fell to and remained at 80%. The people that listened to that song weren’t interested buyers. Most were checking out the song to get a good laugh. Despite that, the song sold approximately 43,000 copies which, in a perfect world, would mean she earned $43,434. Since this is the real world we’d have to deduct the 30% of revenue she’d have to split with iTunes plus whatever percentage of sales she had to pay to her digital distributor which could have left her with as much as $23889.
If her Youtube streams were Spotify streams she would have earned $180,000 at a rate of $0.006 per stream. That by far surpasses what she earned from iTunes.
What also has to be taken into consideration is that Spotify doesn’t pay artists per stream but by their percentage of the total number of streams. Going by the numbers highlighted in my video “How Does Spotify pay artists an answer that makes sense”:
13Billion streams for the year
500 Million in revenue for artists
30 Million streams of a single song = .230% of the total number of streams
.230% of 500 Million = $1,150,000 in revenue for Rebecca Black.
Though Spotify claims to pay royalties this way, the royalty payments disclosed by the artist Zoe Keating cast doubts on that claim. With thousands of Spotify streams per month she was paid less per stream than I who generated only 30 streams for the month. To be fair I’m not sure if those were her gross figures or her net figures after deductions, royalty splits, etc. Spotify, you got some splaining to do! Yet and still, even at $0.006 per stream the revenue that could have been generated from Spotify for Rebecca Black’s song “Friday” crushes what was made from iTunes.
My suggestion to every artist that views Spotify as something working against their profit margin is to do a little math. It might change your mind.