Who’s making money from free music? Spotify makes money from ads. The more people that use Spotify the more money Spotify makes from ads. Spotify likes to make money from ads so it rewards artists that generate more traffic (bring more users to Spotify) by paying them a higher percentage of ad revenue. Somehow they calculate artists’ share of ad revenue to a per stream payout. My per-stream payout on Spotify is about $0.007 per stream, but admittedly, I don’t have many people going to Spotify to hear my music.
The same way Spotify makes money, Rdio makes money. They also pay artists per-stream as well but the potential for artists to generate revenue from Rdio doesn’t stop there. Rdio has an affiliate program that pays:
- 3% of the subscription fee (currently that fee is $9.99) per month for each Rdio Unlimited subscriber you referred
- 2% of the subscription fee (currently that fee is $4.99) per month for each Rdio Web subscriber you referred
- 7% of the purchase price for each MP3 purchased by someone you referred 30-day cookie window
My Rdio payments average out to about a penny per stream. There are more on demand streaming services out there but I’m focusing on these two for sake of brevity.
The same way streaming services like Spotify and Rdio make money is the same way Youtube makes money. Youtube allows its uploaders to monetize their videos with ads and share in the revenue generated from their videos. What this means is, every time one of those commercial styled ads plays before your video starts and viewers actually let it finish, you make money, and every time one of those banner ads show in your video and a viewer clicks on it, you make money. The most I’ve made from Youtube is $2 from 5 clicks from 54 views a video of mine received.
The same way streaming services like Spotify, Rdio, Youtube, etc. make money is the same way file-sharing sites like Sendspace and mixtape hosting sites like Datpiff, Livemixtapes, and AudioMack make money. The difference is, Sendspace, Datpiff, Livemixtapes, AudioMack, etc. don’t pay artists anything! Yet, artists collectively drive tons of traffic to these sites, which they utilize to generate dollars from ads so people can download artists’ music for free!
I apply the same logic to sites like Soundcloud and Bandcamp that artists use to provide on demand access to their music while earning nothing in return but the potential for popularity and the possibility of an unlikely sale. Soundcloud doesn’t work to expose artists’ music on the site. The only people that go there to hear an artist’s music are people that are sent there by the artist or by a blog the artist was featured on. The same goes for Bandcamp, Datpiff, and any other download site. Being on sites like Soundcloud, Bandcamp, Datpiff, etc. isn’t like being on a show like X Factor where there are promo campaigns that run to get people to watch the show and see new artists. These sites, if anything, promote to get more artists to register and use them to distribute their music. Their business isn’t getting your music heard.
Spotify users have their Spotify accounts synched with their Facebook accounts which results in passive promotion of what they listen to and the Spotify brand. Every time a Spotify user plays a song it gets broadcast to their Facebook page and the news feed and looks like this “Dunce Apprentice is listening to Neon Valley Street by Janelle Monáe on Spotify.” This provides artists with great potential for further exposure through the act of listening. Soundcloud has a similar feature but, again, doesn’t pay artists anything. When a Spotify user synchs his music library with Spotify and listens to songs from his library away from where the songs are stored, like on another computer or his cellphone, the artist is paid per stream. What that means is that I can download an album for free, synch it to Spotify, and the artist can still earn something from me listening to it. The other streaming services do this as well.
Many artists have an argument against streaming services that claims the on demand access they provide results in a lack of incentive to buy and lower sales. I find the argument contradictory being that these streaming services pay artists for their music being played and many of those same artists create the same on demand access to their music through Soundcloud, Reverbnation, Bandcamp, etc. and generate no revenue from doing so.
I’ve heard the complaints about streaming services like Spotify; the low per stream payout and how it’s not enough for artists to make a living off of. What I haven’t heard is any artists say that they launched a promotional campaign targeted toward getting people to listen to their music on Spotify. I don’t see links to listen to artists’ music on Spotify on their websites like I see links to Soundcloud, Bandcamp, and Reverbnation. With the launch of Spotify’s new player widget and Kanye West using it to provide a full stream of his compilation album “Cruel Summer” that may be about to change. What may make lesser known artists hesitant to use the Spotify widget is the barrier it presents to people that aren’t registered with Spotify. In order for people not registered to listen they would have to install Spotify which may be a deterrent. Taking notice of the drawbacks of using Spotify to circulate music, maybe artists should consider creating Youtube playlists of their music, monetizing the videos and posting them to their sites where they can make money from the ads.
When I saw the Cruel Summer stream in the Spotify widget I decided to swap all the audio players I had on my site for my album “EX.O.L.L” that were powered by Soundcloud to Spotify. I removed the link to Bandcamp and replaced it with a link to Spotify and added a link to Rdio. Maybe I got too carried away, I tend to do that, but the potential for alternative revenue is there, it’s on us to maximize it and get from it all that we can.
Are Spotify, Rdio, and MOG the only option for monetizing the listening experience, no. communities of artists could form their own Myspace styled site where they run ads on each other’s pages and share the ad revenue generated with each other. Doing this they could use player widgets from Soundcloud and Bandcamp because the income wouldn’t come from the streams but instead the hits to the site. A site like that with a sidebar of thumbnail images for other artists in the network could work in exposing each to the other’s audience and facilitate growth for all artists in the network. Maybe it wouldn’t and shouldn’t be one site like Myspace, but instead a host of sites with different communities of artists and not just music artists but all artists; painters, dancers, sketch artists, graffiti artists, whatever you can imagine.
We supply sites with free music and allow them to make money from ads from the traffic we send there to consume that free music. We supply sites with free music and pay them for the privilege of giving away free music. We supply streaming services with music they charge users monthly fees to consume only paying us a low per stream payout. What drives traffic to all of these sites and services is our music and the effort and energy we expend in getting people to listen to our music. We praised the Internet because it allowed us to cut out the record companies and take our music directly to the fans. Maybe it’s about time we take full advantage. To quote He-Man “[We] have the power”!