Spotify: Can you make more from streaming than sales?

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How many streams does it take to make the same amount of money you could make with the sale of a single 99 cent iTunes download? Spotify says it pays artists .006 cent per stream on average. Looking at that, it would take about 165 streams to generate the same 99 cents you could earn from the sale of a single iTunes download.

Here’s an even better question. How many streams does it take for you to generate a sale? Like how many times is your song streamed before somebody buys it? In order for iTunes sales to surpass the value of streaming revenue you’d need to average one sale for every 165 times your song is streamed online. That would come to about 6 sales for every 1000 streams. There aren’t many artists I know that are averaging 6 sales per 1000 streams. There aren’t many artists I know that are averaging one sale per 1000 streams.

Let’s say an artist is averaging one sale per thousand streams. The argument is artists want to make a living and how could they make a living only making .006 cents per stream. Say you want to make $30,000 for the year. At the rate of 1 sale for every thousand streams you’d need 33 million streams to make $30,000 in iTunes revenue. Where those 33 million streams would make you $30,000 in iTunes revenue, they’d make you $180,000 in streaming revenue on Spotify. If you swap Spotify with Rdio and their payment of .01 cent per stream, you’d make $330,000.

The issue with streaming is that most artists underestimate how often their music is streamed and where those streams come from. They tend to view the people who stream their music and the people who buy their music as the same people. They ask questions like “how many times is somebody going to listen to one song or album?” and use how often they listen to their favorite albums to estimate how often their fans will stream theirs.

Someone with 1000 friends shares a link to Facebook. Each of those 1000 friends has at least 500 friends of their own. They all share the link and listen to your song. You generate 500,000 streams from one medium in Facebook. These things happen, maybe not in the exact way of my example, but they do. Look no further than Soundcloud for evidence where you’ll see artists hit 500,000 streams in a day or two

What should stop being implied is that streaming is unprofitable for artists as some type of general rule. What it comes down to is your rate of sales to streams. If you’re generating a large amount of streams that’s only resulting in a tiny percentage of sales then streaming would be the more profitable of the two. Alternatively, if you’re generating a large percentage of sales from a small number of streams then sales would be the more profitable of the two. It’s up to artists to find what works best for them.

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9 COMMENTS

  1. Sure, if you’re making decent money from streaming, why not do it? I think though, that a more realistic scenario for someone with 1,000 friends is this…
    They post a link but only 100 of their friends see it. 10 of those listen and two share (which results in another 4 listens). 14 listens total. My guess (and it’s only a guess) is that the people who are generating hundreds of thousands of listens aren’t achieving that through mere Facebook shares.

    • They’re not. I gave an example it wasn’t to say that’s the way it goes. Content spreads on the web in a combination of ways. It spreads through Facebook shares, Tweets, blog posts, and internal traffic from the platform the music is hosted on. The bottom line is artists can’t count streams as lost sales because the large majority of online streams will come from people who don’t plan to buy their music.

      • I think it’s probably true that “artists can’t count streams as lost sales because the large majority of online streams will come from people who don’t plan to buy their music.” And those streams would mean additional income. However, if my calculations are accurate, you’d need about 100 streams to equal one iTunes sale. Actually, that’s not as bad as I thought. But it’s still a pretty tough row to hoe in terms of making more from streaming than sales.

        • You need 165 streams on Spotify or 99 streams on a platform like Rdio to equal one iTunes download, but really you have to factor in that iTunes takes 30% of every sale. For every iTunes download you’re really making $0.70. That’s beside the point though. What it comes down to is the ratio between streams and sales. Nobody buys an album without listening to it first and most of the people that listen to an album aren’t going to buy it.This is especially true when you factor in the multitude of reasons why people would stream an album online which sometimes people do to get a laugh if they’ve heard it’s entertainingly terrible. You’d need to generate a sale every 165 times someone listened to your music. Consider that artists get thousands of views on Youtube without generating a single sale. Also consider that one person may stream your song multiple times with each stream generating revenue. Besides that, people buy music and sync it with Spotify so they have access to it on the go without storing it on their physical device so some of those streams will come from people who already own the music. You’re monetizing everyone that will listen to your music for whatever reason and every listen from the people who bought it. It’s very possible to make more from streaming than sales. The problem is Spotify has the restriction where people have to sign in or register, download and launch the app, and there’s no on demand listening on mobile devices. That results in less streams and less revenue. Plus many of those people turn to Youtube which pays waaaaay less than Spotify and Soundcloud which doesn’t pay at all.

  2. Firstly, I appreciate all your videos in providing info and knowledge for the artists.
    But here is a simple math error, that debunks all your above theory.
    If spotify pays .006 cents per stream., then to make 6 cents the number of streams = 6/0.006 = 1000.
    Or the other way to put it, To make 1 cent the number of streams = 1.000/0.006 = 165.
    To make 99 cents (100 cents) the number of streams = 165 * (100 cents ) = 16500
    also itunes pays only 70% so money earned for one download = 70/100 * 16500 = 11620 streams
    So to earn the same amount as one download the streams = 11620, say roughly 10K

    This may still be OK, because compared to the amount of money you spent to make the song, This is 10K free publicity assuming you’d make money from tours gaining knowledge of the demographics of their fans. Record Label would make you pay for the same, vs paying you a small money.

    • You put your decimal points in the wrong place. 6/0.006 = 1000 but that’s $6 not $0.06 which is six cent. 0.06/0.006 = 10.
      0.99/0.006 = 165

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