How much streaming revenue you should really be making

Unless you've been living in a cave recently, you should be aware that a large debate has been raging about streaming revenues on the Internet and how much artists should actually be making from streaming. I've been busy looking at numbers available from various places on the internet in order to try and calculate an answer to that question for you.

The revenue calculations

There are two possible ways we can come up with an average. One is to look on a per artist basis, the other to look on a per stream basis. Either way, there are a number of figures we need to try and get hold of, which leads to the following questions.

1. How many internet users are there?
According to Internetworldstats, there were just under 2.5 billion internet users in June 2012. Obviously not all of them will listen to music via the internet, but as a starting point for calculations, let's assume they do.

2. How much music does the average person listen to in a day?
Not a particularly clear answer on this one as it depends on many factors such as where you live and whether you work. I've seen figures between 1 and 13hrs a day quoted. For the purposes of this experiment, I'm going to go towards the generous end of the spectrum and use a figure of 10 hrs a day as a starting point.

3. So how many tracks is that in a year?
If we assume a track is 5 minutes in length, in theory you'd be able to listen to 12 tracks an hour. In practice, thanks to things like news bulletins and advertising it probably makes more sense to drop this to 10 tracks in an hour. Using our figures from above this means a person can listen to 100 tracks in a day or around 36500 in a year.

4. How many artists are there?
Hard to say. The best figure I have comes from the current front page of last.fm which mentions tracks from 54 million artists. It would be pretty safe to say there are probably a lot more who aren't currently on the service.

5. How many available tracks are there?
Again, hard to say for the same kind of reasons as number of artists. Once again, I'm using the figure from last fm which states 640 million

6. How many listeners to an artist?
2.5 billion = 2500 million, so we can say that each of our 54 million artists should have around 46 listeners in an ideal world where every artist is created equal. The true figure is almost certainly less for the majority. "But people listen to more than one artist" you might say. Correct, but each of those artists would then only get a percentage of the revenue i.e. if one listener listens to 10 different artists equally, each artist effectively gets 1/10 of the listening hours and revenue that listener can provide.  We're just making the calculations simpler here.

7. So on an artist basis, how much revenue?
I'm going to use UK pounds here, but as UK streaming services are looking at charging around £10 a month, EU ones 10 euros a month and US ones $10 a month, you could probably just ignore the currency sign wherever I use it and consider the numbers in terms of whichever of the 3 currencies makes most sense to you.

46 listeners paying £10 a month = £460 a month in revenue. However this assumes that all of your 46 listeners can both afford to pay and are prepared to pay £10 a month, which is unlikely given they need to come from the total world population. Even if all 46 can afford it, you're still not going to see all of that £460 as some of it is going to get eaten up by sales taxes and the cut that the streaming service itself takes. Plus, if you have a label then they may well take a cut before you see any of that money. Assuming that about 25% of the money actually makes its way to you, this means the average artist would get a mere £115 a month

8. So on a track basis, how much revenue?
Just like the lottery, not all artists are created equal in terms of the number of tracks they have available, so in many ways this figure may make more sense than going from the number of artists themselves i.e. having more tracks gives you more chance at getting revenue.

We already know that our 2.5 billion people are going to listen to 36500 x 2.5 billion tracks in a year. That's a total of  91250000000000 plays. If each of our 2.5 billion people is paying £120 a year (£10 a month), that means those plays are generating £300000000000 which is roughly equivalent to £0.003 a play.

And if there are 460 million tracks, this means that on average each one will be played around 198,000 times a year or 16,500 a month. At £0.003 a play this means a track would generate less than £50 of revenue a month.

However, once again if we assume that only 25% of the revenue generated by plays actually reaches you the artist, that means each track is capable of generating you around £12 a month

What does this really mean?

On the one hand it's hardly great money, but on the other it doesn't sound like the streaming situation is quite as bad as many artists are making out.

But on the other, if you consider the questions again carefully, you should see that I have generally erred towards the generous side as far as you, the artist is concerned. If there were more artists or more tracks out there, you'd have more competition and hence less revenue. If people are actually listening to less hours of music than I've suggested, once again you'll have less revenue. If (as is likely) not all internet users listen to music on the internet in the first place, you'll have less revenue. In other words the figures of £115 (artist) and £12 (track) for an average artist are likely to be close to absolute best figures that streaming could provide.

But wait... it gets WORSE.

The most obvious point here is that the music industry as a whole is currently not worth anything like £300 billion a year (2.5 billion people paying £120 a year). Even if we consider all sources of revenue such as concerts, merchandising, advertising and sales of things like CDs and players, the best estimate I've seen is $168 billion. And currently streaming is only a small fraction of that - something like 10%. So if we base on 16.8 billion instead of 300 billion (and assume £=$ as per question 6 above), the average artist should currently be earning less than £6.50 a month (artist) or £0.70 a month (track) from streaming. Is it really any wonder that artists are worried about streaming revenues and the income they might receive if CD sales disappear?

Even if the whole of the $168 billion was to come from streaming in the future we've still got to more or less halve the absolute best figures I came up with earlier. Or to put it another way, current spending on all areas of music needs to both double and come from streaming alone if an artist is to see anything close to the absolute best figures I've quoted.

Also the internet is still fairly new in terms of the average age a human lives to. That means there are independent artists who died before the internet was around and it's likely their music isn't anywhere to be found on it as a result. In a world where every artist is created equal, that means you're up against not just your current peers but also every other artist whose music has either hit the internet in the past or will do so in the future. In other words we can expect the number of artists on the internet to go up. So thinking 5, 10 or more years down the line, your music will likely be up against the music from all the new artists that appeared in that time as well as new music from artists currently on there and most of/all the music currently on there.from artists who are already dead or who died in that time. If the competition goes up, your share of the music revenues goes down.

Of course this in turn raises some interesting questions with regard to both the present and the future of music licensing. We can already say with certainty that the 54 million artists contains artists from tens or even hundreds of years ago (think Bach, Mozart etc. for starters) so not all of the tracks out there are likely to be due revenue under current conditions. If independent artists say things should be on an equal footing, what should this really mean for the future in terms of how and when revenues should be paid to artists? Should revenues only be paid while an artist is alive? And what happens to the revenues generated by someone listening to a track by an artist who has died if so? Should there be a "lifetime" for a track in terms of revenues being paid for it or should it still count towards revenue calculations whether played now, or in 10/20/50/more years time? What would happen to revenues after a track's "lifetime" was up? i.e. if a listener was paying £10 a month but only ever listened to tracks whose "lifetime" was up, where would the money they paid go?  Just a few of the questions to be considered.

Some other statistics you might find interesting.
1. With 54 million artists available and the ability to listen to 36500 tracks a year  (based on the information above), it would take me nearly 1480 YEARS to listen to just one track (and then only once)  from each of the artists currently available. That's more than 15 lifetimes to listen to every artist currently out there if I listen for 10 hours a day every day of the year. If you wanted the ultimate proof of why finding your music is like looking for a needle in a haystack and why so few people are listening to you, then this is surely it.

2. It might be hard to fathom where the RIAA is coming from when it is deciding that streaming 100 tracks = 1 sale. As sales are generally £0.99, this would make one play equal to £0.0099 rather than the "best possible" of £0.003 I quoted earlier, particularly when you remember that this figure is derived from streaming revenues of 300 billion a year rather than the industry current of more like 17 billion of streaming revenues. Even with some income from advertising on top, if there are indeed at least 640 million tracks out there, then one sale should currently be worth more like 2% of the "best possible" figure if all artists are to be treated equally. (i.e. more like 5000 plays = 1 sale = £0.99).

3. The figure of 100 streams = 1 sale is also interesting based on our previous calculations. You should remember from earlier that I stated a figure of 10 hours listening a day or 100 tracks being played in a day as the basis for calculations. This would mean the average user was effectively buying a track a day or more like 3 albums in a month if they streamed music for 10 hours a day. It also means that to buy the equivalent of one album a month, you'd actually need to be streaming music for only something like 3 hours a day,  if 100 streams = 1 sale. Interestingly if 5000 streams were equal to one sale, then our 10 hour a day listener would be buying the equivalent of just over 3 tracks a month with a 3 hour a day listener purchasing just the one.

This is really getting to the root of the problem the industry faces. When presented with "all available music" even hardcore music lovers tend to become casual purchasers, yet to accurately filter out something like 90% of this before it ever gets played to make it seem worthwhile to buy leads us back to a situation where we have a "music elite". When you can buy only the tracks you like (compared to a single or CD where you may land up with "padding tracks" that you wouldn't normally buy but which just happened to come free with it), even without piracy it leads to the general behaviour of people buying a lower number of tracks at once.

In summary
After running the numbers, I was actually quite shocked at how bad some of them turned out compared to what I'd thought they might be. It seems clear to me that the miniscule figures per play that streaming services quote are actually quite realistic in a world where artists want equal treatment (if a figure of at least 54 million of them is to be believed). It's also clear that something is going to have to give somewhere for artists to be able to make the same living from music streaming that was possible from CD sales because of the increased competition - instead of a case where only a CD could be sold before (and not every artist would get to make one) now anyone has the potential to make money just by uploading a track.  But clearly, if you're currently receiving at least £7 / $7 /7 euros a month from all streaming services combined I'd say congratulations - you're already a successful artist.

Although independent artists say they want equal treatment, there are clearly way too many artists and tracks out there for the streaming income available. Unless music revenues as a whole make a significant leap in a very short period of time, the future could be a case of the "money pie" being split far too many ways to give anyone enough of an income to live on if the figures I've found and calculated are any indication. The top end artists don't make enough of a difference to everyone else when their money is shared out and would merely increase the number of artists receiving a fraction not much above nothing in an equal streaming world. (compared to a world where the vast majority of artists used to receive nothing at all and a few could break even or maybe turn a profit). We're already seeing the start of this shift with so few long term "superstars of music" being created these days as the money is already being spread more widely than it was before the internet.

Clearly something is needed to lessen the impact of the move towards streaming as there is way too much supply compared to demand. Whether that means the number of artists making music just needs to drop dramatically or whether the reality is such that the "music elite" that so many independents complain about needs to remain in some form (e.g. where only the top 2% of played songs would actually receive revenues) to enable at least some artists to make a proper living from music is unclear. If music sales get completely replaced by streaming at some point in the future it looks to me like artists will still lose out unless consumers are prepared to spend a lot more (basically to take over covering the loss makers the labels have traditionally had) The myth that you can make money as an artist by using the increased audience on the internet will remain just that - with luck a few may, but the vast majority still won't.

Now that you've seen the numbers, how much do you agree or disagree with my analysis, and what do you think needs to change to enable artists to make a living?