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Distribution: To stream or not to stream
Old 3rd September 2012
  #1
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turnstile's Avatar
Distribution: To stream or not to stream

I started a small record label in February of this year and am gearing up for our first release. I've chosen TuneCore to do the digital side while physical and HD WAV versions will be available via the labels website and some retail outlets.

I am now at the crossroads of selecting the 'stores' in which the record will be distributed (via TuneCore). My idea is to leave off the top 5 streaming companies (Spotify, MOG, RDIO, Rhapsody, and Napster) during the first month or so of the release.

Problem is I am torn on whether this is a smart idea. Im really for the exposure these services provide, especially the social networking aspect. But, Im afraid it will erode sales right from the start.

My thinking is:
2,000+ plays on Spotify =.99
1.5 downloads from iTunes, etc = .99

So 40 people could play the song 50 times, until they are bored, and you would have made the same amount as if just 2 people downloaded it one time.

What are your thoughts?
Old 3rd September 2012
  #2
I think people need to stop supporting Spotify's content library without getting fair compensation.
Old 3rd September 2012
  #3
Weekly News and Recap! Sunday Sep 2, 2012 | The Trichordist

Quote:
Streaming and Sustainability, Maybe it Just Doesn’t Work?
- This isn’t just about Spotify as Pandora also faces challenges with scaling it’s business. Maybe the truth is that internet advertising dependent businesses for content just don’t work once one factors in the actual fixed costs to produce and license the content itself? It’s no mystery to us why the illegally operating infringing sites monetizing content seem to be the only ones making money. They’re not actually paying for the content they are monetizing against. This is not a failure of the content industries, it is a failure of the internet community to figure out how to build models that can actually pay for the content they are using to attract the audience they need in which to sell advertising. Not surprisingly, Pandora has hired K-Street lobbyists in an attempt to deny artists of royalties and to line their own pockets. This may also be why Spotify is betting on a subscription model and not advertising, as Digital Music News reports.
Old 3rd September 2012
  #4
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Hey turnstile,

Has tune core confirmed what the royalty rate per stream is?

I'm in a similar position to you in that I'm releasing an ep this year and I'm working a strategy out.
Old 3rd September 2012
  #6
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Thanks Rack,

But that's almost a year old. Has anyone got the current data?

And preferably from a digital distributor as is be interested in what you get after their cut.
Old 3rd September 2012
  #7
Quote:
Originally Posted by Ntk drummer View Post
Thanks Rack,

But that's almost a year old. Has anyone got the current data?

And preferably from a digital distributor as is be interested in what you get after their cut.
those are the going rates, wishing won't make them better. Spotify has no plans to increase their per stream rates, the best you can hope for is that they get 30 million subscribers. those numbers are based on 4 million subscribers, you can do the math...

so if 4 million subscribers = $4,200 in revenue than that's $1,050 per million subscribers. so the same catalog should earn $31,500 IF the catalog scales across a larger user base and IF Spotify even actually get's 30 million subscribers.

given that I manage a catalog of about the same size and performance, I can tell you the transactional numbers for the same period are about $60,000 or double what the Spotify numbers COULD be under the best case scenario...

it's just math...
Old 3rd September 2012
  #8
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I think you'd be cutting your nose off to spite your face if you don't put it on Spotify. Yes you may get peanuts per play, but peanuts is better than nothing. And most people who play the song have probably never heard it before, they just want to check it out. How many people listen to a short section on iTunes before buying? The difference with Spotify is that you get paid for those auditions.

The streaming model is nowhere near perfect and there's so much that needs to be done to make things fairer in all sections of society, but you as an individual are not going to change the world by leaving your music off as a protest. If somebody orchestrated a huge demonstration against corporate injustice in the music industry then I'd join the movement, but as things stand at the moment when you're starting out you need to get as many people on board as you can and you'll gain more respect by not morally judging people and letting them decide if they want to pay or just check it out.
Old 3rd September 2012
  #9
Gear Maniac
 

Let's face it, Spotify is great for Joe Public, crap for the artists/songwriters - it gives no people no reason to actually buy music. With the tech business being more powerful than the music business, I don't see rates of streaming changing for the better - if Spotify/YouTube et al were to pay a decent rate, they'd go out of business. Unfortunately the majors see streaming as the future.

However, I'd say that you should put your music up - you can always take it down. I've got music up there (begrudgingly).
Old 3rd September 2012
  #10
Quote:
Originally Posted by levelgain View Post
... but you as an individual are not going to change the world by leaving your music off as a protest. If somebody orchestrated a huge demonstration against corporate injustice in the music industry then I'd join the movement...


Do you not see the problem with your statement? No one person "orchestrates" a movement. It takes a boiling point of enough people caring enough to stop thinking like you are.

On the web, content is king. Yet artists want to act like peasants?
Old 3rd September 2012
  #11
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Streaming is the future and now its starting to happen to licensing websites as well where they will license,gratis mind you whole catalogs for a fee.
And mico money goes with the sound mites.
Smaller royalties and ant size complaints on Tech companies futures of monetizing your content for less.....
Old 3rd September 2012
  #12
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Quote:
Originally Posted by Johntron512 View Post
No one person "orchestrates" a movement. It takes a boiling point of enough people caring enough to stop thinking like you are.
Bury your head in your hand by all means but if you want to make them take notice it will need planning. Me boycotting Spotify today and then someone else next tuesday until 3 years later 10% of artists are boycotting will make no difference. Get a million artists to pull out on the same day and people will take notice.
Old 3rd September 2012
  #13
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turnstile's Avatar
Thanks for all of the excellent responses, however I'm feeling more confused then ever.

I'm thinking a delayed release to these streaming sites makes the most sense, no? Any arguement against something like this?

Thanks again for your insight and opinions.
Old 3rd September 2012
  #14
Quote:
Originally Posted by levelgain View Post
I think you'd be cutting your nose off to spite your face if you don't put it on Spotify.
nonsense. you'd be cutting off your nose to spite your face to give your music away without being fairly paid for it.
Old 3rd September 2012
  #15
Quote:
Originally Posted by turnstile View Post
Thanks for all of the excellent responses, however I'm feeling more confused then ever.

I'm thinking a delayed release to these streaming sites makes the most sense, no? Any arguement against something like this?

Thanks again for your insight and opinions.
if you have no intention of making money from your music, streaming is great.
Old 3rd September 2012
  #16
Quote:
Originally Posted by dan p View Post
Streaming is the future
I wouldn't be so quick on that. It is for films, but music and films are different. Also the economics on films work completely differently. Films stream on a transactional basis as a rental. I'd be happy for some to stream an album for 48 hours for $3.99... but that's not how it's working. The music streaming models are not thought out because Spotify is a financial instrument for major labels and not a business model.

the truth is, we don't know what spotify is, but it doesn't look good. let me say this again - because this is a big part of it...

it's just bad math... the major labels are looking for a win on their 18% equity in an IPO hoping that Spotify is Facebook for Music. Someone ran the numbers and figured out the equity investment is pure profit (cause they leveraged the artists music to get it) and don't have to pay royalties on stock dividends...

had Facebook not tanked, what would 18% of that IPO be worth? In BILLIONS?

Now it's unlikely Spotify's IPO horizon is anytime soon, and if it turns out that streaming actually does cannibalize transactional business labels will not renew their licenses... that would effectively turn Spotify into Emusic...

On an operational basis, the math just does not work. It's pretty simple. It's like how everyone in the housing bubble convinced themselves there was no bubble and "free money" was the "new normal." It wasn't and neither is this.

I think the labels (who will never admit this) we're looking for a short term, "pump & dump" which seems highly unlikely now.

Jimmy Iovine and Doug Morris made almost the EXACT same mistake with FarmClub trying to build an IPO (which never happened) because they were pissed about mp3.com being the biggest IPO ever (at the time)... which was a music business they had no piece of...

Netflix is very different for a number of reasons... 1) they paid MG's (minimum guarantee's) 2) which are paid at the end of the life cycle for the product window (just before the trash can), and 3) massive subscriber base migrated from the physical mail business, with less overhead... etc, etc, etc... and finally Netflix is not a replacement for Box Office, Broadcast & Cable rights (although they are getting more aggressive to compete against cable outlets like Starz).
Old 3rd September 2012
  #17
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turnstile's Avatar
Quote:
Originally Posted by rack gear View Post
I wouldn't be so quick on that. It is for films, but music and films are different. Also the economics on films work completely differently. Films stream on a transactional basis as a rental. I'd be happy for some to stream an album for 48 hours for $3.99... but that's not how it's working. The music streaming models are not thought out because Spotify is a financial instrument for major labels and not a business model.

the truth is, we don't know what spotify is, but it doesn't look good. let me say this again - because this is a big part of it...

it's just bad math... the major labels are looking for a win on their 18% equity in an IPO hoping that Spotify is Facebook for Music. Someone ran the numbers and figured out the equity investment is pure profit (cause they leveraged the artists music to get it) and don't have to pay royalties on stock dividends...

had Facebook not tanked, what would 18% of that IPO be worth? In BILLIONS?

Now it's unlikely Spotify's IPO horizon is anytime soon, and if it turns out that streaming actually does cannibalize transactional business labels will not renew their licenses... that would effectively turn Spotify into Emusic...

On an operational basis, the math just does not work. It's pretty simple. It's like how everyone in the housing bubble convinced themselves there was no bubble and "free money" was the "new normal." It wasn't and neither is this.

I think the labels (who will never admit this) we're looking for a short term, "pump & dump" which seems highly unlikely now.

Jimmy Iovine and Doug Morris made almost the EXACT same mistake with FarmClub trying to build an IPO (which never happened) because they were pissed about mp3.com being the biggest IPO ever (at the time)... which was a music business they had no piece of...

Netflix is very different for a number of reasons... 1) they paid MG's (minimum guarantee's) 2) which are paid at the end of the life cycle for the product window (just before the trash can), and 3) massive subscriber base migrated from the physical mail business, with less overhead... etc, etc, etc... and finally Netflix is not a replacement for Box Office, Broadcast & Cable rights (although they are getting more aggressive to compete against cable outlets like Starz).
Great points.

I'd be curious as to how much a performance royalty pays on a per spin basis via terrestrial radio (BMI,ASCAP,SESAC). Is it inline with what Spotify pays?
Old 3rd September 2012
  #18
Quote:
Originally Posted by turnstile View Post
Great points.

I'd be curious as to how much a performance royalty pays on a per spin basis via terrestrial radio (BMI,ASCAP,SESAC). Is it inline with what Spotify pays?
Spotify is not radio, does not function like radio, does not provide the benefits of radio. They could not be more different. Radio promotes and develops artists. You can break artists on radio, you can not break artists on Spotify. So it's important to understand that first.

Second, the is a stat rate for publishing on streaming music services, but it is a complicated formula. Ironically, it appears the publishing payments on Spotify are higher per stream than the performance royalty... although oddly enough NO ONE seems to have actually collected any publishing money from Spotify in the 2-3 years they've been around.

And if they have, they're not talking about it, or letting it be known publicly what those numbers look like.

How Spotify Streams Turn Into Royalties and how to collect them | Songtrust
Old 3rd September 2012
  #19
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Out of curiosity how much is the royalty per play for terrestrial radio?
Old 4th September 2012
  #20
Quote:
Originally Posted by rack gear View Post
Spotify is not radio, does not function like radio, does not provide the benefits of radio. They could not be more different. Radio promotes and develops artists. You can break artists on radio, you can not break artists on Spotify. So it's important to understand that first.

Second, the is a stat rate for publishing on streaming music services, but it is a complicated formula. Ironically, it appears the publishing payments on Spotify are higher per stream than the performance royalty... although oddly enough NO ONE seems to have actually collected any publishing money from Spotify in the 2-3 years they've been around.

And if they have, they're not talking about it, or letting it be known publicly what those numbers look like.

How Spotify Streams Turn Into Royalties and how to collect them | Songtrust
These are good points. People mistake Spotify for some sort of advertising or promotional outlet. But really it's an alternative to purchasing (or stealing) music.

Spotify does have a Radio function, and it's not bad, but it's nowhere near as diverse as Pandora's. I'm skeptical people discover much independent music on Spotify.
Old 4th September 2012
  #21
Quote:
Originally Posted by Ntk drummer View Post
Out of curiosity how much is the royalty per play for terrestrial radio?
ASCAP Radio Music Licensing

http://www.bmi.com/licensing/entry/radio

http://en.wikipedia.org/wiki/Music_l...g#Broadcasting
Old 4th September 2012
  #22
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Thanks rack.

Here is an article that I found interesting.

http://blog.mediaevolution.se/2012/0...ey-to-artists/

Looks like Swedish artists might be getting a better deal.

I'm skeptical towards both sides of the streaming debate. I don't see it as a viable business yet but I'm keen to see how it pans out.

What is surprising to me is spotifys 4 million subscribers compared to Netflix's 50 odd million. Music used to be much bigger than the motion picture business!!

I'd like to see spotify only offer the free version for a limited time and then customers have to subscribe. It'd be a different story if there was a 100 million subscribers. And I suppose that's what they're banking on. Reach a critical mass of subscribers or go bankrupt.
Old 4th September 2012
  #23
Gear Maniac
 

Quote:
Originally Posted by Johntron512 View Post
I'm skeptical people discover much independent music on Spotify.
Indeed. How can you, considering the amount of music on there. Marketing/promotion is more important than ever to raise an act's head(s) above the parapet, and companies dealing with that are the ones reaping the benefit in the present day industry - I don't see any of them bringing down their prices, and it's not as if you're paying for guaranteed results.

Piracy and iTunes (tracks being sold separately leading to much less album sales) may be the two main factors as to why the music industry is in the predicament it is, but streaming sites aren't too far behind - they don't give people a reason to buy the music. I've long felt that physical product should have "bonus" tracks as opposed to the digital format usually being the favoured medium for these extras.
Old 4th September 2012
  #24
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AwwDeOhh's Avatar
 

OP:
if you are considering using streaming, but want to give yourself a window to where you'll actually bring money in beforehand...
I'd wait until your sales all but die off before putting it on any streaming site. Whether that be 6-months or 3-4 years later...
Spotify isn't a promo tool, it's where music goes to kill off sales.
Old 4th September 2012
  #25
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Quote:
Originally Posted by JJAM View Post
Indeed. How can you, considering the amount of music on there.
Through the last.fm app on Spotify, by seeing what friends are listening to, through the album, artist and song radio feature, through the genre specific listening rooms that plays music based in user requests which other users can vote up or down etc etc.

I've found it great for discovering new music. As an example I was recommended an artist called Lettuce. They're definitely not a house hold name but I'm now a fan. I'll be buying some vinyl recordings of theirs if u can find some.
Old 4th September 2012
  #26
I don't have a problem with Spotify's general model. I also don't think people need to "own" their music when the internet is getting more and more accessible.

I have problem with their numbers. Subscription costs should be tiered based on listening activity, and artists should be paid in kind at fair proportion.
Old 4th September 2012
  #27
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Quote:
Originally Posted by Johntron512 View Post
I don't have a problem with Spotify's general model. I also don't think people need to "own" their music when the internet is getting more and more accessible.

I have problem with their numbers. Subscription costs should be tiered based on listening activity, and artists should be paid in kind at fair proportion.
Sounds reasonable to me. If they could get it to 1c per stream. I'd be happy.
Old 4th September 2012
  #28
Quote:
Originally Posted by Ntk drummer View Post
It'd be a different story if there was a 100 million subscribers. And I suppose that's what they're banking on. Reach a critical mass of subscribers or go bankrupt.
pretty much...

here's some simple math of what a Spotify IPO could be worth to the major labels...

let me say this again... Had Facebook not tanked, what would 18% of that IPO be worth? In BILLIONS? According to a report at the Guardian UK, Dustin Moskovitz 7.5% share of Facebook was worth $4.5 Billion in the IPO. That’s 1.57% per Billion. At those kind of numbers the major labels equity of 18% would be worth approximately $11.5 Billion. Stay with me here, that’s about the same revenue that’s currently earned in two years at $5.5 Billion per year, except in this case there’s no overhead or royalties to pay. It’s all profit.

So let’s just say Spotify was projected to IPO at half of Facebook, that’s $5.5 Billion or the same revenue as one entire year of earnings for the US labels. You can easily see how this type of incentive works as a financial instrument and not a business model.

Who did the housing bubble benefit? Bankers or Homeowners? Whom will Spotify benefit, Artists or Major Labels? And, that's only IF it works as an IPO... as a business, it's hard to say if it works or not, and on what level.

If Spotify actually does appear to cannibalize transactional sales, labels will jump like rats from a sinking ship.
Old 4th September 2012
  #29
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I think that it would be more accurate and fair to compare a spotify IPO to Netflix not facebook.

The IPO for Netflix was $83 mill. Granted they had less than a million subscribers at launch but there is no way a spotify IPO will be anywhere near Facebook.

Spotify is loosing money Facebook was very profitable at launch.

Anyway it's all speculative. I'll release my music on iTunes and spotify this year and watch this space.
Old 4th September 2012
  #30
Spotify has a burn rate in hundreds of millions... not sure an 83 Mil IPO is going to excite anyone.

Digital Music News - Yes, Spotify Is Raising a Seriously Gigantic Round...
Quote:
according to multiple reports now published, Spotify is pursuing a king-size investment that would value the company at roughly $3.5 billion. Currently, Spotify has a valuation of about $1 billion, and most recently raised $100 million (give or take).
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