While consumers have made the switch from buying their music in a physical form (cd, tape or record) to digital distribution, the business model around the music industry has also changed dramatically over the past few years.
The days are ending where you have to buy the permanent rights to a song or album through iTunes or Amazon. Streaming services like Spotify and Apple Music dominate the market offering unlimited ad-free music streaming on your computer or mobile device for under $10/month.
Of course, this is great for consumers as you are getting more for your money yet the artists who create the music are the ones suffering in the end. For example, the average going rate on Spotify is between $0.006 and $0.0084 per song play which equates to the following:
- 10,000 plays = $60-$84
- 100,000 plays = $600-$840
- 1,000,000 plays = $6,000-$8,400
- 10,000,000 plays = $60,000-$84,000
- 100,000,000 plays = $600,000-$840,000
Now, this may seem like a lot of money to you, but it is significantly less compensation than the traditional pay-per-song model that artists have grown accustomed to in the past. Only major artists can pull in the huge streaming numbers to make a decent living off streaming royalties alone.
As of today, this could change as the Copyright Royalty Board ruled in a court case between music publishers (Google, Amazon, Apple, Spotify, and Pandora) and songwriters that the mechanical rates for songwriters will need to rise by 43.2% over the next five years.
Is this good news? For songwriters, it is as they will make more money and have more incentive to support their content on streaming services. However, the streaming giants themselves will be forced to either take a hit and accept thinner margins or raise the cost of their subscriptions.
It is too early to tell if this will affect consumers' wallets, but if it is anything like the video streaming market, then we know that when operating costs rise so do the monthly subscription costs.