DENVER (Billboard) - As the music business continues to watch traditional revenue streams slow or even evaporate, a good deal of faith often has been placed in what’s hailed as a panacea for the industry’s ills: online streaming.
But a Billboard analysis shows that even the amount of money earned by top artists from on-demand streams and noninteractive streams (such as Internet radio) is, in plain terms, shockingly low.
When Billboard calculated the rankings for its annual Money Makers report, the music trade magazine assigned a value to each digital download or song streamed based on information about labels’ licensing deals with those services and assumptions made about standard artist contracts.
The results show that of the more than 100 artists examined to compile the Money Makers list, only 10 made more than $2,000 from noninteractive streams in 2009, with Beyonce topping the list with an underwhelming $5,000. Only 25 artists made more than $1,000 from on-demand streams, with Michael Jackson topping that list -- as the result of a barrage of interest after his death -- with $10,000. Neither totals include any due publishing royalties and all are for U.S. activity only.
Compare that with the money that artists make from other digital channels. Digital album download sales generated sales of at least $200,000 for 13 artists, led by Jackson with $800,000, while another 26 sold $100,000 or more. Three acts pulled in more than $1 million in digital track sales for the year, led by Lady Gaga, with 33 making more than $100,000 from digital single sales.
Even tethered subscription downloads -- tracks downloaded from services like Rhapsody that must have their licenses renewed monthly -- showed better numbers. Nickelback, Jackson and Taylor Swift each made about $500,000 from such services, leading a field of 26 acts that earned in excess of $100,000.
NERVOUS OVER NUMBERS
So when pundits declare online streaming access to be the future of the music industry over buying and downloading music, it’s understandable that both artists and labels get a little nervous. It’s numbers like these that prompted Warner Music Group chairman/CEO Edgar Bronfman Jr. to take aim at the streaming model during the company’s recent first-quarter earnings conference call.
“Free streaming services are clearly not net positive for the industry, and as far as Warner Music is concerned, will not be licensed,” Bronfman said. “So the ‘get all your music you want for free, and then maybe with a few bells and whistles we can move you to a premium price’ strategy is not the kind of approach to business that we will be supporting in the future.”
These figures show why labels are so afraid of streaming services cannibalizing digital and physical sales. If artists and labels are already making less money from digital album sales than physical album sales, why would they want to replace that with digital streams that bring in even less?
The answer, of course, is that they may not have much of a choice. Labels might be tempted to dismiss the streaming model as unimportant or try to force fans to consume music differently. But the lessons of the original Napster, digital rights management and continuing online piracy are that it’s better to give consumers what they want than to fight them. If music fans want to access music through streaming services from multiple devices rather than buy and download files that they must transfer from device to another, the recording industry needs to figure out a way to make that happen.
The access-over-ownership model works only if it works for everyone -- artist, label, service and fan. And while it holds great potential to drive significant music consumption and revenue, the results so far make it clear that there’s a long road ahead before either is realized.