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Streaming Music And Royalties: Who Pays The Most?

How much can labels really make from streaming music?

Pandora: Up To $0.00137 Per Play

In June 2013, Cracker vocalist David Lowery claimed that he was paid $16.89 for a song that was played more than 1.15 million times on Pandora (NYSE: P).

Pandora co-founder Tim Westergren responded to that report with a defensive blog post. Westergren claimed that Pandora actually pays "about $1,370" for every one million times that a song is played. On a per-play basis, this amounts to $0.00137.

Pink Floyd is among the artists that have complained about Pandora's rates and its plan to reduce its royalty payouts by 85 percent. Westergren denied that claim, saying that it was a "lie manufactured by the RIAA and promoted by their hired guns to mislead and agitate the artist community."

"We have never, nor would we ever advocate such a thing," he added.

Related Link: Pirates Stole Million Worth of Beyonce Albums, But Should She Care?

Not satisfied with that response, David M. Israelite (president and CEO of the National Music Publishers Association) wrote an open letter to Brian McAndrews after he was appointed CEO of Pandora.

"Today, for one million plays of our songs on Pandora, songwriters and publishers earn less than $60," Israelite wrote. "That's $0.00006 per play. Meanwhile, Pandora is suing to pay songwriters even less, lobbying Congress for biased treatment, and attempting to use gimmicks to avoid paying songwriters fairly, instead of building business partnerships with songwriters as have many other digital music services."

Israelite concluded his letter by saying that he welcomes "the opportunity to meet and discuss the challenges and opportunities we face together."

Israelite has yet to comment on Pandora's deal with Merlin.

Note: Songwriters and recording artists are paid separately. If an artist writes and records a song, he or she receives both royalties.

Spotify: Up To $0.0084 Per Play

Streaming music companies don't like to talk about how much they pay artists, but Spotify has provided some information.

"Spotify is one of the most effective ways to monetize access to music," the company wrote at SpotifyArtists.com. "In addition to encouraging consumers to pay for music again, our rates are higher than many alternative services."

For every one million listens, Spotify will pay approximately $6,000 to $8,400.

Spotify also compared the overall value of domestic streaming ($530 million in 2013) to the perceived value if all music streams occurred on Spotify. If that were the case, Spotify claims that it would have paid $1.3 billion -- more than double the amount that labels actually received.

This sounds great on paper, but musicians only need a calculator to figure out that Spotify pays less than one penny per play ($8,400 / 1,000,000 = $0.0084).

Related Link: Rhapsody's New Partnerships Could Give It An Edge Over Spotify

Spotify denies that it pays on a per-play basis, however. The company has attempted to explain its payout strategy using a simple formula, but since record labels get paid first, it is still unclear how much artists actually receive.

Xbox Music: Up To $0.036 Per Play

Microsoft (NASDAQ: MSFT) has not officially said how much it pays on a per-play basis (or how much it has paid artists overall, for that matter). If this report is accurate, however, Microsoft could be paying as much as 3.6 cents per play.

At that rate, Microsoft would pay labels and publishers $36,000 for every one million plays. That's significantly higher than what the other companies pay.

According to The Guardian, at least one musician -- Zoë Keating -- has confirmed that she earned 3.5 cents per play from Xbox Music.

iTunes Match / iTunes Radio: Up To $0.0033 Per Play

Apple (NASDAQ: AAPL) has not officially stated how much it pays labels for iTunes Match, but at least one artist (Parks and Gardens) is being paid $0.0033 per stream.0033 per stream. That same artist also claimed that in 2012 his band was being paid $0.0096 per play on Spotify, which is higher than the company's average payout.

By comparison, iTunes Radio reportedly pays $0.0013 per play.0013 per play.

These figures have not been confirmed by Apple, but there could be a good reason for the discrepancy between iTunes Match and iTunes Radio. The former costs $24.99 per year, while the latter is a free, ad-supported service.

Others: Up To $0.074 Per Play

In February 2014, The Trichordist released a list of per stream fees for a wide variety of music services. The unconfirmed data reportedly came from an independent label that has a catalog of roughly 1,500 songs.

According to the list, Nokia's MixRadio service pays as much as 7.4 cents for every stream. Other notable services include:

  • Google Play: Up To $0.045 Per Play

  • Rhapsody: Up To $0.011 Per Play

  • Rdio: Up To $0.0069 Per Play

  • Amazon Cloud: Up To $0.00012 Per Play

Beats Music, now owned by Apple, did not make the list. Early reports claim that the service pays as little as $0.000126 per stream.

Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.

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