Digital Audio Insider -- the economics of music and other digital content

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Digital Audio Insider is David Harrell's blog about the economics of music and other digital content. I write from the perspective of a musican who has self-released four albums with the indie rock band the Layaways.

My personal website has links to my LinkedIn and Google+ pages and you can send e-mail to david [at] thelayaways [dot] com.

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February 06, 2009

Last.fm Royalties for Q4 2008
by David Harrell

Last.fm recently posted fourth quarter 2008 reports for its artists royalty program. Thanks to a new album, and an in-season Christmas EP, our total Last.fm plays increased significantly from the previous quarter, leading to a royalty payout of $17.27:

Q4 2008 Last.fm Streaming Royalties

As with the previous quarter, Last.fm paid half a cent per stream for "free on-demand plays," while the "free radio plays" rate was slightly lower this quarter -- .05 cents vs. .057 per play.

Clearly, payouts like this one don't encourage me to quit the day job. But it's easy enough to multiply these numbers to get a general idea of how much a relatively well-known act might receive from Last.fm for making its music available for free, on-demand streaming.

For example, my own band currently has a total Last.fm audience of just under 4,400 listeners. Moving up the music food chain to an act on "big indie," we find that the Broken West, on Merge records, currently has more than 16,700 Last.fm listeners. However, my guess is that they'd earn more than 4X what we did because their average number of plays per listener is much higher, as are, no doubt, their sales. (Our listener count is probably inflated somewhat by the folks who listened to various Last.fm holiday radio streams in late 2008 and heard a track or two by the Layaways.) There's also the caveat that the Broken West's albums aren't currently available for streaming on Last.fm. If they were, there's a good chance their Last.fm listens/streams would increase significantly.

Yet even a generous assumption of 100X our royalty for the quarter still only converts into $1,727, or a little more than $6,900 a year. While every little bit helps, it seems like you'd need to get to more than 1,000X our payout to reach an amount that begins to be significant to larger labels and artists. Given some of the play counts that I've seen on MySpace, however, it doesn't seem implausible that some acts could generate six-figures in total annual streaming income from Last.fm, MySpace, the free services from Rhapsody and Napster, etc.

The question, of course, is do these "on demand" royalties represent a net supplement to artist income? Or, are they simply a poor substitute for lost sales that didn't take place because listeners opted for free streams instead of purchasing a CD or digital downloads?

It's probably a case-by-case basis, with no set answer. My guess is that the cost/benefit relationship depends a lot on the previous commercial success of each artist. That is, relatively unknown acts are probably going to come out ahead by making their music available for free streams, while an established act might lose enough sales to negate the streaming income.

In a post from late last year, Glenn at Coolfer.com had some good thoughts about streaming revenues vs. those from actual sales and noted that -- given current payout rates -- an individual would have to spend 93 hours listening to digital streams to generate the same revenue as the purchase of an iTunes album. And he also pointed out that it really all comes down to CPM advertising rates. Given what online advertisers are currently willing to pay per page impression, there's a limit to how much an ad-supported streaming service can pass on to labels and artists and still have a viable business model...

tags: digital music Last.fm streaming music royalties iTunes the Layaways

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THE LAYAWAYS

Out Now -- "Maybe Next Year" -- The New Holiday Album:

"This is a sweet treat, deliciously musical without being overbaked for mass media consumption." -- Hyperbolium

"Perfect listening to accompany whatever holiday preparations you may be making today." -- Bag of Songs

O Christmas Tree - free mp3 lyrics and song details
Away In A Manger - free mp3

Download from eMusic, iTunes, Amazon MP3, or Bandcamp. Listen to free streams at Last.fm.

"...about as melodic and hooky as indie pop can get." -- Absolute Powerpop

"Their laid-back, '60s era sounds are absolutely delightening." -- 3hive

"...melodic, garage-influenced shoegaze." -- RCRD LBL

Where The Conversation Ends - free mp3
January - free mp3
Keep It To Yourself - free mp3

Download from eMusic, iTunes, Amazon MP3, or CD Baby, stream it at Last.fm or Napster.

"The Layaways make fine indie pop. Hushed vocals interweave with understated buzzing guitars. The whole LP is a revelation from the start." -- Lost Music

"Catchy Guided by Voices-like rockers who lay it on sweetly and sincerely, just like Lionel Richie." -- WRUV Radio

Silence - free mp3 lyrics and song details
The Long Night - free mp3

Download from eMusic, Amazon MP3, or iTunes, stream it at Last.fm, Napster, or Rhapsody.

"These are songs that you want to take home with you, curl up with, hold them close -- and pray that they are still with you when you wake up." -- The Big Takeover

Let Me In - free mp3
Ocean Blue - free mp3

Download from eMusic, Amazon MP3, or iTunes, stream it at Last.fm, Napster, or Rhapsody.

More Layaways downloads:

the layaways website