Royalties Keep Streaming Music Subscription Sites from Being Profitable

By Minal Bopaiah A new report predicts that subscription sales for streaming music will double by 2017, but profitability will be nearly impossible for

By Minal Bopaiah

A new report predicts that subscription sales for streaming music will double by 2017, but profitability will be nearly impossible for most subscription music models.

The report issued by Generator Research states that the main reason for unprofitability for services like Pandora, Spotify and Rhapsody is that those services are paying 60% to 70% of revenues out in royalties to artists and record labels.

That’s a HUGE percentage, especially when you consider how much Apple’s 30% commission for digital subscription sales via tablet and mobile apps cut into publishers’ profits.

Furthermore, the lack of profitability is surprising given the fact that most streaming music subscription sites get above-average conversion rates.

The report also had the following interesting statistics to reporton the streaming music subscription industry:

  • 767 million individuals worldwide use a music subscription service. Of those, 36 million pay for subscription-based access.
  • By 2017, the number of subscribers is expected to jump to 1.7 billion, with 125 million paid subscribers.
  • The increase in paid subscriptions means revenues earned from music subscription services will hit $2.9 billion.

The report pulled data from the United States, Japan, the United Kingdom, Germany and Australia.

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