$300 Million Lost to Streaming Fraud?
Peace, what’s happening good people. This Gif here, for Payusnomind and today I want today, I want to talk about Streaming fraud. I read a report on Rolling Stone that said artists could be losing $300 Million a year to Streaming fraud and I thought about how so many artists don’t understand how. Artists commonly think streaming fraud is something that impacts streaming platforms and that they, as artists, make the same amount they’d otherwise make. That simply isn’t true.
I’ll explain how Streaming fraud impacts artists using a hypothetical scenario of a streaming platform earning $100 in annual revenue from 100 streams. We’re keeping the numbers small for the purpose of simple math.
Streaming platforms pay artists a percentage of revenue based on their percentage of the total number of streams minus their 30% cut. So if a streaming platform makes $100, they take $30 and the remaining $70 is what artists split based on their percentage of the total number of streams.
Streaming Platform: $30
Artists Share: $70
The streaming platform takes its cut off top so streaming activity has ZERO impact on its revenue. The only ones impacted by streaming fraud are artists, record companies, and labels.
Let’s say there’s 100 Streams split evenly across 10 artists which would mean each artist is responsible for 10% of the total number of streams. With $100 in revenue, each artists would earn $7 and the revenue split would look like this:
Impact of Streaming fraud
What if Artist 1 goes out and buys 1,000 fake streams? The total number of streams would then be 1,100 and he’d be responsible for 90% of them. The revenue split would then look like this:
There would only be $7 to be split between the 9 other artists which would drop their royalty revenue from $7 to $0.07. If you’re generating legitimate streams, you’re having your revenue cut by 99%. This is how you’re impacted by streaming fraud.
Just a few years ago, the average per stream royalty rate on Spotify was $0.006 and now, it’s $0.003. That’s a drop of 50% in artists’ per stream revenue. The amount of money Spotify earns has to increase with the number of streams because if it doesn’t artists make less. So if an increase in streams is the result of new paying subscribers, or users listening for longer durations where they’re exposed to more ads, great. When it’s brought on by non-revenue generating activity, not so great.