Study on the economic impacts of music streaming platforms on Canadian creators

NOTE: The views expressed in this document are solely those of Wall Communications Inc. and do not necessarily represent the views of the Canadian Heritage or any other person or agency.

Table of contents

List of Tables

List of acronyms and abbreviations

AAC
Advanced Audio Coding
ACTRA
Alliance of Canadian Cinema, Television and Radio Artists
AD
Adware
ALAC
Apple Lossless Audio Codec
AV
Audio-visual
CAGR
Compound Annual Growth Rate
CBC
Canadian Broadcasting Corporation
CDN
Canadian
CMRRA
Canadian Musical Reproduction Rights Agency
CRTC
Canadian Radio-television and Telecommunications Commission
CSI
CMRRA-SODRAC Inc.
DIY
Do-It-Yourself
DPA
Digital Pay Audio
DTH
Direct-To-Home
E.g.
Exempli gratia
FLAC
Free Lossless Audio Codec
HE-AAC
High-Efficiency Advanced Audio-Coding
i.e.
“It’s mean”
IFPI
International Federation of the Phonographic Industry
MQA
Master Quality Authenticated
MROC
Musicians Rights Organization Canada
N/A
Not Available
NRCC
National Research Council Canada
PCH
Patrimoine Canadien/Canadian Heritage
PwC
Pricewaterhouse Coopers
RACs
Recording Artists' Collecting Society
RIAA
Recording Industry Association of America
SOCAN
Society of Composers, Authors and Music Publishers of Canada
SODRAC
Society for reproduction rights of authors, composers and publishers in Canada
SOPROQ
Soproq collective management organization for the rights of
SRS
Satellite Radio Services
US
United States
WMA
Windows Media Audio

1. Introduction and background

The Canadian music streaming market has existed (as a substantive market presence) for considerably less than ten years.Footnote 1 Music delivery has evolved over the last thirty years from physical media (e.g. CDs and vinyl) to the transmission and local retention of digital files – and ultimately to streaming services where standalone files are no longer (necessarily) stored but rather are transmitted (or “streamed”) to users in real time.

Recall that the Internet (which enabled file sharing) began wider adoption in about the year 2000. iPods were first introduced in 2001 while Smartphones began to penetrate the market in about 2009. Although pioneering streaming services like Last.FM and Deezer (some radio-style and some interactive) were available in Canada before 2010, the largest streaming service providers like Spotify and iTunes Music didn’t enter the Canadian market until 2014 and 2015 respectivelyFootnote 2. Other significant service providers like Google Play Music (2014) and Amazon Prime Music (2018) were also relatively late arrivals. The streaming of music via videos on YouTube (available in 2005) – offered as an advertising-supported service – notably launched more than ten years ago, and has been a key factor in the public adoption of streamed music.

The streaming of music has been a somewhat controversial development for music creators. At the same time, it is generally perceived as highly beneficial to music listeners. For many creators, music streaming via commercial providers has reportedly led to severely diminished incomes and by some accounts streaming has had a devastating impact on music creators’ ability to simply make a living pursuing a career built around making music. This sentiment is aptly captured in a recent social media statement by Canadian musician Danny Michel:

“I’ve been a full-time musician for 25 years. It’s been nothing but hard work, but I love hard work. My songs bought my home, my studio, paid the bills and more. Through it all the conversations backstage with other musicians have always been about music, family, guitars, friends, art etc. But in 2018 that conversation changed. Everywhere I go musicians are quietly talking about one thing: how to survive. And I’ve never worried about it myself UNTIL 2018. What I can tell you is my album sales have held steady for the last decade until dropping by 95% this year due to music streaming services.”Footnote 3

Musician Danny Michel is not the only music creator to voice his dismay at the perceived negative impact of streaming on his career. Similar concerns have been widely expressed:

“A small minority of market-tested stars rak(e) in an enormous share of the money and publicity, while everybody else tries to scratch out enough money to pay the rent. Meanwhile, the musicians who cling to what once would have been referred to as the industry’s “middle class” are barely getting by. These are the artists who release an unprofitable album every two years or so, and make their money by constant touring, playing clubs and small theatres. They may get an afternoon or early evening slot at a festival, often playing a side stage. Some of their income is generated through merchandise and the odd licensing of a song to a movie, television show or commercial. It isn’t uncommon for artists of this type to take on secondary employment to make ends meet.”Footnote 4

“Streaming services that we all use like Spotify and Apple Music offer great convenience to fans. But, artists are getting a raw deal. The simple truth is musicians need to be paid more for their content.”Footnote 5

In seemingly contrarian observations, the business of recorded music (and streaming specifically), seems to be booming (globally, in the US and in Canada) according to numerous reports.

“The music industry in Canada is thriving following yet another year of tremendous growth and engagement”Footnote 6

“The overarching narrative in both reports is the same: Canadian consumers are seizing onto music-streaming services such as Spotify more than ever, and buying less physical and digital music.”Footnote 7

“Paid music streaming has been helping the U.S. music industry bounce back, as consumers continue to flock to the streaming subscription model.”Footnote 8

“Thanks to growth in Spotify and Apple Music, music streaming has passed the milestone of 100m paying subscribers worldwide, a feat few imagined possible a few years ago. The US music industry is on track to record a second consecutive year of growth — something that has not happened since 1999, the year Napster launched. Some analysts and executives are beginning to confidently predict a new golden age.”Footnote 9

Adding a final perspective, SOCAN has reported preliminary earnings for 2018, with estimated total revenue of $374 M (an 11% increase over 2017) with Internet revenues hitting $62 M (an increase of 27% over 2017).Footnote 10 While this relatively large jump in streaming revenues indicates a positive direction for creators, SOCAN President Eric Baptiste also noted “music creators and publishers on average are yet to see earnings commensurate with the value that their work brings to these online corporations”.

We are left with an apparent conundrum: Streaming revenues are growing dramatically and resuscitating a moribund recorded music business, but many (perhaps most) music creators are struggling to make a living wage.

This Report performs a preliminary investigation to collect numerical data and descriptive information regarding the economic impact of music streaming on Canadian music creators. The Report is not intended to resolve the issue of the impact of streaming on Canadian music creators, but rather it takes a first step to establish a factual basis and to develop a framework under which a more complete analysis can ultimately occur.

The research for this Report was conducted via two separate activity stages. The first stage (subject as always to data availability) was undertaken to quantify the extent of streaming services use in Canada (by both listeners and artists), estimate the market size, clarify the terms of payment (for both artists and users), broadly estimate the overall amounts paid to artists currently and over time from various music delivery platforms and to generally provide a description of the economic landscape of music streaming in Canada.Footnote 11

Building on the base of our initial fact-finding research, the second stage was undertaken to identify the key unanswered questions regarding the impact of streaming and to clarify any remaining gaps in our data. For example, our research determined that music creators operate in significant sub-categories, and that separate groups of creators may be impacted differentially by music streaming. The second stage research employs a variety of methodologies, including the testing of an interview approach with a small sample of creator representatives, discussions with key music creator organizations (such as Collectives) and targeted data analysis.

Based upon our preliminary research, we provide an overview of the elements that are critical to understanding the economic impact of streaming on Canadian music creators. Further, we provide a guidebook for further research, defining the key unanswered questions and proposing approaches to answer those questions.

2. Service providers, subscriptions and revenues

2.1 Service providers

The business models for streaming service providers are continually evolving. The features (and pricing) of services that are provided in Table 1 below will likely be different a year from now – just as they are different from one year ago. We expect this type of competitive dynamic to occur as market participants observe competitors’ marketing approaches and adjust their own service features to capture new customers or to retain their current base.

Table 1: Major Canadian music streaming services and description
User cost/Promo Library size Features
Apple Music $10 month; 3 month free trial; (for up to 6 family members cost is $15); no ads 45 M Playlists using human editors
Amazon Prime Music Included in Amazon Prime Delivery ($99 per year) >2 M songs N/A
Amazon Music Unlimited $8 to $10 per month; 3 month trial at $1; family plan available >20 M Playlists using human editors; personalized radio stations
Google Play Music $10 month (being replaced by YouTube Music Premium) N/A Digital locker
YouTube Music Free Ad supported N/A Personalized playlists and videos
YouTube Music Premium $10 month N/A Personalized playlists and videos; Can download
YouTube Premium $12 month All in Music Premium plus original content and no-ads videos N/A
Pandora Free (US only) Ad supported N/A Streaming Radio
Pandora Subscription (US only) $5 (no ads)
$10 (on-demand library)
N/A Streaming Radio and SR/on-demand
Slacker Radio Free Ad supported N/A Streaming radio
Slacker Radio Subscription $4 month (radio) or $10 (radio plus on-demand library) N/A Streaming radio or SR plus on demand library
Spotify Free Ad supported N/A Multiple playlists including “discover” and personalized playlists via algorithm and human curation
Spotify Subscription $10 month (or $15 for family up to 6) >35 M songs Multiple playlists including “discover” and personalized playlists via algorithm and human curation

Sources: Wall Communications Inc. 2018; various service provider websites.

The above Table lists the most prominent music streaming services operating in Canada and features (subject to data availability). A more comprehensive listing is provided in Appendix 1.

Points of interest

2.2 Music streaming service provider subscribers and revenues

As noted earlier, the growth of streaming services has been a relatively recent phenomenon. One report estimates that the number of paid music streaming subscribers in the US has grown from 7.9 M in 2014 to 46.4 M in 2018.Footnote 12 Other sources estimate the paid subscription market in the US at 51 M in 2018. Estimating the domestic subscribers and revenues of individual service providers is challenging since service providers typically do not publicly release region-specific information. This is particularly true of the Canadian market, which is rarely addressed separately in annual report or financial reporting information. However, estimates are available for subscribers and revenues for the US. Canadian numbers can be estimated through scaling of the US numbers.Footnote 13

We note that we will set an upper estimate using the 1/10 ratio typically associated with the relative size of the two countries’ economies. However, there are several reasons why the number of paid subscribers in Canada might not match one tenth proportionally with the US. The major music streaming services all launched in the US before they were available in Canada – we therefore expect a (potentially significant) lag in the Canadian take up. The larger US market would also likely attract more aggressive marketing campaigns for subscribers relative to Canada. Finally, the major record labels (who are a primary beneficiary of music streaming) are all headquartered outside of Canada (with a strong a US presence) and would therefore focus their own efforts in the US to boost subscribership. Accordingly, we will use a lower bound for Canada as 1/20 the size of the US market.Footnote 14

Table 2: US and Canadian paid streaming services subscribers 2018
US Paid subscribers Canadian Paid subscribers (higher bound estimate on 1/10 US/Canada ratio) Canadian Paid subscribers (lower bound estimate on 1/20 US/Canada ratio)
Apple Music 20M 2M 1M
Spotify Paid 20M 2M 1M
Pandora Paid 6M None (not available in Canada) None (not available in Canada)
Others: Google Play Music, YouTube, Amazon Music Unlimited, iHeart 5M 0.5M 0.25M
Napster, Tidal, Deezer, all others Negligible – possibly 1M 0.1M 0.05M
TOTAL 51M 4.6M 2.3M

Sources: Wall Communications Inc. 2018; and MusicWatch 2018 estimates.

We would note that consumers also have access to music streaming via advertising-supported platforms (e.g. YouTube and Spotify free services), “free” market-trials (Apple and Spotify) and services that are included as part of a broader service (e.g. Prime Music included as part of Amazon Prime). MusicWatch estimated that there are 157 million US consumers who use free, non-interactive streaming services, and 29 million who stream music through free trials or bundled services that include music streaming.Footnote 15

Streaming services that offer “free” listening options principally derive revenue from advertising. We expect that such revenues are substantial (particularly for services such as YouTube) but estimating advertising related revenues that are derived from music streaming activities would be extremely speculative, given the lack of authoritative public information and, in some instances, the combining of services that earn revenue.

Most music streaming services in Canada, including Spotify, Apple, Google Play, YouTube Music, Amazon Music Unlimited, iHeartRadio, Tidal Premium and Deezer charge $10 per month for an individual subscription. However, promotions/discounts are offered by most services (e.g. Spotify has a 3-month promo for $0.99; Apple offers a student subscription for $4.99; etc.). Given the lack of data on the proportion of subscribers receiving discounts and how those vary across services, we feel it is unfruitful to attempt revenue estimates via a ground up approach.

We note that there have been a handful of estimates put forward on the size of the Canadian paid subscription market (Table 3). These estimates are provided below.

Table 3: Reported Canadian streaming service subscription revenues 2016/17
Paid Subscription Revenues ($ CDN)
CRTC (Ovum) $187 M (2016)
PwC $141 M (2017)
G&M (ref. IFPI 2018) $209 M (2017)
IFPI 2017 $122 M (2016)

Source: Ovum, PwC and IFPI; compiled by Wall Communications Inc. 2019

We note that Table 3 only provides aggregate estimates of the Canadian paid subscription market - it does not provide granular information, such as the absolute size or percentage of revenues being paid to music creators (versus other input factor payments). We also note that estimates of the size of the ad-supported music streaming market are scarce.Footnote 16

Points of interest

2.3 Trends in music revenues by source

Another perspective on streaming economics can be gained by observing the growth (or decline) of various music delivery systems over time. The RIAA provides data on the US for Physical, Digital Download and Streaming by year back to 2013.

Table 4: Revenues from sales of recorded music by source (US)
2013 – 2017 ($ US)
2013 2014 2015 2016 2017 2018
Digital Downloads $2.8B $2.5B $2.3B $1.8B $1.3B $1.0B
Physical $2.4B $2.3B $2.0B $1.6B $1.5B $1.2B
StreamingFootnote 17 $1.4B $1.8B $2.3B $4.0B $5.7B $7.4B
TOTAL $6.6B $6.6B $6.6B $7.4B $8.5B $9.6B

Source: RIAA (various years’ reports on revenue sources).Footnote 18

As can be seen from the above Table, revenues from both digital download and physical units have been trending downward since 2013. Streaming, however, has been climbing, with a significant jump in 2016 (continuing in 2017). On its face, this data suggests that streaming revenues have more than compensated for the loss of revenues from digital downloads and physical sales (at least in the US). Between 2013 and 2017, digital downloads declined by $1.5B and physical declined by $0.9B for a total decline of $2.4B. However, streaming gained $4.3B between 2013 and 2017.

The data for Canada reveals similar findings.

Table 5: Retail revenues from recorded music by source (Canada)
2012 – 2017 ($ CDN)
2012 2013 2014 2015 2016 2017
Physical $212M $183M $145M $152M $131M $117M
Digital Download $248M $240M $226M $196M $149M $109M
Streaming $11M $22M $25M $85M $209M $280M
TOTAL $471M $445M $396M $433M $489M $516M

Source: Various Reports; compiled by Wall Communications Inc.Footnote 19

As in the US, both physical and digital download sales of recorded music have been declining, while streaming revenues have been increasing over time.

Points of interest

We note that this data does not provide an indication of which types of music creators may have gained or lost over the time period.

3. Creator representation, payments, trends and terms

3.1 Representation and identification of creator categories that are due royalty payments

The variety of payment terms offered by different streaming services to rights holders and the royalties associated with various creator types is labyrinth-like and subject to much confusion. As a first step, it is necessary to identify the various rights holders that can expect payment from music streaming (and generally other types of music) services.Footnote 20

At a high level, we can distinguish two basic creator roles within the music business: “music publishing” (involving the monetization of musical works) and “recordings of music” (involving monetization of the recording of a song). On the music publishing side, there are two key creator participants: the songwriter (or authors/composers) and the publisher. The songwriter is the author of lyrics and melody while the publisher (often a recording company/label) promotes the song to recording or performing artists. Each party will own rights that can be licensed to performers and recording artists with a typical split being 50/50 between the songwriter and the publisher.

Regarding music recordings, there are two additional parties involved: the “performers” of a song and the “producer” or “maker” (typically hired or provided by a record label and therefore the rights are often owned by the record label).

We would note that an independent artist may perform all (or most) of these functions and may therefore own each (or most) of the associated rights. In contrast, a major artist may be performing a song written by someone else (e.g. Celine Dion singing a David Foster song) meaning the songwriter and the publisher control the rights to the musical work while the performer (i.e. Dion) would only own the performance right (while the record label might own the production right).

Adding somewhat to the confusion is the representation of each creator party by distinct collective organizations – sometimes with overlapping responsibilities.

Table 6: Key Canadian royalty collective organizations
by primary function
Communication to Public Reproductions
Authors/composers SOCAN SODRAC and CSI (representing SODRAC for authors and composers)Footnote 21
Publishers SOCAN CMRRA, SODRAC and their joint venture CSI for particular uses (e.g. radio stations, background music services)
Performers MROC, ACTRA RACs or Artisti (Quebec) collected by umbrella collective Re:Sound (NRCC) Artisti (Quebec) for radio
Producers CONNECT (formerly AVLA) or SOPROQ (Quebec) collected by umbrella collective Re:Sound CONNECT (AVLA) or SOPROQ (Quebec)

Sources: Wall Communications Inc. 2018.

Points of interest

3.2 Royalty rates for various creators and music uses

The royalty rates payable for each right of use are primarily set by the Copyright Board of Canada.Footnote 22 The wide diversity of music uses – each with their own royalty rate – adds further complexity to the rights landscape. Table 7 below displays certified royalty rates for a wide range of music uses and for different rights.Footnote 23

Table 7: Summary of selected certified Copyright tariff rates
(With Year Decision Rendered)
Music Use
(Year of last Decision)
SOCAN Re:Sound
(formerly NRCC)
CSI
(CMRRA-SODRAC)
AVLA/ SOPROQ Artisti Total Max Fee
Commercial Radio
(2019)
(2016)
3.2% < $1.25M
4.4% > $1.25M
Gross RevenuesFootnote 24
Low-use = 1.5%
$100 < $1.25M
Ad Revenues
1.44% < $1.25M
2.1% > $1.25M
Gross Revenues
Low-use = 0.75%

0.304% < $0.625M
0.597%: $0.625-1.25M
1.238%
0.826% > $1.25M
Gross Revenues

Low-use rates apply on each tier

0.822%

Low-use rates apply

0.017%

Low-use rates apply

8.165%
Digital Pay Audio (DPA)
(2010)
12.35% 5.85% Confidential Agreement
Est = 3.5%
(with repertoire adj.)
N/A N/A 21.70%
Satellite Radio Services (SRS)
(2017)
4.26% 3.63% 0.09 – 2.8%
(depends on type of SRS receiver)Footnote 25
Set in 2010
N/A N/A 7.98% - 10.70%
Online Music
(2017)
On-demand stream 5.3% N/A 1.49% N/A N/A 6.79%
On-demand video-clips 2.99% N/A N/A N/A N/A 2.99%
Non-interactive and semi-interactive N/A 21.75%
(proposed in 2018)
1.49% N/A N/A 23.24%

Sources: Wall Communications Inc. from various Copyright Board documents.

As can be seen from Table 7, royalty rates are generally set as a percentage of gross eligible revenues earned by the music user. While rates depend on specific music use, SOCAN and Re:Sound tend to have the highest royalty rates among collectives. For example, the commercial radio rates as a percentage of gross revenues are SOCAN (4.4%). Re:Sound (2.1%), CSI (1.24%) and SOPROQ (1.19%). We also note that on-line music services have one of the lowest certified total tariffs. An on-demand (or inter-active audio service) has a maximum total tariff of 6.79%, compared to 8.165% for commercial radio, 21.7% for digital pay audio and 10.79% for satellite radio. An on-demand video service (such as YouTube) has the lowest maximum rate of 2.99% of revenues.

Points of interest

3.3 Distributions and payments to Canadian creators from collective societies

We note that not all collective societies make revenue and distribution information available to the public. However, the two largest (by revenue) collectives are SOCAN and Re: Sound – both of whom make data available in their Annual Reports.Footnote 26

In 2017 SOCAN distributed $295 M to their members (both writers and publishers) on net collected revenues of $352 M.

Table 8: 2017 SOCAN payments to members by source
($ CDN ‘000’s)
2017 SOCAN Writers SOCAN Publishers International Affiliation TOTAL
Cable 11,203 24,350 24,085 58,638
Television 7,705 14,295 12,976 34,976
Radio - Census 6,925 18,054 41,609 41,609
Radio - Survey 2,432 5,286 5.511 13,228
Radio - CBC 2,541 2,531 2,398 7,469
Total Radio 11,898 25,871 24,538 62,306
Concerts 3,963 7,938 8,465 20,366
Cinema + Hotel 16 470 518 1,004
Pay Audio 180 622 864 1,665
Internet 1,195 8,116 10,084 19,394
AV Online 363 4,800 6,077 11,241
Satellite Radio 1,011 4,960 6,897 12,868
Internationally Affiliated Bodies 61,409 8,430 960 70,799
Private Copying 220 157 354 731
Total Distributions 99,163 100,010 95,817 294,258

Sources: Wall Communications Inc. 2018 compiled from SOCAN 2017 Annual Report

Table 8 provides important information, not only as it specifically relates to streaming revenues earned by Canadian creators, but also by informing us on relative payments form different sources. Some key points derived from Table 8 include:

100% of SOCAN’s Canadian Internet revenues come from online streaming activities.Footnote 27

Regarding music streaming payments going to domestic SOCAN members, the amount earned in 2017 is relatively small (at $9.3 M) compared to cable, TV or radio, but it has grown from virtually nothing 8 years ago. There is also a sizable difference between streaming monies going to Canadian authors ($1.2 M) versus a much more sizable distribution ($8.1 M) to Canadian publishers.Footnote 28 Streaming payments from SOCAN to non-Canadian creators were even higher at $10.1 M.

SOCAN reports that it collected Internet revenues of $48.6 M in 2017, while it only distributed $19.4 M of those revenues, and only $9.3 M to Canadian members. Distributions for Internet occur 11 months after the performance occurred. Accordingly, the $19.4 M reflects royalties collected largely in the previous year – 2016.Footnote 29 Looking at 2017 collected Internet revenues of $48.6 M relative to total collected revenues for SOCAN of $352 M, Internet (which we use as a proxy for streaming) is about 14% of collected revenues.

We can compare SOCAN distributions from an earlier period to identify payment trends in the industry. Table 9 below provides SOCAN distributions for the year 2010.

Table 9: 2010 SOCAN payments to members by source
($ CDN ‘000’s)
2010 SOCAN Writers SOCAN Publishers International Affiliation TOTAL
Cable 9,229 16,627 16,306 42,162
Television 8,310 13,255 13,057 34,622
Radio - Census 5,368 12,697 15,063 33,128
Radio - Survey 2,521 5,012 6,298 13,831
Radio - CBC 2,231 1,742 2,412 6,385
Total Radio 10,120 19,451 23,773 53,344
Concerts 2,550 4,201 5,061 11,812
Cinema + Hotel 22 318 418 758
Pay Audio 328 662 1,027 2,017
Ringtones 57 508 739 1,304
Internet N/A N/A N/A N/A
AV Online N/A N/A N/A N/A
Satellite Radio N/A N/A N/A N/A
Internationally Affiliated Bodies 36,134 7,024 772 43,930
Private Copying 1,292 1,057 1,954 4,303
Total Distributions 68,312 63,353 63,107 194,772

Sources: Wall Communications Inc. 2018 compiled from SOCAN 2011 Annual Report

Comparing the 2010 and 2017 distribution payments, we can see that payments to domestic authors and publishers have increased roughly 50% from $131.7 M in 2010 to $199.2 M in 2017. However, while authors received 8% more than publishers in 2010 ($68.3 M relative to $63.4 for publishers), in 2017 they received about the same as publishers ($99.2 M versus $100 M).

Key music streaming points can be noted in comparing 2010 with 2017:

Other interesting trends or developments over the time period include:

Table 10 below looks just at the changes in payments to domestic authors and publishers over time in key categories.

Table 10: 2010 versus 2017 SOCAN payments to domestic members
by selected source
($ CDN)
2010 2017 % Change
Cable 25.8M 35.6M 38%
Television 21.6M 22.0M 2%
Total Radio 29.6M 37.8M 28%
Concerts 6.8M 11.9M 75%
Internet 0 9.3M N/A
Internationally Affiliated Bodies 43.1M 69.8M 62%
Total Distributions 131.6M 199.2M 51%

Sources: Wall Communications Inc. 2018 compiled from SOCAN 2011 and 2017 Annual Reports

Perhaps the two most relevant observations to emerge from the SOCAN data is that domestic song creators (writers and publishers) saw their royalty payments increase more than 50% in the eight years between 2010 and 2017 (a non-CAGR of more than 6%). Second, streaming payments to domestic creators have gone from non-existent ($0) in 2010 to just under $10 M (paid out) in 2017.

It should also be noted that payments from cable and TV remain a very substantial part of overall payments to music creators who belong to collectives – almost 30%. If payments from internationally affiliated bodies are removed (it is unclear what percentage in international affiliate payments comes from various originating sources such as radio, TV, cable, etc.) then revenues from cable and TV are almost 45% of the total. We would also note that SOCAN only collects for the communications right: creators will also receive payment for synchronization rights when their work is used in a TV production.Footnote 30

In the analog/digital download era, SOCAN’s rights were primarily related to music consumption over transmission media (e.g. communication to the public via radio, TV or cable). SOCAN did not collect revenues related to the consumption of music from the sale of physical media such as vinyl albums and CDs or digital media downloads – creator revenues in those media were primarily related to the mechanical right.Footnote 31 Streaming has become the dominant mode of music consumption as physical media and digital file consumption has diminished. Both SOCAN (for interactive and non-interactive services) and Re:Sound (for non-interactive services) find themselves in an expanded role with streaming.

As noted, SOCAN has reported preliminary 2018 collected revenues of $63 M from Internet services (primarily streaming). This compares with collected revenues of $48.6 M in 2017, $33.8 M in 2016 and $15.5 M in 2015.

SOCAN has roughly 160,000 members. While there is no expectation that revenues are distributed evenly among members (in fact, we know that distributions are highly skewed), it is interesting to note that average 2018 revenues collected per member from Internet services are therefore $393.75 per year per member.Footnote 32

Re:Sound has also provided data on collections and disbursements (Table 11 below).

Table 11: 2017 Re:Sound revenues by selected source
($ CDN)
2017 ($M) 2017 (%) 1997-2017 % (Average over period)
Commercial Radio 16.3 30.5% 59.1%
CBC 1.3 2.4% 4.8%
Pay Audio 0.1 0.2% 4.5%
Satellite Radio 13.5 25.3% 12.7%
Background Music, Live Event, Dance and Fitness 6.4 12% 8.2%
Internet 0.9 1.7% 1.3%
International Revenue 6.9 12.9% 7.1%
Private copying 7.6 14.2% 2.3%
TOTAL 53.4 99.2% 100%

Sources: Wall Communications Inc. 2018 compiled from Re:Sound 2016 and 2017 Annual Reports

Since only a period (1997 – 2017) average is available, year-to-year changes cannot be examined. However, we can note that there has been a substantial drop in payments from commercial radio since the 2017 percentage is 30.5% while the historical average is 59.1%. CBC and Pay Audio have also fallen, while all other categories have increased. Somewhat surprisingly, Internet revenues appear to have grown only modestly for Re:Sound (historically averaging at 1.3% but rising to 1.7% in 2017). Re:Sound Internet service revenues collected are less than $1 M in 2017 – an extremely small amount, both in absolute terms and on an average per member basis.Footnote 33

The other Canadian collective that earns streaming revenues (e.g. CSI – CMRRA, SODRAC) would have much smaller revenues, even compared to Re:Sound (let alone SOCAN).Footnote 34

Points of interest

3.4 Payments from music streaming services

At the outset of this section, we note that while we are able to identify average per stream payments from various steaming services, identifying which rights holder gets what portion of the payment is muddy at best. “While the path of revenue from streaming services to performers via record labels is relatively easy to trace, the path to songwriters and their publishers is not. There are far too many “snakes and ladders” for a songwriter to trace what happens to what he assumes is his money between the payment of license feeFootnote 35 s and receipt of the royalty statement.”

A variety of reports provide data on the payments made by music streaming services. Rates vary by service provider and are determined according to several factors including country or origin, whether the song is played under a paid subscription or an ad-supported service, whether the service is on-demand or non-interactive and the specific payment model chosen by the service provider. The most current estimates of payments ($ US) to artists (or rights owners) per stream are:Footnote 36

Table 12: Earning per stream according to the streaming company
Companies Money per stream
Spotify $0.00331
ITunes/Apple $0.00495
YouTube Content ID $0.00028
Amazon Unlimited $0.01175
Google Play $0.00543
Pandora $0.00155
Deezer $0.00567
Amazon Digital Services $0.00395
TIDAL $0.00927
Napster/Rhapsody $0.01110

Calculating the average earnings from streaming per artist is a virtually impossible task.Footnote 37 Observers have noted that at the derived per streaming rates the number of streams necessary to achieve even a modest monthly revenue is extremely high. For example, “The cellist Zoe Keating last month said that she received $4,388.93 based on 1,154,513 streams using RouteNote as her distributor on Spotify, which divided by 12 averages to less than $400 (per month).”Footnote 38 If we use an example of one million streams per year per artist, we can calculate an average estimate of artist earnings for each streaming service:

Table 13: Rights holder payouts for various music streaming services
with 1 million yearly streams ($ US)
Payment per year Average Payment per month
Spotify $3,310 $276
iTunes/Apple $4,950 $413
YouTube Content ID $280 $23
Amazon Unlimited $11,750 $979
Google Play $5,430 $452
Deezer $5,670 $473
Amazon Digital Services $3,950 $329
TIDAL $9,270 $773
Napster/Rhapsody $11,100 $925

Sources: D. Turner 2019 base data; calculations by Wall Communications Inc. 2019

As can be seen in Table 13, the highest payouts are slightly less than $1,000 per month on average for a million yearly streams, while the lowest (YouTube) only pays $28 per month. We note that while the use of a million streams for quantification is arbitrary, it can provide a benchmark for comparison to actual number of streams for a given artist (such as for Spotify artists where streaming data per song is publicly available).

The largest services (by volume of streams) are Spotify, iTunes/Apple and YouTube Content ID. Table 14 compares the percent volume of streams for these services relative to the percent of revenue that each service each pays to artists.

Table 14: Top 3 music streaming services percent streaming volumes and payoutsFootnote 39
YouTube Content ID Spotify iTunes Others
% of All Streams 48.6% 29.2% 10% 12.2%
% of $ Paid Out 7% 48.9% 25% 19.1%

Sources: D. Turner 2019, source data; derivations Wall Communications Inc. 2019

There is a significant difference between the volume of streams and the amounts paid out by service provider. In particular, YouTube has almost half the total streams (49%) but pays out only 7% of total artist payments.

Trying to gauge the economic impact of these payment schedules is complicated by lack of information on the distribution of song stream volumes by artist. Do the majority of Canadian artist’s experience one million streams per year? That seems highly unlikely. While some Canadian artists have extremely high streaming volumes (e.g. Drake, Justin Bieber and the Weeknd were in the top 10 streamed artists in 2018), the vast majority “top selling” Canadian artists have less than 100 M total (cumulative) streams on Spotify. Of the top 150 selling Canadian artists (as of 2016), about 125 have less than 100 million total streams; a majority of Canadian artists on the list have less than 20 million streams.Footnote 40 Several of the 150 top listed Canadian artists have less than 5 million cumulative streams.Footnote 41

We also note that some of the 150 top selling Canadian artists have less than 1 million streams. From this, we conclude that the vast majority of Canadian music creators (who are not among the top 150 Canadian artists) would have less than 1 million streams on Spotify.

If a Canadian artist has 1 million total streams on Spotify (as an illustrative example), that would earn them (at current rates) about $3,310 (note – that is not yearly earnings, that is cumulative).Footnote 42 If we use the 40,000 members of SOCAN as an illustrative proxy of the number of Canadian streamed artists, it is clear that the vast majority of Canadian song-writing music creators (with less than 1 million streams on Spotify) would not receive enough from the service to earn a living solely from those payments.

On the other hand, a handful of very popular Canadian artists (e.g. Drake, Justin Bieber, Shawn Mendes and the Weeknd) have more than a billion streams.Footnote 43 These statistics speak to the enormous spread in the distribution of earnings from streaming services across artists.Footnote 44 Based on the available data, it appears that a small number of Canadian artists earn huge income from streaming, while the vast majority of Canadian music creators make a nominal (or at least minimal) streaming income.

Points of interest

4. Testing the ground-up Data collection on the role of streaming in the lived experience of Canadian music creators

Recognizing that publicly available aggregate data and limited anecdotal information may be insufficient for a complete understanding of streaming impact, we developed a method to incorporate individual experiences. This section describes efforts to gather data from a small sample of individual Canadian music creators as a means to identifying key outstanding issues and to help construct a plan for future work in this area.

We first developed a categorization of artists (roughly reflecting various licensing rights as well as musical genre) that may be impacted in significantly different ways by streaming. We then identified a small sample of music creators (drawing from across categories) to use to test a survey questionnaire. The survey questionnaire was then developed to solicit responses that could help define relevant issues or questions and to provide a basic sense of creator streaming awareness.

We describe the results of this test survey exercise below.

4.1 Categorizing music creators

Based on discussions with professional and semi-professional Canadian music creators, anecdotal evidence presented in various articles and journals and blogs, and a cursory examination of the number of streams by various artists on Spotify,Footnote 45 it appears that different categories of creator are impacted differentially by streaming. For example, certain genres (e.g. hip-hop) seem to garner a very large number of streams while other genres (e.g. jazz and classical) garner relatively few streams. Differential impact also appears to run across other creator classifications, including the career life cycle juncture of an artist, the label stature of an artist (e.g. major label versus indie or DIY) and other characteristics.

As a start point, we formulate the following categories of artist that could be impacted differently by streaming:

  1. Legacy songwriters/performers (moderate to major success);
  2. Major current performers (within past decade; major labels);
  3. Film and TV score creators;
  4. Indie artists (within last 20 years);
  5. Session musicians (side or non-principal performers); and
  6. According to musical genre.

We note that this categorization is simply used as a start point and is not considered to be a definitive or final categorization.

4.2 Discussion of test survey

Wall Communications Inc. prepared a survey questionnaire for the purpose of collecting data on how artists in various categories were financially (and otherwise) impacted by streaming over time. The questionnaire essentially asked respondents to provide income percentages derived from various activities (e.g. live performance, sales of physical music, digital downloads, streaming, sync rights, merchandise, etc.) for the years 2018 and 2015. The complete questionnaire is provided in Appendix 2.

The questionnaire was sent to a small sample (approximately thirty Canadian music creators) drawn from various artist categories.Footnote 46 The sample was random in only a limited sense: potential respondents were selected to roughly achieve a balance in gender (i.e. male and female) and across categories. As this survey was primarily designed as a tool to gather information that would feed into the preparation of a future data gathering process (and not as the ultimate process for drawing definitive conclusions on the population of Canadian music creators), random selection was not essential.Footnote 47

The test survey approach did not produce sufficient responses to aid our understanding of how streaming impacts artists, nor did it enlighten our understanding of how a better data collection process might be structured. The very poor response rate (less than 3%) indicates that the survey approach must be radically adjusted if it is considered for future research. (See Section 5.3 below for further discussion).

Commentary on the survey questions received informally from various artists suggested that the artist categorization should be reformulated with a view to be more inclusive of all music creators and to reflect self-identified categorization (i.e. allow artists to self-identify according to the rights they hold and according to how they earn income from various sources).

5. Findings and conclusions

5.1. What we have learned?

There is a conundrum regarding the impact of streaming on music creators: a large number of creators believe that their ability to make a living creating music has been greatly diminished by streaming, while at the same time, streaming is credited with resuscitating a dying recorded music industry. This Study has attempted to assemble and sift available data to better understand this puzzle.

By examining numerous disparate data sources, we provide several perspectives on the economics of streaming as it impacts Canadian music creators. These perspectives – or findings – include the following:

Streaming service providers in Canada

Retail market size: users and revenues

Trends in recorded music retail revenues by source

Creator categories and representation

Royalty rates

Payments to creators from collective societies

Payments from music streaming services

5.2 What we don’t know?

The findings of this Report, while covering numerous issues, leave at least as many questions unanswered as are answered. The following list identifies questions and strategies that might be pursued in further research:

  1. It appears from our preliminary research that streaming payments vary by artist for a wide variety of factors (e.g. major label vs. indie; genre of music, etc.). A more complete and detailed artist categorization should be developed to better understand the differential impact on artists. This might be aided with more extensive artist input and possibly with input from the collective agencies.
  2. The input of Canadian collective agencies was sought for this Study on several questions but was limited due to several factors (e.g. timing considerations of the collectives, confidentiality concerns, coordination with appropriate personnel). Greater involvement of the collectives would lead to better characterizations of artist situations and issues.
  3. The use of streaming service generated “Playlists” can be instrumental in increasing the number of streams of a song.Footnote 48 For example, the “Top Canada 100” and “Discover” playlists can bring enormous new exposure (and dollars) to an artist.

    To what extent do service-generated “Playlists” impact the income of Canadian music creators? Do indie artists have the same opportunity as major label artists?

  4. User payments from streaming services typically follow a “pro rata” approach where payments are proportional to the number of times songs are streamed relative to the total number of streams in a period. While this seems both equitable and efficient on the surface, it may not reflect the intent or wishes of the music user (and therefor may disadvantage less popular artists). For example, if a user pays $10 a month and only listens to Artist X (say streaming their songs 20 times a month), Artist X would get less than 10 cents. The user, however, might expect that Artist X should be receiving the bulk of the monthly fee that is paid out to artists. The alternative approach is called a “User-Centric” method.Footnote 49

    How much does the “Pro Rata” approach impact smaller (perhaps the majority) of artists on streaming services? To what extent would a “User Centric” approach lead to a higher likelihood of Canadian artists earning a “living wage”?

  5. There is a lack of understanding about how Canadian music creators make a living from various sources – and that is very much dependent on the type of music creator in question. Since answering this question will require disclosure of sensitive financial information by creators, alternative ways of addressing this should be explored by PCH, artists, artist management and other agencies.

5.3 Additional suggestions for further research

The outstanding questions and issues described in Section 5.2 above all warrant further examination. We recommend that future research be conducted into these issues.

In addition, we recommend the following additional research activities for consideration:

1) Getting better data on actual artist streaming payments

Given the reluctance of music creators to provide personal financial data related to streaming (and other sources of income), we consider two possible alternative approaches to data collection. The first is to partner with one or more of the major collective agencies (e.g. SOCAN, Re:Sound). By aligning the survey research with the “stamp of approval” of a major collective agency it is likely that the response rate would improve. Issues of sampling error and bias, however, might still be present.

A second approach would be to conduct in-depth analysis of Spotify payments for a large sample of Canadian music creators. Recall that Spotify makes its data on number of streams per artist/song publicly available. While the sample would be restricted to streaming on just a single service provider, it would be possible to at least make credible projections based on sound baseline information. The advantage of this approach is that there is no (or little) “guess work” on the payments involved. With a survey questionnaire, respondents are likely providing best estimates of actual streaming income.

2) Copyright streaming tariffs in other jurisdictions

Since Canadian artists will have their music heard outside of Canada (thereby impacting their overall compensation from streaming), it would be helpful to have a comparative analysis of different copyright tariff schemes in other countries. Such a comparison might also provide useful policy analysis input.

3) Focus group approach

As an additional means to assist defining the streaming impact issues, various ecosystem parties (e.g. songwriters, performers, agents, collective society personnel, label representatives, streaming company representatives, etc.) could be invited to participate in a focus group (or groups). This approach would help identify any issues or factors that have been omitted or gauge importance levels.

Appendix

Appendix 1: Canadian streaming music services (November 2018)

1. Major streaming services (On-demand music streaming services)

Service Name Description Cost Free/Premium Notes
Spotify A large music library that is available for streaming and download (with premium). $9.99/month
$0.99 3-month promo

Free
Features advertisements.

With a free account I seem to be able to select specific songs and listen to them.

Premium
removes the ads and allows for unlimited skips on shuffle play. You can also download music to listen to offline. High quality audio is also offered with premium.

Quality

Free – 160kbit/s (can be even lower on mobile)

Premium – 320kbit/s high quality option available.

The files are Ogg Vorbis format.

Apple Music A large music library that is available for streaming and download.
Features 50 million songs as well as curated playlists, also an internet radio service from Beats 1.

Individual plan is $9.99/month

Family Plan - $14.99

(6 people)

Student - $4.99

Free
There are internet radio streams available.

Premium
Can stream/ download any of the songs from the apple music library (50 million songs).
Family plan also allows for individual accounts which can share iTunes purchases.

“There were 50 million paying subscribers as of May 2018.”

Apple uses 256kbit/s AAC format.

YouTube The largest video streaming site on the internet. Premium is available $11.99/month
1 month free offer

Free
A majority of content on Youtube is free. Some videos will feature ads before playback.

Premium
There is a premium option but it is related to exclusive content that they produce.
It does offer ad-free playback.

You can get programs for free that will remove YouTube ads.
AAC audio format is also standard for YouTube according to Wikipedia.
YouTube Music

This is a separate app released by YouTube. It has an emphasis on “effortless discovery”

Get new music served to you based on your tastes and what’s moving the community around you.

And finding the music you want.

Easily find albums, live performances & remixes by searching lyrics or describing the song.

$9.99/month
1 month free offer
This is also included in the 11.99 YouTube premium subscription.

Free
The free service appears to be a somewhat curated library of YouTube videos.

Premium
Audio-only background playback.
Download songs for offline playback.
Ad-free playback.

“YouTube currently streams in 128 kbps HE-ACC, dropping to 64 kbps if needed to, and a higher quality 256 kbps is being worked on.” – from a YouTube forum
Google Play Music

Music Library available for streaming. The app allows for downloads.

The service is linked to your Google account.

$9.99/ month
30 days free

This subscription also includes a YouTube music subscription.

Free
Can play “radio” stations based on artist, basically a Spotify shuffle playlist.
Ads are included

Premium
Ad free playback and
can select specific songs.

Up to 320kbps quality.
“Supported file formats for upload include: MP3, AAC, WMA, FLAC, Ogg, or ALAC. Non-MP3 uploads will be converted to MP3.”
Amazon Music Unlimited

This is a library of tens of millions of songs which was made to compete with Spotify.

There is also a reduced library available with amazon prime.

$9.99/ month

$7.99 if you have amazon prime

90 day free trial is offered.

Free
no free service

Premium
unlimited streaming of the amazon music library

“Amazon has been coy about revealing its streaming bitrate, claiming to support 'multiple bitrates’, but we’d bet our reference hi-fi system that it’s not dissimilar from Spotify’s 320kbps streams. At best.” - whathifi
TIDAL

Music Library available for streaming and download.

More focus on high quality audio and additional services (music videos, magazine, playlists, exclusive artists)

TIDAL Premium
$9.99/month

TIDAL HiFi
$19.99/month

30 day free trial

Free
None offered

Premium
2 tiers
TIDAL Premium

TIDAL HiFi
Lossless high fidelity sound quality

56 million tracks
Lossless audio

High-def music videos

Curated playlists

Integrated music magazine

Offline mode

Premium
320kbps AAC
96kbps (mobile)

HiFi
FLAC, ALAC, MQA file types various bit rates

Sources: Various service provider websites; compiled by Wall Communications Inc. 2019

2. Other Music Streaming Services

Soundcloud Recently introduced on-demand subscription service $9.99 Free, $4.99 and $9.99 Can also download
Musi Mobile app allows Free N/A Streaming of YouTube content
Stingray Music Available as part of Cable and DTH service and on mobile App N/A Subscription (or included in package) N/A
Deezer $9.99 or free version $9.99 or free version Radio style channels and playlists; recommendations
Tune-in Radio Internet radio style service N/A N/A N/A
I heart radio Internet radio style service N/A Free ad-supported N/A
Radio player Can Internet radio style service N/A Free ad-supported N/A
Slacker Internet radio style service N/A Free (ad-supported) or subscription based N/A
Hoopla Digital content including music For library users (paid by library) N/A N/A
Napster Subscription on-demand and download service $9.99/month N/A N/A
Sirius XM Satellite radio also available via App Various starting at $10.99 N/A N/A
Saavn Streaming app $4.99 N/A Playlists and download

Sources: Various service provider websites; compiled by Wall Communications Inc. 2019

Appendix 2: Test survey questionnaire

Streaming Test Questionnaire

  1. Please categorize your 2018 income in percentages (NOTE: percentages should sum to 100%):
    • Live performance
    • Sales of music (physical product)
    • Sales of music (digital, not including streaming but including download sales)
    • Streaming
    • Sync rights or other payments for use of music in AV product (commercial, TV, film, video game, etc.) or in a live event
    • Music-related merchandise
    • Patronage or kick-starter campaigns
    • Other music-related (please describe)
    • Non-music related activities
  2. Please categorize your 2015 income in percentages (NOTE: percentages should sum to 100%):
    • Live performance
    • Sales of music (physical product e.g. CDs, vinyl, memory stick)
    • Sales of music (digital, not including streaming but including download sales)
    • Streaming
    • Sync rights or other payments for use of music in AV product (commercial, TV, film, video game, etc.) or live performance
    • Music-related merchandise
    • Patronage or kick-starter campaigns
    • Other music-related (please describe)
    • Non-music related activities (please list and describe)
  3. Describe how streaming has impacted the following (in terms of impact on your income):
    • Recording activities
    • Live performance activities
    • Creative processes of writing/composing/performing live
    • The costs of conducting or pursuing your music career
  4. Describe the uses you make of data generated from streaming services to improve income opportunities and/or invest in your career. Do you consider this data and its accessibility a critical component of your planning/marketing/other music creation activities?
  5. Some music creators are only able to make a living in music in part because their income is supplemented by income from a spouse, family members or support from other benefactors – or by drawing on other financial assets (including a trust fund or similar resources). How important are such sources to you? Has that changed over time?
  6. Please provide any other comments you care to make on the impact of streaming as it related to your ability to pursue a music career.
  7. Optional Question

    Please provide the 2018 music-related income range that fits your personal circumstances:

    • Less than $40,000;
    • Between $40,000 and $80,000;
    • Between $80,000 and $120,000;
    • Between $120,000 and $160,000;
    • More than $160,000

Note: Responses will be kept strictly confidential. For further information contact Gerry Wall at 613 747 0555.

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