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.

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November 24, 2008 Artist Royalty Details
by David Harrell banner

A disclaimer: Although I often write about how much money my band receives from various digital retailers and subscription services, I sincerely hope it doesn't come off as tacky or an obsession with my music "income." The actual dollar amount is usually small enough that it's an academic discussion at best.

Our first statement from's artist royalty program definitely falls into the "interesting numbers but not a significant amount" category: For the third quarter of 2008, we received less than one dollar. However, we're only collecting "on demand" royalties directly from for a three-song Christmas EP, which was definitely out of season during the second quarter of the year. CD Baby delivered our first two albums to, so any on demand royalties for those tracks will appear in our CD Baby account. While CD Baby takes 9% cut from those royalties, it reportedly negotiated a higher royalty rate, enough so that artists will receive more that they would directly from (I'll post those details as soon as I see them.) pays royalties for two types of online plays -- on demand plays of individual tracks and a digital performance royalty for radio plays. The latter is the royalty collected (in the U.S.) by SoundExchange, so it's only paid directly to artists who haven't signed up with SoundExchange. Plays by members of their own digital files or CDs are included in the totals plays for each artist, but they obviously don't result in any royalty income.

Here's what the numbers looked like for our third quarter report:

Free on demand: 0.5 cents per stream

Premium on demand: no royalties received

Premium radio: 0.1 cents per stream

Free radio: .057 cents per stream
The details:

On-demand plays: pays out separate rates for free on-demand plays and premium on-demand plays (by subscribers).'s FAQs stipulates a payment of 30% of net ad revenue for each free on-demand play. We received 1/2 a cent for each play, which implies that is receiving 1.67 cents in net ad revenue per play, though there's no way to be certain if that's the actual amount. could be paying more than 30% to boost the artist payout level, if it believed that 30% of the actual ad revenue was an insufficient amount to keep artists/labels in the program. There were no premium on-demand plays for us in this statement. (We actually received the stipulated payment for premium on-demand plays for our free on-demand plays, so maybe is using that amount as a minimum payout rate...)

Radio plays are paid at two levels -- premium radio (paid subscribers) and free:

Premium radio: promises the greater of 10% of net ad revenue or 1/20th of a cent for each premium radio play. We received 1/10th of a cent for each premium radio play, which would translate into net ad revenue equal to one cent for each radio play.

Regular radio: For our free radio plays, we received .057 cents per play -- a little more than 1/20 of a cent. promises a 30% cut of the net ad revenue for these plays, implying net ad revenue of .19 cent per track. Again, though, it's certainly possible that chose to pay out more than the required minimums.


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