How much could streaming payments go up for artists and writers? this is a really good question! With the current raise in streaming royalty rates in the US and the every growing use of streaming services by consumers this could be a much needed boost in revenue for independent artists. Below is an excerpt of an article written by Glenn Peoples for Billboard magazine. You can review the full article by clicking the source info link at the end of the excerpt. JJG
An Aug. 31 settlement covering U.S. mechanical streaming rates — which must now be approved by the Copyright Royalty Board — will allow publishers and songwriters to enjoy a slightly larger share of streaming revenue over the next five years. For Phonorecords IV, the National Music Publishers’ Association and Nashville Songwriters Association International negotiated a percent-of-revenue royalty rate increase with streaming services that grows from 15.1% in 2023 to 15.35% in 2027, adding up to 1.7% cumulatively. But the real gains will depend on how much streaming growth occurs over this time.
A handful of variables, including subscriber acquisitions, increased ad revenue and possible rising subscription costs, will create a multiplier effect that far surpasses the small increases in Phonorecords IV royalty rates. The same forces that built today’s music business are widely expected to continue for the foreseeable future. Streaming will expand as download and CD sales trail off. Subscription services will find new paying customers – even in a mature market such as the U.S. — and raise prices. Ad-supported streaming will improve, too, as companies better monetize continuously growing free streaming hours.
To show how publishers’ streaming royalties could grow, Billboard constructed three scenarios based on U.S. recorded-music streaming revenue reported by the RIAA:
In the bull case, average revenue per user (ARPU) grows at 2% annually as streaming services pass along price increases without hurting subscriber acquisitions. Subscriptions, limited-tier revenue and ad-supported revenue each grow at 7% per year.
In the base case, ARPU remains flat. Subscriptions, limited-tier revenue and ad-supported revenue each grow at 5% per year.
In the bear case, ARPU falls at 2% annually as low-cost subscription growth outpaces price increases. Subscriptions, limited-tier revenue and ad-supported revenue each grow at 3% per year.
Streaming services’ ability to acquire new customers and raise prices will be the major determinants of publishers’ streaming revenue. And music executives think there is potential for both, as streaming businesses are pressed by investors to improve margins while maintaining growth. In 2021, the United States had an average of 84 million subscribers, according to the RIAA, an increase of 8.5 million (or 11%) from 2020. If subscriptions grow at 7% per year and ARPU rises 2% per year (the bull case), under Phonorecords IV, settlement publishing revenue will grow an accumulative 53.9% over the five-year term. At 5% subscription growth and zero improvement in ARPU (the base case), revenue will still grow 29.7% — with nearly four-fifths of that coming from newly acquired subscribers.
The biggest problem facing corporations in 2022 – inflation – won’t persist for the entirety of Phonorecords IV. In the near term, streaming services could be less willing to raise subscription pricing while Americans are feeling financially stressed. Over the course of Phonorecords IV, however, there will still be plenty of opportunity to raise prices that have been kept low for the past decade to help subscriber acquisition.