How ROI works for Spotify and music streaming
Streaming platforms like Spotify pay low per-stream rates, making short-term promotion costly. However, investing in streaming can yield returns over months or years through algorithmic boosts, audience growth, and ongoing royalties.
By Andrew Southworth
Hey friends!
Today we’re going to talk about how ROI works for Spotify and other music streaming platforms.
We all know music streaming doesn’t pay that much, right? So how does anyone justify spending money promoting their music on Spotify and other DSPs?
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How much does streaming pay?
Real quick, let’s talk about streaming payments.
Spotify pays about $0.0033 per stream or about $3.30 per 1,000 streams
Apple Music pays roughly double that, but it has half the user base
YouTube and Amazon are similar to Spotify, but also have a smaller user base
Tidal and Napster are way better than Spotify and Apple, but practically nobody uses those platforms
As a result, most artists make the most money from Spotify. It has the largest market share by far right now.
How much does it cost to promote?
It will pretty much always cost more than $0.0033 per stream to promote music on Spotify in the short term. Whether you’re using Facebook ads, TikTok ads, Spotify ad studio, Showcase, Marquee or playlisting you won’t get a price less than $3.30 per 1,000 streams.
But does that mean it’s a loss? Nope.
There are actually several scenarios that justify the investment into streaming:
You can trigger algorithmic playlists and actually profit in a relatively short amount of time (6-12 months)
If the listeners are engaged the song might break even or profit over the long haul, 3-10 years
Even if a song loses money, it may recover a substantial part of the investment over time
The audience you grew along the way has real world value that will help you in the future
Did you just say 3-10 years?
Yep! While you can massively trigger the algorithm and have songs that profit in the short term, most songs won’t do that.
A more likely scenario is that the people who like the song will keep listening every so often over time, and/or the song will get smaller amounts of algorithmic activity over time.
This scenario is one reason why record labels tend to have long contracts. They know that it takes time for your investments to pay off, and its fine if an album doesn’t turn a profit for 8 years.
Many companies aren’t profitable for several years, and Spotify itself has never really been profitable it’s entire existence (aside from a few quarters here and there).
There are some activities that will give you an immediate profit, but there are many things that will not.
The other numbers matter
It isn’t all about the money either. I mean, if you’re a label owner it might be all about the money for you. But if you’re the artist, you likely care about a lot more than the money.
If you were looking for a get-rick-quick scheme being a music artist would be a pretty bad way to try and do it.
Let’s walk through an example:
You spend $1,000 promoting a song
During the campaign you get 10,000 streams on Spotify
During the campaign you also got 300 Spotify followers and 300 Instagram followers
Over the span of 3 more years, the song increases to 100,000 streams
In this scenario you still lost about $670 financially, but you also gained 300 Spotify followers and 300 Instagram followers. Plus you have a song with 100,000 streams, and likely increase the streams on multiple other platforms as well.
How many of these followers will check out future posts, and listen to future songs? It’s hard to say exactly because it depends a lot on how well you engage with them, but there is some real world value to having this audience.
The song will also continue to bring in payments for years going forward too, so the loss will shrink further and further over time.
In Summary
The lesson here is that you need to think about returns over a longer period of time, and you need to factor in all the areas you’ve grown when investing in any marketing effort.
If all you’ve been thinking about is the raw input/output of money over a short 1-3 month time span, you’re not considering everything you should be.
This doesn’t mean it always makes sense to dump buckets of money promoting your music on streaming platforms. However if you’ve been wondering how anyone justifies doing this, this is how.
Whenever you’re ready, there are 4 ways I can help you:
My courses. Spotify Growth Machine teaches you how to use Facebook ads to promote your music on Spotify. YouTube Growth Machine teaches you how to grow a YouTube channel organically and how to use YouTube ads. Fan Growth Machine teaches you how to build a website, online store and grow your email list.
My ad agency. Forbid Media specializes in running Facebook conversion ads to promote your music on Spotify.
Website / Store / Funnels. MusicFunnels is the best all-in-one platform for music artists to make a website, online store, sales funnels and build their mailing list.
1-on-1 consulting. You can book 1-hour calls with myself or my team here.
New Content
Spotify Wrapped 2023 is here! In this video I go over my artist wrapped and listener wrapped:
Did you know you can listen to my music industry interviews on podcast platforms? Click here to listen to the Modern Music Marketing podcast.
News
Here are some music industry news highlights from the past week.
Over 75,000 artists in 20+ countries can now sell Ticketmaster tickets directly on TikTok
Spotify laying off over 1,500 employees
TikTok announces new ‘artist accounts’ featuring promotional tools for musicians
Sony has issued over 10,000 deep fake takedowns, showing how problematic this technology may be
Quote of the Week
Innovation is not about saying yes to everything. It’s about saying no to all but the most crucial features.
My Links:
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