How is success measured and compensated for, in the era of digital music distribution?

Browsing through Billboard’s excellent “billboard biz” blog, I stumbled across two reports, regarding Frank Ocean’s latest album titled “Blond”. These reports included some very interesting insights regarding the way Billboard and the industry, measure a release’s success and revenue in the era of digital distribution. You can read the two reports here and here.

So, what does it take for a single album unit to considered as sold, in the era of digital downloads and music streaming?

Billboard and Nielsen take three different metrics under consideration. The first metric has to do with traditional album sales which include sales of an album in physical or digital format. So, when someone buys an album as a vinyl record, a CD or a digital download, this counts as a single traditional album sale. The second metric is the Track-Equivalent Album (TAE) which means that if a user buys not a whole album but enough of the album’s songs individually, this also counts as an album sale. Now that’s where things get a little complicated; If a number of people buy a single track multiple times, or different tracks from the same album but not all of the album’s tracks, that still counts as a single album sale. For example, if one user buys three tracks from an eleven-track album and another user buys eight tracks, the album would have sold a single unit. The third, and final, metric is the Streaming-Equivalent Album (SAE) which measures 1,500 streams of songs from an album as the sale of an album “unit”.

So, for an artist to achieve an album sale digitally, he/she has to sell either one digital download of the album, or the album’s songs as individual digital downloads, or 1,500 digital streams of the album’s songs.

Nowadays, for an album to reach the Billboard 200’s No. 1 position, it would take approximately 200,000 to 650,000 album sales within a week, using any combination of the three aforementioned metrics.

The next important report was about the revenue earned from these sales. For each album sold digitally, either as a unit or as a TAE, the owner, and producer of the recording, ie. Universal Music Group, would get paid, let’s say from iTunes, $6.99, or 70% of the asking price. For an album sale achieved through streaming, that is 1,500 streams of the album’s songs, the owner, and producer of the recording would get paid $10.95 ($0.0073 per single stream).

So, the label, and subsequently the artists involved in the album’s making, will get paid more if an album was sold through streaming, the only problem being that it would take 1,500 streams of the album’s songs for a sale to be made.

Are these numbers enough to revive the music industry? It depends on whether it will be easier, in the future, for the label and the artists to get the subscribers to stream their songs, as well as the total number of subscribers. The latter number seems to be increasing rapidly so there’s hope!

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