26 Nov '20
The lifetime value of a Spotify follower
Followers and listeners on Spotify are often cited as important, in part because these numbers are so visible. But it’s hard to come by an analysis of the value of a Spotify follower to an artist and their team… probably because it’s very difficult to quantify with available data and requires a lot of guesswork.
I don't think that shouldn’t stop us trying, though! It was actually Spotify’s recent (and very controversial) announcement of their new Discovery Mode - where artists and their teams can boost visibility of tracks in exchange for lower royalty payouts - that prompted me to take a look at this. But that's another story... moving swiftly on.
Estimating the value of a Spotify follower can inform how much you should be willing to pay to acquire each follower when marketing your music. In other words, how much income you might receive from a follower versus how much you spend to get them on board. This ‘unit economics’ concept is used all the time in for startups and is just as easily applied to music. It’s something we always have in our minds as we’re building out and improving Feed.
Let’s start with streams directly attributable to that follower. This data is hard to come by, but a quick ‘distribution’ type calculation, where your followers are segmented into people who listen a lot, an average amount and not at all, suggests that 5 monthly streams per follower on average could be a reasonable assumption. So that’s 60 streams per year.
It’s worth remembering the difference between listeners and streams. One person might stream your music 10 times over the course of a month = 1 listener, 10 streams.
Streams per follower will obviously fluctuate over time, in particular dependent on when you’re releasing music (followers get new releases on their Release Radar) and how many tracks you have uploaded to the platform.
Another optimistic assumption - let’s assume you own 100% of the rights to your music. Your payout rate on Spotify might be a meagre £0.003 ($0.004) per stream. So, from 60 direct streams alone, each follower might be worth £0.18 ($0.24) per year.
Hold that thought! Direct streams are only half of the story. There are other ‘spillover’ factors that are likely to boost the value of a follower:
- Ticket, merch and physical/download sales that come as a result of someone being a Spotify follower (more on what this means below).
- More followers makes it more likely that you’ll be included on an algorithmic playlist.
- The ‘network’ effect - fans tell their friends about you, inclusion on fans’ playlists etc.
These require pretty big leaps of faith, but let’s give it a go with some reasonable sounding numbers...
Ticket, merch and physical sales
What I’m trying to say here is that there are people who will buy your tickets, merch or records who wouldn’t have bought them had they not followed you on Spotify.
It’s hard to estimate the average number of followers who might do this from available data... but in principle it makes sense. Someone follows you, listens to your music for a few months and as a result buys a ticket to a gig. They wouldn’t have done this if they hadn’t been listening to (and enjoying!) your music.
Let’s say 1% of your followers act in this way and buy a ticket in a given year, priced at £10. Seems reasonable - if you have 1,000 followers it means that 10 of them buy a ticket as a result of following you on Spotify. That means on average a follower is worth 1% x £10 = £0.10 ($0.13) per year.
If we do the same for merch (priced at £15) and a record (£15), on average a Spotify follower is worth £0.15 ($0.20) for each per year. Adding everything up, we get a total potential value of £0.40 ($0.52) on average per Spotify follower, through tickets, merch and record sales.
We know factors such as follower numbers and track saves to listener ratios are important in triggering those all-too-elusive algorithmic playlists. And it’s likely that there will be some crossover here, as followers are going to be more likely to save your tracks than people listening to your music on a random playlist.
In our experience, it’s not uncommon for some artists to generate at least 50% of their streams from algorithmic playlists.
This is a big jump but let’s assume that the number of followers (who are listening, saving and sharing your music) required to trigger Spotify’s algorithmic playlists is 500. We've seen artists trigger the algorithm roughly equally either side of that number. This means an individual follower contributes 0.2% (1 ÷ 500) to getting on a playlist like Discover Weekly.
Now let’s assume streams from a track making it onto an algorithmic playlists amount to 50,000, again not unreasonable for an earlier stage artist. That means the value from each follower is 0.2% x 50k streams x £0.003 payout rate = £0.30 ($0.39)
The value of a Spotify follower
So far we've arrived at a value of £0.88 ($1.15) per year = £0.18 from direct streams, £0.40 from merch, physical and ticket sales, £0.30 from contribution to algorithmic success. And over a longer period of say 5 years, the value is likely to be into the single digit £s.
Then we need to add in network effects. If each follower speaks to just 1 person who also becomes a follower, the value of that follower is immediately doubled (and more than that if you roll over network & compounding effects!).
What does this mean? It's not a huge leap to estimate that, over a period of a few years, a Spotify follower could easily fall in the £1–5 ($1.30–$6.50) range on average. If you’re acquiring Spotify followers at £0.50 ($0.65), that’s probably pretty good in terms of unit economics.
(as an aside, tracking return on investment - ie. number of Spotify followers gained for your ad spend - is something we’re looking at building into Feed soon)
This might not sound like much, but as you build into the thousands of followers it starts to look more significant.
Should you give up if the cost of gaining a Spotify follower is bigger than the likely value of that follower when you're starting out? No! You can view this as investment in your creative business, with benefits expected to come later. It takes time to build up your artistic career from scratch. An individual follower may not seem like much, but the cumulative effect over time can be really powerful, resulting in significant income, a 'buzz' around you and even a record or publishing deal, if you choose to go down that route.
What can increase or decrease this number?
Quite a few things! My estimate could be way too low if your followers talk a lot about your music, or way too high if someone else owns/licenses the rights to your music and Spotify's algorithm isn’t kind to you.
These are the sorts of things that matter:
- How loyal your follower base is, and network effects. Both online and offline. If your followers are streaming, saving and sharing more tracks, then the network effect and the average value of a follower will be higher.
- Your share of royalty income. For example, if you’re giving away a significant share to a label or distributor, then your payout per stream will be lower and the value of a follower will be lower while that contract is in place.
- How many tracks you have out. More catalogue / tracks means more music for followers to listen to, which could increase streams per follower.
- How successful your track is on algorithmic playlists. Certain genres tend to do quite well. Sometimes it’s hard to trigger the algorithm even if you have 10,000 followers!
The point of this article isn’t to arrive at a definite number, but rather to outline some things to think about when assessing how much each follower on Spotify could be worth to you. It can be a lot more than at first glance (direct streams) when you consider other sales channels and all the positive spillover effects.
One day I’ll make a calculator where you can plug in some of these numbers and have everything chalked up automatically!
It’s also easy to generalise this beyond Spotify, and adjust the numbers for each platform. A Facebook follower might be worth more or less than a Spotify follower depending on how they behave when it comes to buying tickets, records etc. Someone on your mailing list could be worth a lot more if they are much more likely to buy tickets, merch and records than a Spotify follower.
Lastly, they say teamwork makes the dreamwork - if you have any data or information that can inform or improve this analysis, please get in touch!
And, of course, if you'd like to try out Feed you can request access right here.