“Despacito” could have made so much money—if people weren’t listening on YouTube

Quiero ser tu ritmo…
Quiero ser tu ritmo…
Image: RW/MediaPunch/IPX
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Poquito a poquito, Luis Fonsi and Daddy Yankee’s “Despacito” has taken over music charts—and many many listeners’ hearts—the world over. The reggaeton pop song, thanks in part to clever composition and a winning promotional strategy, became the most streamed song of all time in July, mere months after coming out at the start of this year.

It has spent 16 weeks at the #1 spot on Billboard’s Hot 100 charts, challenging a record previously reached only by a 1996 Mariah Carey song. It’s the most-watched YouTube music video of all time. Spotify today dubbed the track “this summer’s undisputed anthem.” Its reign doesn’t seem likely to be toppled anytime soon.

So Fonsi and Daddy Yankee are among the richest musicians ever now—right?

Not really, when we look at the numbers. According to Fonsi’s label, Universal Music, “Despacito” has been played 4.6 billion times across streaming platforms such as Spotify, Apple Music, and YouTube; while we don’t know the exact monetary agreement that Universal struck with each and every service for the song—most music royalty negotiations are not made public, and they depend on factors such as artists’ popularity and prior work—we can take some educated guesses.

Bear in mind that 2.7 billion of the song’s streams were from YouTube, an entirely free-to-access, ad-supported website that has been blasted at length by the music industry for being too stingy with its royalties, which are all cut from ad revenue. Current estimates on its per-stream royalty rates are around $0.0007 per play.

That mean Fonsi and co.—remember that he also has to split the profits with his songwriters Erika Ender, Daddy Yankee, and Justin Bieber, the latter of whom appears on a popular remix version—at the very most made a measly $3.2 million from YouTube.

What about streaming services, the supposed saviours of music? On Spotify, the average “per-stream” payout to rights holders (e.g. songwriters) ranges from $0.006 to $0.0084. Taking the high estimate, this mean that if “Despacito” had hypothetically been streamed 4.6 billion times on Spotify alone, it would have made $38.6 million. (If it had reached that number of streams on Apple Music, Amazon Music, Deezer, Tidal, or any subscription-only music service, the figure would be even higher, because Spotify’s ad-supported free tier cuts down a bit on artists’ profits.)

It was only, in actuality, streamed 1.9 billion times on these services, meaning it raked in around $15 million. Add in YouTube’s $3.2 million payout, and that’s a total of $18.2 million in total streaming money—nowhere near $38.6 million. And all this is a far cry yet from how much “Despacito” would have made if it were not streamed at all, and only sold in physical copies or digital downloads: Every song bought on iTunes for $1.29 makes about $0.20 for the songwriters, for example, so it would only have taken 193 million “listens” for the song to get to $38.6 million that way, as opposed to 4.6 billion.

Yet the paradox of the streaming is that if the free service of YouTube didn’t exist, perhaps people would not have listened to the song at all on paid streaming sites. (Imagine excitedly sharing a new music discovery with your friends but adding the oh-so-appealing caveat: “Check this song out! You just have to pay 99 cents to do it!”)

Per Moneyish, YouTube currently has three times the number of users of Spotify, Pandora, and SoundCloud combined; its mighty leverage cannot be ignored, and artists who are unhappy with its payout rates still have no other choice but to take them.