Why Video Streaming Can be Much More Profitable Than Music Streaming (for Distributors)

Even if there are similarities for distributors in the streaming video and streaming music businesses, for most entities, if there was a choice, you’d probably choose to be in the video business, not music. 

Music streaming is good for copyright holders but pretty difficult for distributors, while video streaming is better for distributors at scale, and less favorable for copyright holders. 

Both types of streaming share core digital economics: high upfront fixed costs for content creation or licensing, followed by near-zero marginal costs for additional distribution.

But they diverge sharply in how revenue flows to copyright holders (artists/labels/studios) and distributors. 

The marginal cost of streaming additional songs is linear: play a stream, pay a fee. Video streaming is different: content is typically licensed for a flat, fixed fee covering unlimited streams.

So video streamers can reach higher margins as additional subscribers are added: the marginal cost comes mostly in the form of marketing or acquisition cost, not content rights payments. 

Music streamers, on the other hand, pay 70 percent of revenue to copyright holders, at the margin. Volume helps, but only so much. 

source: Joel Goveia 

Platforms such as Spotify pay out 70 percent of revenue to rights holders (roughly 55 percent to 60 percent to labels/masters and 10 percent to 15 percent to publishers). So distributor costs are variable with scale. 

More streams mean higher payouts.

Video streamers pay flat fees for licensing content, so digital scale economies work. 

For a video streamer, there is no per-view royalty. Netflix’s costs, for example,  are largely fixed upfront (production or licensing deals), so additional views do not increase payments to rights holders.

Video streaming licensing also means differentiation is possible. Virtually all music streamers have access to the same content.

Video licensing is restricted: content can be supplied uniquely on a single platform. Also, some video streamers (such as Netflix) can create original content and own it. 

Aspect	Similarities	Music Streaming – Copyright Holders	Music Streaming – Distributors (e.g., Spotify)	Video Streaming – Copyright Holders	Video Streaming – Distributors (e.g., Netflix)
Primary Revenue to Holders	Subscription-driven platform access	Revenue share (~55-60% masters, 10-15% publishing from platform revenue)	Pays ~70% of revenue to holders (variable)	Fixed lump-sum licensing fees or IP ownership	Fixed licensing or owns originals (no per-view royalties)
Marginal Cost Structure	Near-zero for delivery (bandwidth/storage)	Proportional to streams (recurring royalties)	Variable costs rise with usage/revenue	Upfront fixed fee (unlimited plays)	Fixed after acquisition; bandwidth only
Content Ownership	Holders license access rather than sell copies	Retain rights; perpetual licensing	No ownership; pure licensing	Retain/sell licensing rights; strong IP control	Increasingly owns originals for future value
Consumption Incentive	Scales with catalog size and user engagement	`` ++	Wants high engagement but pays more for it	Favors binge/complete viewing	Benefits from high consumption of sunk-cost content
Risk & Profit Model	High fixed costs; economies of scale at large user base	Stable but diluted per-stream payouts	Thin margins; freemium helps acquisition	Front-loaded, predictable fees	Higher margins possible; originals drive differentiation
Business Model Type	Platform economy with low marginal costs	Per-stream / pro-rata royalties	Revenue-share licensing	Flat-fee licensing or ownership	Fixed-cost licensing + owned content

The bottom line is that if an entity has a choice, it will want to be in the video streaming business rather than music streaming. 

The caveat is that some entities use music and/or video streaming as a “loss leader” to add value for some other product feature that actually drives the direct profits and profit margins. Amazon Prime video and music provide a good example.