Major Labels

Does Spotify Pay Major Labels More Than Indies?

image from The utopian dream of the Internet is that it makes artists equals. Each can have their music available on iTunes and have a webpage to call their own.

But do major label artists make more money per stream on Spotify than the indies like the xx?

New reports hint that this may be the case.

It's not that Lady Gaga may get paid more than an indie artist just because she's Lady Gaga. Rather, it's that the Universal Music Group – the label that backs her – was able to secure a better deal with Spotify than their indie counterparts.

Due to this, some indies have threatened to remove their music from the service.

Both Naxos, a music distributor and one of the world's largest record company in classical music, and ECM, a major publisher of both jazz and classical music, are warning Spotify that they will leave, New Affärer reports. These labels are upset over low revenue and can't figure out how the streaming rates are calculated

Since Universal Music Group is the largest of the labels, they were able to use their leverage to negotiate a higher rate and demand large upfront payments.

The label also secured a minimum rate for the ad-funded version of Spotify.

"You can't blame Universal for securing the best deal possible. After all, it has a lot of leverage, being the world's biggest music group. Spotify would be a lot less successful without Universal artists such as Lady Gaga, Eminem and Black Eyed Peas," Helienne Lindvall writes. "I do, however, have an issue with a track by Lady Gaga earning more money for 100,000 streams than, for example, one by Adele or the xx, just because Gaga is signed to a major label."

In my opinion, yes, artists should be compensated the same. But, in this case, you can't blame Spotify, as it's the majors, not them, that are the cause of this.

What's your take?

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  1. Pennies are still pennies. Probably the biggest artist on the planet is Lady Gaga and her statements from streaming are a joke.
    Does it matter about the rates if no artists are making money?

  2. How much of that money actually goes to Lady Gaga is the next question. If you are an independent artist you are likely to collect most if not all of the profits if you are a major label artist, I doubt you’ll see very much, after UMG takes their cut. James you do have a point, streaming hardly makes money, and that’s why a lot of people don’t think THE CLOUD will fix the problem and music will only be Harder not easier to monetize.

  3. I agree with both Chris and James’ points–particularly Chris’. Spotify may be great for the fans but any artist signed to a major label is going to have a hard time seeing their share of what little money comes in. If labels don’t account accurately on actual sales that you can quantify, they’re certainly not going to account accurately with regard to streams that an artist will have a hard time proving occurred because it will be difficult to get accurate data from the streaming sources.

  4. First of all, the internet is utopia. Why? Because it gives artists equality in ACCESS. Even my US-based college a cappella group is available on Spotify in Sweden. However, PRICE is a different story.
    It comes down to simple economics. If you sell more units, you can command a higher price. Simple as that.
    Instead of Universal, let’s take a big indie network like Merlin (illustrative only). Merlin wants its labels’ artists on Spotify (or Rdio, as they’ve already done). They know that Spotify needs its artists more than Spotify needs ECM artists. Therefore, Merlin can command a higher price. Your last paragraph implies that Merlin is to blame. I disagree. Just as much as Merlin wanted a better rate than ECM (or XYZ tiny indie label), Spotify was willing to pay a higher rate. Spotify knows Merlin (or Universal) songs will attract more users than ECM songs. Again – it’s simple economics.
    And by the way, if Merlin (or some indie rock label) tried to license music to some classical or jazz streaming service, they probably would get a LOWER rate than ECM or Naxos. Again – is this unfair? No.
    I understand the points in the comments. It is pennies right now. But no one can argue that streaming has already reached it’s inflection point. Those pennies are not representative of full potential. And if that potential doesn’t pan out, consumers will continue to buy digitally. Or steal digitally – which by the way means 0 pennies for Vampire Weekend or XL or Lady Gaga or Universal.
    This price disparity is the same for other content types. For example, established photographers command higher CPMs than amateur photographers, even if displayed on the same site. Shouldn’t they? If the amateur photographer gets big, their content becomes more valuable, and they can then command higher CPMs.
    In short, no one is to blame (except mr economics).
    P Con – noticed the same thing. Adele is Columbia (via JV with XL Records I believe) and I’m guessing she is probably covered under sony rates.

  5. I’m still not sold on Spotify. Artists need to be thinking about more than digital downloads, streams and physical sales. Licensing and publishing music are two of the most lucrative things creating revenue for music creators. Sadly most artist have no clue about either.

  6. ECM are a huge company, and their threat to remove their content, is maybe not as harmful to Spotify a UMG, but they still control a VERY big and important catalog.
    I think, as an indie artist, that Spotify just have to obey the conditions UMG had faced them, otherwise – no Spotify. no Spotify-no exposure for the indies.
    So, the world isn’t fair, and it sucks, but internet is just another method of commerce. Supply and demand, the oldest rule in the book.
    This wouldn’t and cannot change, and this Spotify thing is no different. you have to attract visitors by giving them a value that they are looking for, and UMG holds that value.
    It’s like complaining that an indie band would charge 5$ at the door, and compare them to Paul McCartney’s 100$ ticket. it’s a different supply for a whole different demand. The basics of commerce.

  7. Don’t understand why Spotify and the likes are considered game changers… They need deals with majors… Just another way to promote the same crap which doesn’t work anymore on radios etc.
    They just keep on the same things… CDs are gone, Spotify comes… for a while ? no added value, no revolution, IMO… what a shame…

  8. Boils down to whether you support capitalism or not. If so, it’s perfectly fine to use leverage to get better deals. Also fine (from that perspective) to use leverage over artists to pay them less….but unless labels are creating value for Spotify or artists in other dimensions, their position is untenable long term. Good news is that by the time the numbers become meaningful and some kind of overall solution to ‘how to monetize artistic talent’ shakes out, the labels will have lost that position. But it’s all taking way too long….

  9. It seems like everyone has forgotten that the major labels own shares in Spotify! Thus, im sure they have an agreement to pay the major labels smaller royalty fees.

  10. yes thei do. the major labels that owns spotify hawe own royalty fees contracts. i hawe a friend that works for one of them!!! major artists gets from 0,16 cent to 0,32 cent pr stream on spotify.

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