Spotify Payouts – The Strangeness Continues

This post is by Faza at The Cynical Musician.

image from inspiredworlds.com When I originally wrote about the Spotify payouts for my music, I noted the large divergence between the minimum and maximum amounts paid per play.

From what I’ve read elsewhere, nobody really has a clue as to how the rate per-stream is calculated (other than Spotify, of course). 

I was mystified as to the spread of the numbers at the time of writing the previous post and, if anything, I’m even more confused now that I have the benefit of a much greater sample of accounting statements.

One thing that hasn’t changed over the past months is the average rate per-stream, which tends to hover around 0.16 cents. However, this is an arithmetic mean that really tells us nothing of the kind of money we can expect from having a play on Spotify.

To give you an example of how wacky things get, one of my most recent statements – for last December – shows 25 plays rated at around $0.0005 each for a total revenue of $0.0136 and two plays of the same track rated at $0.0066 each, giving a revenue of $0.0132 for those two plays. Based on that statement alone, one might infer that 25 plays are worth the same amount as 2 – again emphasising that we’re talking about plays of the same track in the same period of time.

As mentioned, the mean rate isn’t really reflective of typical Spotify payouts, so I took some extra effort to analyse all data I have so far. First off, the median rate is just over $0.0006 per play, less than one-half of the mean rate. Worse still, the modal rate is only around $0.0005, confirming what we’ve suspected thus far – the majority of your Spotify plays will pay peanut crumbs. The minimum rate-per-stream I’ve recorded was $0.00019 – I shall henceforth refer to it as the Lady Gaga rate.

However, these laughable amounts are partly offset by much higher rates that crop up every now and again. We’ve seen an example of that previously, so for completeness let me also quote the highest rate I’ve recorded, which is $0.0085. Now, that’s a different matter entirely. Such rates are comparable to Rhapsody (by far the best-paying streaming service I’ve seen to date) and would actually render Spotify meaningful as a revenue source. At such rates, you’d only require around 75 streams to generate the same revenue as a single download of the song – for heavily listened-to material, it might actually make streaming the more advantageous option.

Nevertheless, such high rates-per-stream remain the exception. It remains to be seen whether the growing number of Spotify’s paying subscribers will lead to an increase of their rates-per-play. As things stand, I’m willing to give them the benefit of a doubt, though I would appreciate more transparency regarding how much they pay and why.

If your music still isn’t being distributed to Spotify, I see little reason for you to hurry. The only scenario where Spotify availability makes real sense is if you’ve got a ton of fans who are Spotify subscribers, but aren’t buying any recordings from you at present. Otherwise, you might as well wait and see if the situation improves. Aside from the whole issue of rates, Spotify probably won’t do much for your exposure either. It’s an on-demand service and while it does offer some discovery tools (such as playlist sharing, Facebook connection and a related artist feature), it’s unlikely that these will be of much benefit to you unless you already have a sizeable audience using the service.

Taking everything into account, the evolution of Spotify may prove the most interesting new music business case study in the coming years.

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  1. I go through CD Baby, but I doubt this has much of an effect. They take 9% of receipts from the digital distro partner, so the numbers already account for that.
    I have two guesses as to why the numbers are such as they are:
    1. they reflect revenue from different countries that Spotify operates in,
    2. there’s a different rate for streams by paying subscribers and users of Spotify Open.
    It’s also possible that both are at work at the same time.

  2. Is it possible the payout is increasing as subscriptions increase? I don’t know much about spotify but I would assume revenue is being equally distributed per song stream, however the more money coming in, the more goes out, as long as subscriptions rise faster than the number of artists songs available. Just a thought…

  3. I signed up a client with Spotify through Zimbalam last year as an experiment to see how many streams would result and what the payout would be. From August through December 2010, her music was streamed 6135 times on Spotify and the payout was 11.59 Euros or 0.00189 per stream.

  4. The are only two people making money off of Spotify and other streaming companies: Record companies and venture captial hoping to sell Spotify.
    Record company takes huge advance and never remit to any artists.
    Spotify is backed by VC money who hope to sell the company within 5 years of its investment.
    Artist is fucked again.

  5. There are two different rates of payment, a rate for ad-supported users and a rate for premium users. So, if you have more premium users, you’ll earn more money.

  6. What? Don’t put your music on Spotify? Strange advice. Most artists put their music on YouTube, Soundcloud, etc for free, so that their music can be discovered and listened to by fans.
    There is so much you can cash in on, other than the music. Get your music out there! Make it easily available! Don’t turn your fans into pirates. I think the advice is a bit short-sighted and I really hope people don’t take it into consideration.
    As for that Lady Gaga figure… I don’t know why people keep bringing that up. Daniel Ek (CEO) has refuted it a bunch of times now. Check it out:
    To end on a more positive note: thanks for sharing those numbers. They are very interesting! 🙂

  7. @Bas:
    A lot of what I write (this is my first appearance on Hypebot, but The Cynical Musician has been going for years) challenges conventional wisdom, such as “put your music everywhere”.
    Yes, there are tons of things you can cash in on, starting with a day job – and that’s all that needs to be said. However, it really doesn’t matter if you aren’t making money because your “fans” are pirating your music or if you aren’t making money because your music is available legally on sites that pay little or nothing.
    One of the reasons musicians (and creators in general) are being stiffed on the bill by Internet-based distributors is that we’re prepared to give our product (which makes such services valuable in the first place – what’s Spotify without a music library?) away for a pittance, in the vain hope that it will lead to something better in the future. It’s just not gonna happen and I’ve written why elsewhere on my blog.

  8. Guess 1.
    In my statement pay out for every country is the same.
    Guess 2.
    I did an experiment by asking Premium users to play one particular track. No difference. Same payout for all streams.

  9. @Bas Thanks for the link to the BBC article. What Daniel Ek says there has become reality.
    The pay out per stream is still rising like I mentioned in my first reply.
    I will have new data next month and will publish them asap

  10. Eh… Why is this even a topic of conversation? After tons and tons of streams the artist is looking making pennies?! Any halfway decent musician can stand on a street corner, bus stop, or subway station and make more in two hours than what they’d make in two months! The bigger problem that should be addressed is the over saturation of music streaming/download/blogs. There are too many that don’t really have the necessary capital to advertise and bring real attention to their sites. THIS is why iTunes is SO successful! When you turn on your television or walk down the street THERE they are! Spotify or any of the other numerous websites hawking music? Nowhere to be seen! The problem is that there are so many unsigned, indie artists that are grasping for any sort of attention as possible, so they are enabling all these services that don’t really do anything for them besides use them and waste their time!
    Free album downlod at http://www.facebook.com/chancius

  11. The main reason that Spotify is a topic of conversation is that it’s huge in Europe and growing. It remains to be seen if and when they’ll finally be available in the U.S., but believe me – you’ll know when that happens.
    The other reason to understand how Spotify stands to affect artists is that there’s a good chance on-demand streaming will supplant downloads in the future: why pay Apple a dollar for each song downloaded when you can listen to all the music you want for just $15 a month (say).

  12. There is a specific calculation done on royalties from Spotify. Deals dont vary depending upon aggregators.
    Spotify have the major labels as part owners. Thus, royalties rates are obviously different.
    Additionally, its absolute stupidity to think that Spotify is a viable revenue stream at the moment. The aim of Spotify is to get your music to the masses (marketing). Its the best marketing tool around if you can get a lot of listeners. Then you can see if those listeners want to see you at a gig, etc, etc.
    Its about time this blog wakes up to the world of online music!

  13. It would be interesting to compare Spotify’s payout to Rhapsody & Napster… can anyone come up with details?
    Thanks for sharing the knowledge!

  14. Going through CD Baby, Rhapsody pays 0.91 cents per stream, plus around 0.02 cents in mechanical royalties. Given that CD Baby takes 9% of digital distro receipts, I’m guessing that they pay 1 cent per stream (plus mechanicals).

  15. Sure. I work for a distributor and we share this information with our clients in their workstation.

  16. The way I see it, unless we’re going to roll back the internet, that is the reality anyway. Even if you’re not prepared to hand it over for a pittance.
    I approach music from a different angle than you do, but I think it’s very important to realize that in the artist-to-consumer relationship, the music is NOT the product.
    The consumer doesn’t pay for your music, it pays for CDs, merchandise and services to access your music.
    I think seeing the music itself as a product is an error which often frustrates many of the monetization efforts bands undertake.
    Again, it’s good that you’re raising this issue with Spotify, since I’m sure they will read this and it will keep them feeling pressured to serve their ecosystem of artists and fans.
    Going to be subscribing to your blog. I like the way you challenge conventional wisdoms and I hope having discussions with you will help us come to new insights or at least strengthen our own visions. 🙂

  17. Deals do vary depending on aggregator. My own aggregator – The state51 Conspiracy – is a member of Merlin, and we got a much better deal through Merlin than we would have got trying to negotiate directly with Spotify.

  18. Thanks for the comparative information. I too am on the fence about Spotify, the statement I get has a lot of play and the same rate ranges (through CDBaby). The rates add up to something – but is it better than nothing? Perhaps.

  19. To me its about seeing the world the way it is and not the way you want it to be.
    Consumers are already not paying for music and streaming it via YouTube, etc. Why not Spotify, et al? Over time payments will improve (as it scales) and opportunties to sell (music, merch, tix) will increase.

  20. But it’s our world, isn’t it?
    I mean, there’s no Word of God that decrees it must be so. This isn’t the law of gravity we’re talking about. The way the market for music works is determined by humans and if we don’t like it, we can change it.
    I don’t see the future in fatalistic terms of “well, that’s just how things are” and the last thing I’d recommend is communal back-patting and telling ourselves how great things are right now. The way forward is to identify problems and fix them.
    It is possible.

  21. I do so agree, Faza.
    We do have the power to influence current events.
    A lot of ‘consumers’ don’t want to pay for music. True. But a lot of music lovers do pay for music. So who do we want to focus on?
    We can either strengthen the idea that no-one wants to pay for music anymore, or the idea that genuine music lovers are keen to carry on purchasing music.
    Which vision of the future do we wish to promote?

  22. So who do we want to focus on?
    I guess we should focus on all music lovers. The ones who don’t pay now may start paying later. A service like Spotify turns illegal downloaders in to paying customers.

  23. “But it’s our world, isn’t it?”
    Welcome to the Music Industry of the 1990s!
    It’s the music consumer’s world. They decide what they want.
    We have to provide them with solutions in-line with how they want to consume music, not how we want them to consume music.

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