An Indie Label Shares What Spotify, Streaming Music Services Paid Them - hypebot

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evolvor

Real insightful blog post. Did I mention how insightful that blog post was?

Ophelia Millais

Why would you expect the same amount as you would for an iTunes download? If a streaming radio service charged per song-listen what iTunes charges per-download, they wouldn't be in business. If you don't like it, start your own streaming radio where you try to match your per-listen take to sales, and let me know how that works out for you. Tell your advertisers and investors that you need to pay out $1 per listen and see what they say. Go on, do it.

Scott Feldman

Why are we still having this debate?!? Spotify doesn't exist for artists to make money. If anything, and at most, it's an AMAZING tool for discovery and promotion. Nothing more, nothing less.

If you place music on your website for artists to listen to, are you going to complain when they listen and you don't get paid? Of course not.

Use Spotify for promotional purposes and help it lead you to the promi$ed land. Remember, your music is supposed to be free. I think I read that on Hypebot somewhere.

Spotidj

I don't agree. Spotify can become a money maker for artists. The data shows that the revenue from Spotify streams is already the highest, despite of the low rate per stream.

It may take a few years (like in Sweden). Just wait.

BTW the $.005 is exactly what my aggregator Zimbalam receives from Spotify. Zimbalam deducts 10% before paying me.

zoso

there is NO discovery within Spotify - people go there looking for what they already know...

Tom

not true. if i read a review of a band, or hear about them from a friend, Spotify is the first place i go.

also, how about this - i have seen a bunch of positive reviews of the new Japandroids album.. but it's not available on Spotify. so, i go on YouTube, search "Japandroids Celebration Rock", find a playlist of youtube videos with the entire album, and listen that way. Japandroids made $0.00 on that.

Yercustomer

Zoso, I'm sorry, but these are words of a fool. :)

I've got over 4000 songs starred and I'm guessing I haven't heard about 99% of them, and I'm slowly checking them out album by album.

Yercustomer

I agree that Spotify could make money, and they may be spot on with the low $10 charge (that's about what Netflix is), but I hope one day they up their service charge and start paying out a bit more money.

Sean Parker convinced Trent Reznor that the Spotify model could work. Trent Reznor. Come on, if you can convince Trent Reznor that your model works, it's probably pretty good.

We just don't get it yet. It's not a question of IF Spotify can start getting massive usage numbers, it's just a question of when. And once that happens, it'll be a different world.

Pete

Why isn't there a standard mechanical royalty on streams similar to what there is on CD sales?
Streaming services should not have the right to choose how much they share with artists, they should be mandated to pay them a set amount per stream - one that is substantial enough to be meaningful.

Economist

People...

There are only 2 ways that Spotify gets plays from music fans:

1. It 'steals' plays that would otherwise have occurred on other music sites. i.e. fans who would have listened to a song on site X instead listen to it on Spotify. A way to think about this is that Spotify is taking a bigger 'slice' of the same music-listening 'pie'. In this case, shifting listening to a lower-paying service like Spotify is BAD for rights holders in its current payout structure, as it shifts the listening from higher paying services to a lower paying service.

2. It creates new plays that would not have otherwise occurred. i.e. people who would have spent time playing farmville instead play less farmville and listen to music. This would be 'growing the pie' and would be GOOD for all rights holders, as this incremental revenue is now being added (albeit at the lowest payout rates).

So its really a question of whether Spotify is growing the pie (causing fans to listen to more music than they used to) or just taking a bigger and bigger slice of the existing pie.

There doesn't yet appear to be any evidence that Spotify is growing the pie, yet there is ample evidence that it is taking a bigger and bigger slice.

To believe that Spotify will begin to payout more per stream as they scale is a bit naive. They already play more streams (apparently) than many of their competitors (named in this article), and yet pay less for them. It would appear that either:
a) Spotify's cost structure is less favorable than their competitors'.
b) Spotify simply keeps more profit for themselves.

In either case, it is hard to cheer for Spotify to succeed if looking at it from the perspective of a right's holder. It is difficult to see a future in which Spotify pays out more per stream than the other sites, even as they scale.

I suspect that this is largely due to the nature of their relationship with the major labels - paying advances every time a deal needs to be renegotiated with one of them. i.e. the reduced per stream payouts that Spotify makes to right's holders is money that is ending up in the pockets of the major labels. Or, said another way, Spotify is taking money from the rights holders (in general) and paying it out to only certain rights holders that have oligopoly power (major labels).

If I were an indie artist or label, I would not hold my breath and expect that if Spotify continues to grow even bigger than the competition, you will get higher payouts.

Instead, I would look for them to go public as soon as possible (as soon as the facebook IPO debacle fades and the markets stabilize, which may never come).

In the meantime, I would continue to think about Spotify in terms of the discovery value it may or may not have, and use that as the lends through which you decide whether or not to place your music on the service.

One other possible outcome that seems likely is that Spotify may eliminate payments to indie artists altogether. Psychology suggests that if Spotify were to re-define itself as a place where indie artists can place their music in exchange for only exposure, indie artists might actually feel more satisfaction than they are feeling right now by measuring Spotify against an ROI mindset. Could be wrong about that, and don't know how legal that might be, but it would probably help solve their PR problem.

Kenneth

Here's my question: If Lady Gaga and Taylor Swift are getting majority of the streams (assumption only) then why is it a big deal to pay the same royalty rate to 'Insert Tiny Indie Band No One Knows' who is getting the smallest fraction of streams?

Why are the majors favored? Is it because they are the ones driving traffic to the service?

It should be a flat rate. If your music is bad and it only get's streamed 10 times in a month, congratulations - you get a dollar for .10 a stream. If you're Lady Gaga and get 1 million streams a month, congratulations - she made $100,000 in royalties. (*figurative/imaginary per stream rate*)

Spotify should level the playing field. At the very least, get it close...

David

BRUCE,

could you please explain the numbers and all the "equals" sign thing? I have no idea how to interpret the data. I don't know much about the subject.

- David

Morphiend Music

Agree !!

ictus75

We should really pay doctors by the spotify model, then everyone would have nearly free health care…

whocares

Exactly.

whocares

Very nice. Well said.

zoso

Sorry Tom, you are not DISCOVERING music on Spotify, you are going there to get it AFTER you have discovered it from a Friend, or a review of band, etc... those are the actually Discovery, Spotify does not help with that as you ALREADY KNOW what you are going there looking for...

zoso

You aren't discovering them on Spotify, you are FINDING them on Spotify and as such you are unlikely to ever pay for them.

zoso

ok - fanboi... sorry, currently spotify steaming pay rates are a FAIL.

Spotidj

So - spotify hater - ;) what would be a fair rate in your opinion?

Spotidj

I guess you are right. Spotify will not be able to pay much more per stream.

About 70% of Spotify’s revenues (advertising + subscriptions) gets paid to the rights holders of the music. This is before Spotify covers their own operational costs (which are still higher than the remaining 30% ) Each month the pay out is calculated based on the revenue and the number of streams.

How many songs do people stream? 20 songs per day maybe? That would mean 600 a month? Let’s say 700 a month for the sake of an easy calculation. You pay $10 a month, 70% is for royalties, so $ 7 is paid out to labels and artists. Now let’s do the math:

$7 for 700 streams means $0,01 per stream

Okay, this is in a perfect world where every user pays 10 bucks a month. You know that is not the case, only 20% is paying. Still Spotify was able to pay $ 0.005 per stream in March 2012. Not that bad if you ask me, advertising revenues are quite well I take it.

I do realize that this calculation is oversimplified, but it may explain why Spotify just cannot pay much more per stream, unless they raise the subscription fees or cap the number of streams per user.

Spotidj

Nope. You discover music in Spotify playlists.

Spotidj

You are paying for it by listening

Spotidj

Is not gonna work. You never know how many songs a user will stream. Fixed rate would be suicide if users stream more and the artists get screwed when users stream less. With less streams the service could pay more than the fixed stream rate.

Yeah

Really?

Trent Reznor has a RABID fanbase that would be willing to pay for anything he puts out.

He has nothing to worry about when it comes to his financial well-being and content sales. His opinion on the matter is really neither here nor there.

Yeah

This is really still an argument about transparency in the end, because while Spotify's 90 day cycle of value creation and payout is in essence viable, how they employ that in the grand scheme has still not been made clear.

Let's get real. Artists power the service. Some of those artists (many) are signed to labels, that's their lot and they deal with their rights ownership and profit splits accordingly. However there have been literally HUNDREDS OF MILLIONS poured into the company to cover "operation costs" and expansion that have nothing to do with the advertising or subscription funds accrued. As paid and unpaid user numbers rise, we should be seeing more significant spikes in the per spin value and overall payout to rights holders.

Some theories point to the idea that this is in fact just another hard push towards an IPO that will payout the Creators, Investors, and labels who have stake in the company. At the end of the day, none of that would necessarily benefit the artists until the service grows and real transparency is shown in their accounting.

Paal

Numbers out of context isnt of very much use.

Is this a well known label?
Is this back-catalog or new releases?
How are these numbers compared to income from iTunes?


Mangee

Why is the revenue of a stream always compared to one of a download? These are two different things.

Ant

Boy oh boy; am I getting TIRED of the endless debate! (round and around and around in circles we endlessly spin) People: do you think it ever possible - in this limited lifetime - to extricate ourselves from Spotify and facebook, please?! They serve only themselves. Traditional media still rules and I would advise all to concentrate a greater effort on promotion through those channels. Abandon Spotify, FOCUS on your own site - primarily - and avail yourselves of the services that reverbnation, and their ilk, provide. Interestingly, recently more individuals seem to be signing up to it, and not just musicians. Seems like some may be cottoning on, finally.

Seth Keller

I agree with zoso, Tom. Discovery would imply that you stumbled upon a band on spotify that you never heard of...like randomly walking into a club in Hollywood in the old days and seeing some unknown band that blew you away.

I use spotify all the time and discovery in the purest sense has never happened. I have "discovered" that I like an artist that I read about or heard about elsewhere...spotify is great for that, but that's not the same as discovering that band's existence.

Zoso

shhhhh... the adults are talking...

Zoso

10 cents per play

Zoso

non-fixed rate may be suicide, for spotify... the only reason spotify exists is because the major labels have equity in it, that they don't pay to artists... grossly unfair,

how this isn't an anti-trust issue is beyond me.

every artist should read this:
http://thetrichordist.wordpress.com/2012/04/30/spotify-is-not-good-for-you-complete-post/

Zoso

Nonsense. Spotify is being valued at Four Billion Dollars but has no money to pay artists? That's just a lie!

Zoso

the numbers are streaming rates, none of your questions matter, that would only change the amount of plays.

Zoso

well said!

Zoso

the rates are prior to distribution fees...

Zoso

Nope, not really. Whose Spotify playlists?

Zoso

Spotify is a ripp off, one step above piracy.

Scott Pactor

The issue that is never mentioned in these articles is that spotify pays different rate in different territories, and i assume this a function of short term agreements and renegotiation, similar to what happens with the way professional sports league adjust salary cap based on total revenue. This is important, since it means territories where spotify is more established pay higher royalties.

indie

On CD Baby indie artists are paid per stream after CD Baby gets their share. Looking at the pay per stream I see:

.0013, .0023, .0029, .0040, .0049, .0052, .0072, .0112

Don't know why some streams pay more than others.

Spotidj

Your friends'

Spotidj

Can be done but that would mean a $100 a month subscription. I'll start the service, will you be my first customer?

Spotidj

Being valued doesn't mean you have the money in your bank account.

Spotidj

CDbaby gets a different rate for every tier ( Free, Unlimited, Premium and people who have a free Premium account through their ISP or Telco). So in this case the payout is calculated from the revenue of this specific tier in the given month. In some cases this even leads to a payment per stream of $0.0111.Confusing, but in average the result is near to the per stream rate of $0.005 mentioned above.

Paul Kamp

Exactly. Think about what it cost for promotion before and what an artist would get paid for play on a terrestrial radio station.

The enemy of the artist is that no one knows you not piracy or streaming rates.

zoso

or, maybe the model just doesn't work! doh!

don't be surprised when more artists remove their music from Spotify... list already includes The Black Keys, Paul McCartney, Cold Play, the entire Projekt label and more!

zoso

but it doesn't mean they're broke either... how about sharing some of that equity with the artists!

zoso

What if most artists just decided to Opt Out of Spotify?

Robbie Fields

I believe the underlying anonymous article from The Trichordist is a hoax. Strange that it took more than a month before going viral.

The article does not withstand any type of basic arithmetical or empirical analysis.

My label is half the size of the purported, anonymous one.

The streaming/download ratios are all over the map.

Which ratio do we use to compute actual iTunes sales?
If we use the Rhapsody ratio, we come up with circa. 1000 iTunes downloads, which seems low for a 6 month period.

The Spotify ratio would give iTunes downloads of circa. 5000.

Without the one outlier outselling album among my 43, my iTunes sales figure would roughly match up with this. Otherwise, the implied iTunes sales figures are too low.

Now I have gone over my reported royalties for 2H2011 and royalties for Rhapsody, Zune, Napster and Spotify are all at the same miserable level, none of them achieving $250 in cumulative royalties over the period cited. And Spotify lags Rhapsody in the U.S.A.!

I am crying foul. The Spotify royalties cited here bear no relation to the other royalties quoted and would be indicative of a label having a million selling title during the reporting period.

I would be ecstatic if getting even $750 monthly (on a comparative basis) from Spotify. I am under 5% of such.

LostInDigital

Why are you guys always complaining about Spotify?
If you're not happy please just take down your music from the service...
Spotify is great for discovery, not for making money.

Robbie Fields

I now see where the original post employed poor editing.

Spotify: 798,783 = $4,277.39 = .005 = 140:1 iTunes Song Download

Should read have the descriptor "Amount for" or similar added in this line item, otherwise the language indicates ratio for numbers of downloads not amount paid.

The third "=" sign is inappropriate. "=" does not mean "represents".

So, what's newsworthy about 70 cents per iTunes single download? Without knowledge of this label's actual iTunes unit sales, where's the meaningful correlation?

clazar

I think you're wrong on this one.

I agree, that everyone finds their own way of using the service and there are certainly a lot of users not making the most of the benefits Spotify has to offer to the music listener.

Although I don't have any hard numbers to back it up, I experience a lot of music fans open up their listening behavior, checking out new emerging artists, finding old classics they might have ignored previously and the sharing of tunes between friends on Spotify and via other Social Sites such as Facebook is on the rise wherever I look.

It's just taking off now. And it will take a while for people getting used to the Spotify environment. Just as it took people selling their CDs and vinyl and moving to music digitally on their iTunes/iPod a few years back.

Spotify takes this a step further with quasi-cloud based music collections but once people start getting the hang of using/maintaining online/offline playlists I'd have no doubts that this will be the future for music listeners.

I'm a Spotify advocate in terms of the technology and how it will shape the listening behaviour of the future. Artists would be mad not to embrace this service. This is the next step, no doubt. You can't turn back the clock.

There're certainly areas of improvement in terms of pay rates to the artists and I'm all up for hitting the barricades but hasn't that been the story of popular recorded music since the early days of Bill Haley and Elvis Presley?

While campaigning for better cuts, emerging artist need to embrace the platform now and for the time being use it as a viral marketing tool.

clazar

Coldplay are on it. That was a marketing move to have the album delayed on Spotify to guarantee chart placement. Worked and now the new album along iwth their entire back catalogue are on SPotify. I'm streaming as we speak ...

MusikleighAlive

The Black keys and Paul McCartney were on last time I checked (just now). Correct me if I'm wrong. As far as I can tell, most musicians are slowly conceding to Spotify, not retracting from it.

Raoul

Ahhh nice to see the 'Discovery' debate happening here. Having previously worked at a relatively well known streaming service I can say that the one's who say they offer 'discovery' it's just a load of cobblers. They push their 'intelligent radio' or whatever you want to call it solely to reduce their costs. The cost of an on demand stream is 10x the cost of a 'radio' stream where the user has no real control over whats coming next (or knowledge usually). They then rely on the user telling the service that they 'like' that track, so the service can reference echonest, the filter, last.fm or another such service to provide 'recommendations' - DISCOVERY.

Face it, it's cobblers. Spotify rules the roost, should rule the roost and all of these crumby radio services should just find a way to innovate for real rather than just copying eachother.

Nelson

At this point in time to there is no way to say if spotify is a great deal or not simply because it alone is not the music total market for any artists, band or label nore is any digital "distributor". The writing is on the wall (note mergers over last 6 months) there needs to be a Clicks to Bricks Distribution strategy in place for your release or you only getting to part of the market and until that is happening discussing music in a silo will yield incomplete data.

Dan Charles

Erm....none of you guys have even mentioned the related artists function or the soundrop app. I have found no less than 30 new and never heard of artists through those functions in last 4 months alone. I will categorically state I had never heard of any of these artists through a friend or any other service. All of these artists have now been heavily listened to, shared with friends, added to playlists, purchased mp3's (through spotify) and I have also looked at purchasing tickets to some of their tour nights. Now if spotify could sell tickets and merch too, they could make a massive killing. But to say you dont discover on their is just plain stupid. I think as well people really need to stop comparing a single sale with a single stream.

I buy 1 track for 99p I could listen to it once or a million times, I could also upload it and share it with 100 friends and the artist would see nothing other than that 99p

I listen to the same track on spotify and what happens? I never own the song, it is leased to me for as long as I wish and everytime it is played the artist gets a lil something. If the tune is good I could listen to it 50 - 100 times maybe more, not to mention it is being highlighted as a favourite to all my friends, who could do the same. the difference is, if I share this with my friends on spotify, the artist gets paid for listen.

Digital download - short term fix, limited legal / awkward shareability

Spotify Stream - Long term earner with far more powerful ways of being heard by more people. easy to share in a completely frictionless and legal way!

Dan Charles

everything you have said here is great -

but pay rates will increase when adoption builds some serious traction - at the last count spotify only has a bout 20 million subscribers (please correct if wrong, but I'm sure its not far off) - lets be honest 20 million of anything, really isn't a lot in this day and age (pre tax and expenses, I'd say spotify would be lucky to see £100 million out of it before paying any royalty, now imagine 200 million, I'm sure you'd see a massive rise in the royalty payments, if not purely through the sheer volume of extra plays on a good song, (a bad one will always collect dust)the payments would go up because spotify had 200 miilion subscribers at £10 a month compared to 20 million - its a numbers game!:)

will

I discover music all the time on Spotify. In fact, it has completely rekindled my interest in discovering new music. I discover via friends' playlists and recommendations from articles etc.

Gianna

Songkick app in Spotify looks at the artists in your Spotify library and location and tells you which artists are playing near you. Links are provided to purchase tickets.

Chris Morgan

Spotify was terrible for discovery until they debuted apps. Now most of my listening is discovery through Last.fm, Pitchfork, We Are Hunted, and the many, many other apps that provide a lean back experience. I have never heard most of the stuff I listen to, I just hit play when I get to work. I discover new stuff all the time. And if I like them I just might go to a concert. I've done that before and that makes the artists really happy. There is much to debate about the economics of streaming, but Spotify has brought in 3rd parties to help them become a great service for discovery.

Sean

Spotify would be better if the artist was paid at least
2 cents per stream, fans who love this artist would definitely feel better knowing they are helping the artist they love by streaming their music, they might even play it more, I would. Artist have been getting jerk around for to many years. Record labels suck, not the streaming sites. The check first stop is to the record label and then it some how mysteriously dissapears without a trace, or 2 cents turns nothing, or should I say, nothing for the artist.

H.G.

I'm a big time Spotify listener and also a musical artist formerly on a major label and now independent. I also work for the estate of a classic artist and see the royalty statements that come in from digital streaming services.

It's my opinion that Spotify is the coolest, biggest music juke box in the world.

I think that the free tier is one thing that is preventing a fair pay-out. It has been great for us consumers to discover Spotify itself, but should now perhaps be adjusted....like Hulu adding Hulu+ for total access after offering everything for free for a while after their launch. I have never paid a dime to Spotify, but if it was a $10 per month service, I would subscribe....just like Netflix. At that point, I would venture to think that the per-stream rate could increase. (fingers crossed - there's a potential greed issue here and a minimum payment rate that could be legally upheld in a court of law).

Music creators are paying for their every service...CD Baby, Tunecore, web hosting, FB promo, rehearsal time, musicians, gear, photographers, CD replication, Logic, ProTools.

People will pay for access. It would be a game changer to flow a significant amount of pennies back to copyright holders.

For those of you who cannot understand why this is even a discussion, I must venture to think that you have not gone through the creation, recording, promotion, and touring process of materializing a musical work. Obscurity *is* the enemy of the artist, but no chance of making minimum wage even after you've invested and gained listenership is a whole other thing. Level the playing field. Make it fair. Artists provide content, joy, enthusiasm, art & entertainment and get paid scraps dead last after everyone else takes their cut, gets their company-provided benefits and goes home. I'm talking about Spotify employees, CD baby employees, mainstream listeners with normal jobs, Universal Music Group, Sony BMG, indie labels, venues....everyone else. And I like those people! Not hating, just saying....we need to get our eyes checked & our fridges filled too.

My main point here is that a monthly subscription + a change in the streaming rate for all digital streaming services could possibly be an amazing way to flow prosperity to everyone.

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