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Spotify Responds To Artist Payments Controversy

image from www.google.com (UDPATED) In an email to Hypebot over the weekend, Spotify responding to our post last week "How Much Does A Band Earn From Each Music Platform?" which shared payment figures provided by indie rockers Uniform Notion from various music streaming and sales platforms. According to Spotify:

"Spotify does not sell streams, but access to music. Users pay for this access either via a subscription fee or with their ear time via the ad-supported service [just like commercial radio] – they do not pay per stream. In other words, Spotify is not a unit based business and it does not make sense to look at revenues from Spotify from a per stream or other music unit-based point of view. Instead, one must look at the overall revenues that Spotify is generating, and how these revenues grow over time.
 
Spotify is generating serious revenues for rights holders, labels, publishers and the artists that they represent.  We have paid over $100m to rights holders since our launch, and the overwhelming majority of our label partners are thrilled with the revenues we're returning to them. Spotify is now the second single largest source of digital music revenue for labels in Europe, according to IFPI.
 
It is also important to note that Spotify was created as a better, more convenient alternative to piracy. Estimates suggest that around 95% of all music downloads are illegal. Spotify is now monetising an audience the large majority of whom were downloading illegally (and therefore not making a penny for the industry) before Spotify was available.”

UPDATE: Spotify has now offered an addtional response here.

There's nothing written above that I disagree with.  Nor did I think that listing what a band gets paid puts Spotify in a bad light. What do you think?

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56 Comments

  1. What worries me is that everything today is a good promotional tool. Artists don’t need more promotional tools as much as real revenue streams that can sustain an artist throughout their life. I expect that in a decade or so this will all sort itself out. Otherwise we may have a music business made up of people who are poor but REALLY popular on Spotify.

  2. “the overwhelming majority of our label partners are thrilled with the revenues we’re returning to them”
    I would like to hear some “thrilled” testimony from the “label partners” themselves, and not just what Spotify wants to tell us they’re saying.
    And yeah, for labels with aggregated content the fractions of pennies may add up to some meaningful nickels or dimes, and that might be an improvement over “zero.” But asserting “our service is better than piracy” is really a matter of choosing your poison, because at the rates that services like Spotify actually pay out, the end result is the same: slow death for content providers
    Streaming subscription services are great for consumers. I love and will stick with MOG for the time being, thankyouverymuch. But until what is great for consumers translates into a better deal for the actual content creators, the model is going to be challenged – to put it mildly.
    –PS

  3. This just sounds like a well-written way of skirting around the truth. “It’s not important to note the per-stream payout, but to instead look at the other revenue streams, and the breakdown of those.” Ok Spotify, want to share that breakdown?
    Also, alternative to piracy, still sounds like piracy.

  4. Its like they said, they aren’t here to replace sales. If you have been getting 5000 streams per month on Spotify then ask yourself, how many of these would have been actual sales?
    An average conversion rate for any business is about 0.04%.
    I have spoken at great detail of how to manipulate Spotify to increase fans and generate sales. People who look at it from a purely statistical viewpoint are missing the whole argument
    You can see my latest blog here 7 tips to promoting your music Spotify
    Lee Parsons
    CEO Ditto Music
    http://www.dittomusic.com

  5. Pay no attention to the bands behind the curtain.
    Holy slight of hand press release from Spotify. Don’t look at the fractions of a penny we pay to each artist. Look at the total we payout across all entities.

  6. Fucking hillarious!
    Hey Spotify, this is the problem. All the money goes to labels, and mostly major labels.

  7. There are a lot of opinions in these comments from people who have no idea. Lots of commenters put words in labels, publishers and artists mouths none of which I’ve heard come out of any significant label, publisher or artists mouth’s who has actual knowledge of the deal.
    Also it should be noted that Spotify is NOT trying to brush this under the rug, what they’re saying without being able to say it (because legally they can’t share what their agreements which each respective company is) is they don’t pay per stream, how this band justified their payments was inaccurate because the band doesn’t actually know what the agreement they’re in actually is… If they did they wouldn’t be posting on here as anyone who has intimate knowledge of this or any type of new deal can’t share the details of their deal, so it’s merely assumptions which are inaccurate.
    Spotify is saying without saying it that you need to look at the number as a whole because they don’t pay on a per-stream basis, they pay out based on market share. So you getting 1 stream or 1 million streams is irrelevant on its own, you need the overall subscriber number, ad sales number (with CPM of each ad sold), total dollar amount and total stream number to actually break down what you make… The payments each time will be different based on your market share, how much of their ad inventory is sold, at what CPM and the amount of users converted to paid subscribers.
    This is a critical mass model being judged 3 months into its existence in the US. Lets at least give them some time before we claim they’ve failed.

  8. It must be frustrating for the indies to know they’re getting a worse deal than the majors.
    It must also be frustrating for Spotify to have to be secretive about their deal with the majors.
    The fact is, a large proportion of what Spotify has to offer is controlled by the majors so they need them. It’s just the way it is.
    I support Spotify and think what they’re doing is great, and it’s not any surprise that they’re a bit tongue-tied in these sorts of statements.

  9. Regardless spotify, my artists don’t care about the total revenue you make the industry, just their payout, which is based per-stream. Where you base mechanicals off and how I must pay them…and you pay less than Rhapsody, Rdio per stream.

  10. Yet again, a vague, non-answer from Spotify.
    I’m sure Spotify is generating some money for the big labels. My beef is that they treat indie artists like second class citizens: they pay different rates for different artists, based on the secretive deals that no one is allowed to talk about. Read this Guardian article:
    http://www.guardian.co.uk/media/pda/2011/feb/01/spotify-royalties-independents
    The end result is that a major artist makes more per play than an indie artist.
    They’ve never responded to that one as far as I’m aware.
    Anyway, I don’t know what my Spotify revenue would be since I’m not up there. Its not for any ideological reason but because I have direct deals with my digital distributors (like iTunes) and Spotify only accepts from aggregators. I’ve yet to find an aggregator that will allow me to pick and choose which streaming music services I want to be in, and at the same time be ok with not handling my iTunes or Amazon mp3 distribution (which is where the real money is).

  11. “the overwhelming majority of our label partners are thrilled with the revenues we’re returning to them”
    Yet there are labels that have pulled their artists/releases from Spotify because there’s no real money for the artists to make. While the basic idea of Spotify is better than piracy, the pay for indie artists is about the same…

  12. not very convincing. and they didn’t address the question. there’s no reason at all NOT to look at how much an artist makes per stream because that’s how it’s monetized for musicians and spotify pays horribly. in fact, spotify’s model ensures a future where only the very biggest artists can make money from recorded music.

  13. I really love this as a conversation. spotify makes awesome points but I feel like what the first hypebot article wasnt about spotify being sucky pay, but about how everything is sucky pay. and spotify responding with a something is better then nothing attitude is true…but not quite…right? i guess…idk I just really like this as a conversation.

  14. Hard to know where this will go, certainly no advances paid to smaller labels or artists. Not allot of money for sure although subscription streams better than ad streams. Here is another major problem, as an artist in Ireland can’t create platlist at all!!! and then with US important market not a clue or way to see what happening with your music or no way of promoting. This is big problem really! So you wait in hope to see lots of streams and as rightly pointed out not allot of $ but at the same time at least it does get the music out there but it needs a better approach to each genre of music and in particular artists who provide allot of catalogue within a genre. Not to mind giving artists from non Spotify countries access. Must say since we7 launched in Ireland wonderfull to all Irish artists.

  15. what a load of tosh from Spotify. I’m an independent artist and have pulled all my music off the service.
    The vast majority of people like me get precisely zero from Spotify, and never will do.
    The ‘promotion’ argument is just a slicked-up version of what the pirates have been saying for years. I’d rather people just straight-up fileshared my music than used spotify. At least there isn’t some hideous yank getting fat off my music if you just steal it.

  16. As a niche micro label we find Spotify to be an useful part of what a “release” has become. We look at it in a similar manner to radio play. I do not yet have full numbers for Spotify in the US, but since our releases have been available through Spotify in EU, digital downloads in EU have increased significantly. (we have no marketing $ in EU) Time will tell if this trend continues. So while the $ from the play is low, it is money and it seems so far to be driving additional sales.
    Having said that – the original article does not in my opinion ding Spotify. Like most everybody else, when I see a monthly revenue report that shows # of streams and total $, I divide streams into $ for $ per stream. This is so that the report makes sense in context of the iTunes, Amazon, emusic, Rhapsody etc reports. But the deal seems to be that you are paid based on popularity. And the Majors get paid more because they have the influence to be more popular.

  17. I can tell you this much. A client of mine made $350.00 last month from iTunes, and $2.25 from Spotify.

  18. Have you ever received a payout from Sound Exchange? From the last article, Spotify paid EUR 0.0029 per stream to the artist but the “statutory rate” SoundExchange would pay is only EUR 0.0012 — less than half what Spotify would pay.

  19. Audioswhite, you’re totally correct for today, at this moment. The problem is the future, when no one will download (i.e. purchase) music again due to quality streaming from anywhere. As everything moves to the cloud, so will music, of course, and when any record ever made is in your pocket, you’ll have no incentive to buy a pay for it, UNLESS Spotify stops misleading its users into thinking the artist is being taken care of. I stream all of my records for free on my site and on bandcamp, but there is a “buy” link always present, so that the listener knows they don’t own it and that what they are hearing is simply promotion. Spotify misleads the user into never desiring a purchase. For now, it can work for promo, but after a few years, if it stays as is, sales will plummet.

  20. In addition, the major labels own a big chunk of the company, which accounts for their advantage. The ad revenue from indie artists goes to major labels they aren’t associated with.

  21. It’s been always obvious that the money goes to the recording companies or the representative parties. What we want to know is ‘does the money goes to the recording company go to the artists?!’

  22. Well rapidshare and the like do make money off of the ads they have on their download page.
    But I do agree that Spotify is piracy. They even use P2P technology too!

  23. transparency should be in effect here; whatever Spotify pays for any master per stream should be a statutory amount, no preferential rates for majors!

  24. I agree with some of the previous comments. They don’t say what they pay, and therefore come off looking more suspect. Spotify has been around long enough to have seriously resolved this issue, but they haven’t.
    Either way, no Indie or DIY artist and earn anything close to a living income from Spotify or any so-called streaming service as this would require over 100,000 streams per month.
    It almost seems like they are taking their play book from Netflix.
    Come on Spotify, Eschew obfuscation.

  25. So the earning power of being on a major label is greater than being independent? Forgive me if I’m not rocked by that revelation.
    You have to look at the cross-market truth in all this: The money flows from those in need towards those who supply. Spotify (and others) need the majors on board in order to create a viable market. They capitalise on those big names to grow their userbase to a size where – you know what? – it wouldn’t be unheard of to get the kind of mass-listener figures the independents “need”.
    Imagine Spotify is a festival. The majors are bringing their huge acts and paid a big slab of sponsorship. All the posters have the big names on them & those names get wined and dined. Now imagine you are an independent who has been allowed to play at that festival. Do you expect the same treatment as the majors? No, because you are just thrilled to be getting your music in front of all those thousands of people – people who are only there because of the majors. You think Spotify can afford to wine & dine everyone? Of course not.
    A festival is also not the sole thing that’s going to buy you your retirement.
    So why not turn to the *advantages* of being on an indie? Put out extra material via your site, or a gig-only EP. Make it clear these are uber-fan *exclusives*. It’s a lot easier without a major breathing down on your to protect their “brand”. Hell, use kickstarter (http://www.kickstarter.com/) to fund your next album. If people can dig your other work without shelling out upfront they’re going to be in a much more generous mindset about shelling out some cash to get your next set of tunes off the ground. You’ll have the costs covered before the aggregator has even seen it.
    Or, y’know, grow your fan base and get signed to a major. If your music was really that financially viable to begin with, it’s a wonder they haven’t snapped you up already.

  26. Yes, Spotify may pay slightly lower per-stream rates in comparison with premium only streaming services. But Spotify is still generating much more money for artists/labels thanks to being the biggest subscription service in the world.
    Getting a high per-stream rate is worth nothing if you can’t get enough listeners to make money from it.

  27. most indies are with big enough distributors who demand the same rates as the indies. sony for example is tied in with IODA .. therefore anyone with them will get the ‘preferential’ deals. this is all just about a bunch of indies crying just like lars ulrich did with napster. same thing. this is a chance to embrace something where the artist actually get paid. the industry is changing with the technology. i suggest these indies stop the LARS ULRICH sensibility and get with the program, quit trying to be PUNK ROCK and CONTRARY .. punk is dead and so is the attitude.

  28. Except the artist does not get paid, because fractions of pennies per stream does not translate into meaningful revenue.
    I was one of the first to use Spotify as an independent artist, and I knew from the outset that it was never going to make me any money. Back in those days they didn’t even offer a “buy” link next to the tracks.
    Since then, I’ve been using bandcamp because at least I can see how often my music is played/downloaded/purchased. And when it’s purchased, I at least get paid.

  29. exactly the same argument pirates / filesharers use. “you should be thanking us! we’re giving you free promotion!”
    the pirates are (bizarrely) more honest; at least they openly build their own businesses off our work without pretending they’ll ever pay us.
    Spotify is the enemy of independent musicians. People bemoan the ‘evil’ record labels, but the new wave of exploitative tech companies are way worse.

  30. one of the most idiotic things i’ve ever read on this subject. well done.
    i know dozens of labels and hundreds of artists and NONE of them get paid from spotify and ALL of them are considering removing their tracks.
    you trying to paint them as greedy or myopic is inaccurate and unfair

  31. it’s been running in the uk for some years now and hardly anyone gets paid anything.
    how long do we have to suck it up for, exactly?

  32. at least rapidshare et al are openly exploitative. there’s no pretense that they have anyone’s interests at heart but their own.

  33. It seems those who control streaming, middlemen like Spotify itself and Sound Exchange, are the winners. From a content-provider perspective where you pay more than the streaming rate per song (to someplace like Sound Exchange), a listener who goes through 40 hours a month at a rate of $0.02 per song and an average song-length of 3 minutes requires a content-provider to pay $16 per month. I don’t know exactly what Pandora pays but it is probably somewhere in that range; I haven’t heard about artists complaining what they are paid from Pandora (or even whether Pandora has agreements with Indie labels). That may be more than a CD club would pay (12 CDs for the price of 1). I’d have to agree, though: the model doesn’t seem to work for artists.
    In the case of Sound Exchange, the artist has to go to Sound Exchange to “claim their money” like it is some scam lottery site. That may seem like a necessary evil but you would think Sound Exchange, with its statutory imprimatur, would go to the USPTO, find the artists and pay them.

  34. Amazing how the majority of their indie ‘partners’ are happy, yet hardly any labels the rest of us know are seeing anything at all.
    I call garbage on that. Pure hyperbole.

  35. Your comment relates to ALL digital music stores – download or streaming – not just Spotify.
    Example: service signs 500 labels – 20% get paid regularly, 80% paid irregularly/never as no sales/plays.
    Most of the critical comments in this thread fall into the 80% – their music is not good enough to get customer attention.

  36. @mackinnon – spotify provide all that info – if youre not getting it then you need to take that up with your distro / label – the buy links are there now BTW
    @sally really ? well that must be the labels not paying them. i work for a distro and myself deal with over 400 labels – we pay them all money from spotify and simply put – when i put all the cheques side by side – spotify come in 3rd. the “not getting paid” doesnt come into it for me, if an artist isnt getting paid its because the label arent paying – and that is an issue between the artist and label. my opinion is that its a decent service for now – fact is people who once may have downloaded illegally now cant be bothered to keep hoarding mp3s and buying up hard discs to store them – this solves that quite nicely, albeit an old idea (napster/rhapsody anyone?) rebranded. streaming is the future, til something else comes out !

  37. driver49 wrote: “I would like to hear some “thrilled” testimony from the “label partners” themselves, and not just what Spotify wants to tell us they’re saying.”
    Exactly right. I don’t know any labels who are THRILLED about this ! I requested a takedown of PROJEKT RECORDS from Spotify, Rdio, Grooveshark, etc on July 29th.
    Enough is enough. I want to live in a world where artists are valued. That is not what Spotofy is about. Their system is really no better than bit torrents. It’s legitimized piracy, where they make money. HOW DOES THIS HELP THE ARTIST?
    Enough is enough.
    Sam / projekt.com

  38. C’mon, it’s not piracy, you have a choice. I can put my music there or not. It just changes standards in the music industry once again and once again, it concerns me that there is unequal treatment for indies.

  39. These numbers mean nothing without more info. Did some of that $2.25 result in people going and paying for the music on iTunes…or conversely, did some of that $2.25 prevent someone from buying the music on iTunes? The concern, to me, is that I feel with great certainty that the latter will ultimately be the reigning truth.

  40. I don’t buy the argument that just having music on Spotify should be adequate payment for artists not on major labels.
    One of the revolutionary things about iTunes was that all artists get the same deal: major or indie, Apple keeps 30%.
    That was a big deal. If you, the artist, sell well, then you show up in the top sellers list and you might get a banner that leads to even more sales.
    Its called a meritocracy.
    I am not against streaming but I expected better from a revolutionary company like Spotify. A secretive, tiered system is so last millennium.

  41. You really thinks that’s the case in the music industry alone?
    You do’t think McDonnalds has a better del with coca cola then your local bar?
    Or that UPS is paying the same price vor petrol as you are?
    Thats just the way it works

  42. Don’t confuse two different royalty rates.
    Spotify pays (in that example) 0.0029 per stream to the artist, which is an on-demand delivery where the listener can choose what song to play and when to play it.
    SoundExchange is purely for internet radio where a listener cannot directly control what song is played when.
    Those two different delivery mechanisms have different royalty rates. For on-demand, the service (like spotify) negotiates with the label. For radio, it’s a statutory rate that is the same for everyone.
    The confusion is that Spotify has both an on-demand component, and a radio component. The radio royalty is supposed to be less expensive, because the listener doesn’t have control.

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