A Look At The Numbers Behind Spotify Payouts

Spotify-logo-parodyBy Jason Epstein from SoundCtrl.

Recently, music streaming service Spotify released data revealing that each song play nets rights holders somewhere between $0.006 and $0.0084. Yep, a fraction of a fraction of a cent. Doesn’t seem like much, does it?

However, Spotify generates an average of $41 per user, which is significantly more than the $25 that Spotify says the average U.S. adult pays for music each year. Last year, the company lost $80M, but just last month, gained $250M in new funding, which brings the company’s value just above $4B. One million plays on Spotify will generate between $6,000 and $8,400. Compare that to $3,000 on YouTube, or between $1,300 to $1,500 on Pandora, or $41 on a radio station, and Spotify’s payout doesn’t seem so bad. The difference is that Google has a billion YouTube users and Apple has 600 million iTunes users, while Spotify has just above 24 million users, about a quarter of whom are actually paying for the service.

image from fc06.deviantart.netIn 2013, Spotify says it will have paid a total of $500 million in artist royalties, which is half of the entirety of their payouts since the streaming service was launched in 2008. This information is part of the new Spotify Artists page, a sub-site where rights holders can track performance using various analytics tools.

Although troubled by artist backlash against low payouts, Spotify co-founder Daniel Ek recently mentioned that the company is trying to usher in a revolution, moving physical music to the digital space and “selling access, not ownership.” Of artists, Mr. Ek says, “All they see is millions of streams and they see, you know, not millions of dollars in the end, but thousands of dollars, and they think that a million streams is compatible to a million downloads, which it obviously isn’t.”

Spotify says that the more subscribers they have, the bigger the payouts will be, but what’s not clear is if they mean to project an increase in listens with an increased number of subscribers, or if there will be more listens per subscriber as the streaming service becomes more widely accepted. This seems like a placation, and a dodging of the real issue at hand. Spotify does, however, plan to launch the ability for users to buy tickets and band merchandise beginning in 2014, which could provide a more effective means of diversifying artist revenue production.

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  1. I’m a Spotify super fan and am a power user. I strongly believe streaming services like Spotify, Beats, Rdio, YouTube, etc are the future. Also it’s a fact that Spotify will bring more money into the music business than mp3 downloads as soon as they reach a certain number of premium subscribers that pay $10/month. I believe that golden number is 20 million paid subscribers, they are at 6 million now. I believe they will get there soon it’s still very early days for streaming. Eventually streaming will bring more money to the music business than mp3 downloads every did so I wish everyone would stop complaining and do your research and get educated! Artists, it’s not about how much money they are paying you per stream or this week or this month, think long term. It’s an investment in your career and the money is coming. Meanwhlie make it easy for more people to discover your music my making it available via streaming. A big factor non of y’all are considering is people that would never buy your album or mp3, will stream it and stumble upon it my accident and you may gain new fans in the process!
    But I do have 2 questions out of curiosity I’m hoping someone here can answer…
    1. How long do you have to stream a song for it to count as a stream on Spotify, Beats, Rdio, YouTube? 30 seconds or 2/3 of the song or what?
    2. If you have a mp3 file of a song on your computer that you bought elsewhere, Spotify will stream directly from that local file on your computer and therefore they won’t have to pay royalties for streams on that particular song which is fair…but if I stream that song via Spotify over and over again and share with my followers, will these streams count in my Spotify total stream counts and charts? I’m guessing no? If I have not downloaded the song for offline listening and I’m listening to the song via mobile, therefore it’s pulling the stream from Spotify’s servers and not my local file, then maybe it will count as a stream and royalties will be paid? Please clarify.

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