The More Money Spotify Makes, The Less Artists Get Paid

Spotify_PerPlay

Spotify CEO Daniel Ek has long asserted that per-play payments would increase over time, especially as more subscribers and advertisers piled on.  Unfortunately, the exact opposite is now happening: according to royalty data just published by David Lowery at Trichordist (above), per-play payments are now in a tailspin, with sub-$.005 payments the norm (i.e., less than half a penny per play).

“The monthly average rate per play on Spotify is currently .00408 for master rights holders,” Lowery noted.

Lowery tracked an indie, mid-sized label catalog of roughly 1,500 songs over a 48-month period, from June of 2011 to May of 2015.  In total, those songs received more than 10 million plays, making this a substantial, real data set for analysis (both the label and Lowery authorized our re-publication of the numbers) .  “This confirms our long held suspicion that as a flat price ‘freemium’ subscription service scales the price per stream will drop,” Lowery continued.  “As the service reaches ‘scale’ the pool of streaming revenue becomes a fixed amount.”

“The pie can’t get any larger and adding more streams only cuts the pie into smaller pieces.”

overall_streaming_comparison

Lowery isn’t the first to identify this issue with actual payout data: earlier this year, indie cellist Zöe Keating noted the the same trend, while publishing her entire royalty statements to back the claims. Others, most notably Jeff Price at Audiam, have also publicly posted aggregated data to show continued payout-plunges for artists (his diagram is above).

Price is seeing this effect not just for Spotify, but for streaming services overall.  “The decrease in the per-stream rate is occurring due to the number of streams per month growing at a more rapid rate than the revenue,” Price asserted back in June.  “In other words, it appears anyone that pays $10 a month for unlimited music streams a hell of a lot of music.”

“In addition, as the rates drop, the money is being spread over a larger number of artists, causing the money to spread more ‘thinly’.”

One solution might be to re-allocate the ways that royalties are paid, including a shift towards paying artists for the actual streams they receive.  That means that users are actually contributing money to their favorite artists, instead of throwing their money into a giant pool.  “If someone pays $10 a month, and only streams songs from the album Broken Boy Soldiers by the band The Raconteurs, the money from these streams would only be paid for the use of these songs and not impact/dilute the royalties to another rights holder,” Price described.

pie95

That hard, per-stream data sharply contradicts with a picture of increasing royalties being painted by Spotify, though importantly, only top-level revenue figures are cited.  “As we grow, the amount of royalties we pay out to artists, songwriters and rights holders continues to climb faster than ever,” Ek recently blogged.  “We have now paid more than $3 billion USD in royalties, including more than $300 million in the first three months of 2015 alone.”

“That’s good for music, good for music fans… and good for music makers.”

 

 

Correction: In the first publication of this article, in the top diagram, we showed the far right date ($0.00408) as ‘May 2014’ when it should have read ‘May 2015’.  It’s now corrected, pardon the mistake!

46 Responses

  1. Freshman Stats

    I didn’t need to read more than the headline to know that this is a sensationalized piece (as usual in DMN) that either (best case) mistakes correlation for causation, or (worst case, and more likely) intentionally misrepresents correlation as causation for clickbait.

    Reply
    • Paul Resnikoff
      Paul Resnikoff

      Artists are definitely making less per-stream, we’ve now seen that over several primary data sources. We’re also seeing very strong evidence that artists are receiving less overall depending on the artist.

      Those are alarming stats, and completely contrary to Spotify’s rhetoric (not to mention that of a very substantial portion of the industry, which predicted massive windfalls for artists once streaming gained critical mass).

      Alarming? Yes.

      Disappointing? Yes.

      Sensationalistic? No.

      Reply
      • dcguzman

        Keep telling yourself that. In other news, UMG rose profit overall in first quarter of 2015. This is from Billboard website, so theres no sugar coating or click bait title on the article. Billboard just posted what happened. Heres the first sentence:

        “Recorded music revenue from streaming and subscription services grew 34 percent, while parent comapny Vivendi saw more modest gains.”

        Reply
        • Versus

          “Recorded music revenue from streaming and subscription services grew 34 percent, while parent comapny Vivendi saw more modest gains.”

          Total streaming/sub revenue may go up, while per-stream revenue goes down. There is no contradiction there.

          Now factor in the lost revenue due to dead and dying CD and download sales, piracy, YouTube, etc. Does this revenue increase even begin to compensate?

          Reply
          • dcguzman

            Youre basing it on old and outdated data. This is from 2 days ago. I should post the whole 3 first paragraph:

            “In another sign of the growing importance of online streaming to the music business, the Universal Music Group had increased revenue and earnings for the first half of 2015, largely because of the popularity of streaming and subscription outlets like Spotify and Deezer.”

            “Universal, whose financial results were reported on Wednesday as part of its parent company, the French conglomerate Vivendi, had $2.6 billion in revenue for the first half of the year, up 15.4 percent from the same period in 2014. Discounting the effects of fluctuating exchange rates, the growth was 3.1 percent.”

            “For the first half of the year, Universal, the largest music company in the world, had $255 million in earnings before interest, taxes, depreciation and amortization, up 11.5 percent from the same period last year, or 5 percent on a “constant currency” basis. For its second quarter alone, Universal had $1.4 billion in revenue and $139 million in earnings.”

            I post the last sentence I posted; “For its second quarter alone, Universal had $1.4 billion in revenue and $139 million in earnings.”

            Do I have to clarify this? I think I should. Earning means net profit. UMG net profit is $139 million.

          • annie

            UMG may have reported strong numbers, hooray for the winners?, but we also know from the leaked Sony contract the “revenue” reported by UMG for digital product may include also other fold ins included in their contract with Spotify. Were ad media sales, factored perhaps as “digital revenue,” and included in their over all streaming numbers? For them this revenue is easily considered income from streaming? because it is tied into their deal with Spotify. This is one example that demonstrates, the increases they reported may coexist with the sad fact of a falling price per stream. I think this is very possible and you might try being a little bit less condescending online.

          • dcguzman

            Its hooray alright, it means its working. And the investors that invests in music streaming are profiting from it. Which means if somehow labels wont renew its not the fault of the stream business system, since it works. Its just that simple.

            This website always says music streaming isnt sustainable. Not even free streaming, music streaming itself. And yet time and time again the investors sees money from the venture. You can even google it to see what I mean.

            To tell you all frankly, I wont even visit this site if not google recommend it every time I type about music news. But what can you expect from a click bait site? Same as buzzfeed.

          • Wait

            Didn’t investors also see benefits from Bernie Madoff’s scam, until they did not? Didn’t Nortel seem enormously profitable to investors, until it failed? Oh… and let’s not forget various tech co.s — remember the dot com bubble and crash?

            I also think those ‘streaming revenue’ numbers aren’t from the record labels receiving their part of royalties, but from ad revenue, or perhaps some sort of payout/dividend as a part owner of spotify which could be called digital revenue. It would be great to see a breakdown.

          • dcguzman

            Now we’re gone to realm of conspiracy theories. So whats next? Pewdiepie really dont have millions of dollars from ad revenue last year? Most of his earnings are given to him by youtube itself to make it look like youtubers are profiting from it? Netflix is a scheme of illuminati to change TV and brainwash internet users on there propaganda?

            Just stop OK? Youre all now moving the goalposts. So you comment that its from ad revenue so does it mean free tier is working? Your reasoning have no leg to stand on. This site reasoning have no leg to stand on. Why even compare a streaming service to most famous swindler in history?

          • Paul Resnikoff
            Paul Resnikoff

            This isn’t a Madoff scheme, because you can simply see the details right in front of you. Spotify is not profitable, and has a variable cost structure that will always crowd a reasonable profit margin; this is not an issue they have been able to overcome. Those are fundamental problems with this model, but does not preclude profiting from an IPO, acquisition, etc., as long as Wall Street plays along (enter Spotify investor Goldman Sach, etc.) UMG wants a piece of that exit or liquidity event, which is why they’ve negotiated that specifically into their contract with Spotify (renewals now slated for early October).

            Call it a ‘pump and dump,’ call it a bubble play, call it whatever, but the game is being played right in front of you. There are indeed hidden aspects, but after the Sony contract leaked, we’re pretty much able to see what a ‘legal scam’ looks like, it’s not a mystery. It seems like it’s being played by the book. I always say, the best way to scam the system is to obey the law.

            The “net/net” here is that UMG can win, if there is an exit similar to that of Beats (in which Vivendi gained $400 million, as publicly reported). They can also draw significant advances from Spotify, but overall, the pie is dramatically shrinking, regardless of what one quarterly statement reflects (and yes, I would read those numbers with a healthy degree of skepticism). That is why Silicon Valley has trouble respecting executives like Doug Morris and Lucian Grainge, as they are being rewarded for shrinking a business, instead of innovating ways to expand it.

          • Name2

            PR: The “net/net” here is that UMG can win

            So things are looking… up?

    • GGG

      As someone who has often defended streaming and made fun of Paul’s headlines, there’s nothing wrong about this.

      They just really need to fix the pay distribution method AT LEAST for premium subscribers. That’d be easy. Maybe allocating free users’ ad rev would be a pain, though I’m sure some programmer out there is more than smart enough to figure it out.

      Reply
  2. Willis

    Is this why the record industry is investing and doing deals with Spotify? Sounds like the US/Contra situation all over again but in music.

    Reply
  3. DavidB

    Am I missing something? The Audiam data show gross revenue increasing by about 50% in a year. Which would you rather have, revenue per stream increasing, but gross revenue static; or revenue per stream falling but gross revenue strongly increasing? Provided the increasing revenue from streaming doesn’t accompany a drop in other revenue (notably paid downloads), it is a no-brainer.

    Reply
    • HansH

      You are a 100% right. The rate doesn’t tell the full story. Crazy that Professor Lowery just looks at rates and ignores total revenue all together.

      I run a small label and I can tell you my streaming revenue keeps growing even with the somewhat lower rates.

      What has happened? Musicians are now complaining people are listening to much? Come on….

      Reply
    • Paul Resnikoff
      Paul Resnikoff

      Provided the increasing revenue from streaming doesn’t accompany a drop in other revenue (notably paid downloads), it is a no-brainer.

      And that’s the key point. Downloads are now headed into a tailspin, and are at 2008 levels. It is now industry knowledge, if not simple common sense, that streams cannibalize downloads. We also know that downloads command a far higher revenue premium for artists, far higher.

      Reply
      • dcguzman

        Nice censoring we’re experiencing here. Because you block open debate doesnt mean you can stop people from finding the truth. Do you know what the truth is? That you always delay the date of Spotify’s renewal deal with major labels. Before this September, this September, end of September, and now early October. Whats next?: End of this October? If theres something wrong with Spotify catalog the company will announced it right away, just like what they did last year with Taylor Swift and stream armageddon of Netflix. There will be mass lawsuit if Spotify wont announce the so called failed renewal deal.

        This site is hiphopgamer and infowars of music. All of it are wild speculation based on facts that gather to make it looks the truth. Oh no the white house is bailing out the banks! We will be in brink of hyper inflation like the post WW1 Germany! Oh no! Digital and physical copies sales are going down! The music industry is doomed! We cannot buy or stream song songs anymore what will we do?!! But hey… Even a broken clock will become correct someday.

        Reply
        • Nina Ulloa

          “Nice censoring we’re experiencing here. Because you block open debate doesnt mean you can stop people from finding the truth.”

          ?????????????????????

          Reply
          • dcguzman

            Paul blocked the reply button when name2 posted this:

            PR: The “net/net” here is that UMG can win

            So things are looking… up?

            …either to him or me. I would want to reply to Paul’s opinion too but theres no reply option. Its confusing because Im replying to different thread. But Paul blocked it.

        • Matt Bunsen

          the expression is: Even a broken clock is correct twice a day. (censoring???)

          Reply
          • dcguzman

            He blocked the other thread either to name2 or me. And thanks for the clarification, as you can see Im not a english native speaker. That reply is meant for the other thread that I cant reply to.

  4. superduper

    Seriously why can’t anybody call these streaming services for what they truly are: a FRAUD! There is NO WAY this should be happening, and if you consider that the fact that it is practically built into its business model is especially worse. Even money from paid subscriptions is still factored into the same formula and business model, that is: the more that one uses the service, the lower the payout rate will be, which overall means that less that gets paid to the artists, and yet more gets paid to the service itself, even though it should be the other way around. To think that there are people who make money this way makes me feel disgusted, and to think that it is becoming a normality is horrifying.

    Reply
    • Anonymous

      Are you 12? What kind of logic is that? Royalties and payouts didnt changed since music sheet and wax cylinder created. Did you know theres a coin operated piano right? And the worth of each play from long time ago with coin operated piano till recent time are still the same, depend on inflation.

      The 7 cents per play when you stream a music is exactly the same with coin operated pianos. Again depend on inflation. I wonder if youre living in 1800s youre complaining about coin operated pianos. And youre thinking it takes away the profit of “talented pianists” at that time.

      I can imagine it now, you keep telling to your friends why use coin operated pianos if you can watch a real pianist in concert halls and live events?

      Reply
        • Anonymous

          Royalties are always less than 10 cents per play since music copyright created. Sorry to not clarify, not to you though for the people that read my last comment. Per play on royalties cant exceed 10 cents, just ask your grandfather on jukebox. If everyone here wants to complain, dont complain to distributors and labels. Complain it to congress and the supreme court. Its them that created the copyright law.

          Reply
          • superduper

            Well, how about the fact that royalties are not even remotely close to 10 cents per play?

          • Anonymous

            Thats the idea. In the old days the piano represent the music industry. The record labels are the manufacturers of the piano, the publishers are the ones making the musical sheet, the writers are the composer of the piece, and the artists are the pianists. While the one cent that paid out to the slot of the piano are the payouts.

            The system didnt changed even with phonograph and radio. Thats why the artists dont have a cent in royalties when there song are played in the radio, at least on the US. Instead, they paid out by live performances same as pianists paid out with there live performances long ago.

          • Anonymous

            Me explaining that royalties makes no sense are proving that this site dont know what copyright is. It makes no sense to you, it also makes no sense to me to be honest. If you have time google Ne Yo 1 million streams=$90, then research how royalties works from the first articles you googled. Copyright and royalties are far more complicated than what this site says. The first articles when you typed it on google makes no sense, what more the history behind it. My coin operated piano is actually based on facts to tell you honestly.

  5. George Glass

    digital publishing is making a killing click baiting the lower middle class of the music industry with this stuff.

    who ever said streaming revenue was to be calculated on a per stream basis in the first place? On their own, they are irrellevant in judging value in a revenue pool, and revenue pool economics are what we have now (and the system all of the artists on streaming services signed up for). I’m all for a change, but the idea that lower per stream rates are controversial in the least (without presenting the missing variables of # of streams and total $) is to suggest a misunderstanding of the economics involved.

    Reply
    • superduper

      It may be true that there is no true per-stream rate, but if on average it is less that is bad because it only means that artists will have to have a higher volume of streams in order to catch up. If each stream is worth less money, that can never be a good thing.

      Reply
    • steveh

      Hey George Glass – can you please explain to me why a reduction in per-stream pay rate is in any way a GOOD thing?

      Reply
      • George Glass

        It’s neither a good thing nor a bad thing. I would argue that it’s an irrelevant thing, given the lack of data available. Without the total revenue and the number of streams, it’s pointless to speculate and Spotify never promised a static (or increasing) per-stream rate because that is not how their business model works.

        Why do we talk about per stream rates at all?

        Reply
        • steveh

          We talk about per stream rates because we who run indie labels and have digital aggregators like Orchard etc get accounted to showing per stream rates, in the same way downloads are accounted showing the per-download rate. Are Orchard doing something wrong?

          It’s just math, isn’t it?

          A = number of streams B = average per-stream rate C = total income

          At the moment A is going up but B is going down.

          Do you not agree that is would be better if both A and B were going up?

          Reply
  6. Plantation

    Who benefits from gross revenue? Obviously, the record labels, or owners/publishers of many songs. So a single artist could care less about gross revenue, because they probably haven’t released thousands of songs.

    Does the minimum wage worker really care that McDonald’s corporate revenue has increased when their own wages are stagnant or dropping?

    You see this arguement a lot recently in all areas: adjunct professors being paid very little while University revenue has risen; contract workers at banks, etc. having no paid benefits, no job security, etc while bank profits have risen; internship programs — a ‘learning’ experience …. becoming a defacto unpaid seasonal workers… all at the same time that executive compensation is out of balance with the average worker (much higher ratio than before.) So to George above: that’s why the middle class musician (citizen) takes the clickbait: they are being shafted.

    Reply
  7. Paul Resnikoff
    Paul Resnikoff

    One quick correction: in the first publication of this article, in the top diagram, we showed the far right date ($0.00408) as ‘May 2014′ when it should have read ‘May 2015′. It’s now corrected, pardon the mistake!

    Reply
  8. lroosemusic

    Spotify is more profitable in 2015 than it was in 2014 or 2011?

    I thought losses increased.

    Reply
    • dcguzman

      This is a click bait site. Paul didnt even cite sources of that graph, just the name of the firm and the person doing the stats. This is the truth though, in UK last year Spotify and I mean Spotify alone overtake the revenue of Itunes by 13%. The total of music streams this half year are doubled. News that this site wont publish.

      Reply
        • dcguzman

          Thats the point though. This site makes it a negative thing even though the original article is far far different. Like I posted this is a click bait site just for ad revenue. Just like the CEO of UMG will resign or be fired, even though this site twist the facts on original sources. Lucian Grainge wont resign or be fired after all the good things he have done to the company.

          Reply

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