Ad revenue doesn't pay the bills. There is a common misconception that ad revenue is soaring for streaming companies and that artists are not seeing it. Well, it isn't. And if 83.5% of their revenue comes from paid memberships, artists are indeed getting paid far more money from the free service than the ads are bringing in.

So Premium and Unlimited users are sort of paying for streams by the free users. It's getting more confusing every day. 

I wil have to revise my math on how the rates are calculated I guess.

I listen to free spotify. Why pay? The ads are few and far between. Way less than terrestial radio. And the ads they do play are about 90% spotify self promotion.

However, I am not a typical music consumer. I listen to obscure jazz, metal and classical.  I assume that the algorithms are set up so that if I were listening to Katy Perry or Carly Rae then I would hear more adverts.

I also asume the marketing folks want more statistics (maybe a years worth) to put a true value on spotify ads.  Once those are in and analyzed expect to see an increase in adverts and ad revenue?

Maybe not I just sound leach and edit out the ads later with audacity

By jove dear Watson, you're spot on!

Look...Google/Youtube do ok from ad revenue. 

Daniel Ek, do us all a favour and do a deal with Google?

If he did that then the digital music industry (i.e. the music industry) would be fixed.

That wouldn't fix anything. Google has a significantly larger userbase and completely different platforms to reach their users. The ad revenue between the two can't be compared.

Anyone who thinks doing one thing will fix the music industry clearly hasn't worked very long in the music industry.

The industry can't be "fixed" without authoriatarian measures being taken, which, most of us don't want.

Everyone just needs to accept the the fact that selling music shouldn't be the focus anymore. Diversifying your product mix is the smartest thing any artist can do, and the ones that are doing it successfully are surviving.

If federal government regulatory commissions would agree to allowing royalty payments on all the music being listened and accessed for downloadable sale(turned down by the CRTC recently,then the artists,who are the industry,would be deriving something decent from their works and efforts... instead they prefer to side with and support the tech industries with whom the 4 Majors of the Record industries have alligned themselves with to sell out all the small independant artists,bands,publishers and labels......... who are and create the product themselves and the culture!

Music is a treat like a candy bar,try taking a taste bite ... FOR  FREE!

Dylan said it when he penned:..business men steal my wine...

Google refuses to release any earnings data, but most analysts project that YouTube is running losses in the hundreds of millions annually for Google, which announced as recently as last year that more loss-leading investment will be required if the company hopes to lead it to profitability.

http://www.nytimes.com/2011/07/15/technology/google-earnings-for-the-second-quarter-top-wall-street-expectations.html

Sounds pretty similar to Ek and Spotify, huh?

Google/Youtube also buys up unused bandwidth at a fraction of the cost. If they had to pay full price for bandwidth they wouldn't be able to earn a profit either...

Googles revenues were $29b last year, $28b of which were from ads. 

0.00008% to artists...

In my estimation, the only way Spotify could turn a decent or significant profit is to raise subscription prices without decreasing demand for subscriptions.

Actually the only way for them to turn a profit is to convince more people to pay something for the music that they enjoy.  anything.  Even the basic tier of $5/mo would go a long way to making Spotify self-sustaining.  

Why won't a music consumer be willing to spend the same amount of money as a good latte for an entire month of listening? 

That's the key question.  It's not about ads versus subscribers.  It's about the perception that paying for music, one way or another, is considered optional.  

If given an option, people won't choose to pay.  I wonder if Spotify created a pay-what-you-can if the end result would actually be more money collected.  Certainly the per listener average revenue would fall.  But i suspect that the total revenue would increase.  I'd love to see that experiment put into place.

It's not the only way. An easier solution: lower the royalty rates a little and there you have the profit.

His point is that people want to pay a royalty rate of 0.00% thats it no more.

Until someone can convince the majority of music "consumers" (especially the 25 year old and under demo) that music has value and should be paid for, the music business is doomed.

The age group of 25 and under don't like to pay for music, you are right about that. But they are willing to pay for convenience. Spotify offers that.

But Spotify is evil. It encourges people to listen to a large variety of music and doesn't limit them much.

As long as Spotify has VCs footing the bill, they don't have to focus on their advertising model. It's, evidently, the least mature aspect of the business. And Ek has said explicitely that they aren't focusing on revenue. So it's very premature to make judgments based on these statistics. At some point that unit will be overhauled & when they expand their ad offices & it's operating more like Clear Channel... probably better than Clear Channel... the numbers are going to tell a different story.

Why can't Spotify be just as profitable with advertising as Clear Channel?

Spotify pays a lot more for their music than Clear Channel does, not exactly a fair comparison.

If they are going to be as profitable with advertising as Clear Channel, then they are doomed. If it were not for the outdoor advertising industry, an industry completely unrelated to music, Clear Channel would be losing even more money now than they already are. And yes, they are losing money.

Interesting if Spotify is an example, the ad model blows for music.

Spotify. Partying, as one wag says, like it's 1999.