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Spotify Royalties Explained, In 3 Easy Diagrams…

It’s actually much simpler than you think.  Here are three easy diagrams to help you understand, as presented by Spotify this week.

Diagram 1: How royalties are split.

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Diagram 2: How artists are paid.

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Diagram 3: What can you expect to receive?

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Any Questions?

Written while listening to The Bloody Beetroots.

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Comments (62)
  1. question

    i use spotify sometimes and if i want to listen to the same song over and over i zip it back to the start of the track just before it ends. I can do this endless times and never get served an ad. What’s the situation there? Is any revenue being generated or is it counting as one play?


    Reply
  2. Anonymous

    No mention of the Artist platform then? Come on! This is not journalism.


    Reply
    1. Paul Resnikoff

      I think you’re confusing us with The Major Label Times (also known as “Billboard”).


      Reply
  3. David

    It’s a welcome step towards transparency, but as usual it is necessary to look critically at the numbers.

    Spotify claims that in July this year an unnamed ‘niche indie album’ generated $3300 in revenue, while a ‘breakthrough indie album’ generated $76000. These figures imply about 470,000 and 10,860,000 streams a month respectively. Those are not impossible figures, but 470,000 seems high for a genuinely ‘niche’ album. To be sustained over a year would require over 5 million streams. We can do some rough checks on how likely that is. For most artists Spotify’s ‘artist profiles’ show cumulative streaming numbers for their 10 most popular tracks. For example, Bjork is a fairly well-known artist, but the cumulative total for her 10 ‘popular’ tracks, taken from various albums, since whenever they went on Spotify, is only just over 13 million. For a more obscure niche artist I checked the figures for the electronica artist Eskmo, and found his 10 ‘popular’ tracks had a cumulative total of just over a million streams. Spotify’s example of a ‘niche indie album’ must be much closer to the mainstream than this.

    As a test case for the ‘breakthrough indie album’ I selected Bat For Lashes’ last album, The Haunted Man, released about 17 months ago. Bat For Lashes is not a mainstream pop artist, but is fairly well known, has won or been nominated for various important awards, and might reasonably be described as having ‘broken through’. The Haunted Man was critically well received and had moderate chart placings in the UK and USA, with one bona fide hit single in the shape of ‘Laura’ (co-written by the guy who did Lana Del Ray’s stuff). On Spotify’s artist profile 3 of the 11 tracks on the album are listed as ‘popular’, with a combined streaming total of around 6.6 million since release. We might reasonably multiply that by 3 to get a total of about 19.8 million for the album as a whole, but that needs to be divided by 17 to give a monthly average of about 1.2 million. That is little more than a tenth of Spotify’s figure for a ‘breakthrough indie album, which suggests that their conception of a ‘breakthrough’ is out of most people’s reach. Gotye would pass the test, but there are never more than a handful of Gotye-style sensations.


    Reply
    1. GGG

      I think we can look at Arcade Fire as a breakthrough indie. Very popular but still not mainstream. Even though their latest is a double LP, let’s say an album is 12 tracks. They sold like 150K first week, and have about 2M Facebook fans. So we’ll take out 200K for purchases, lose a few for people who won’t care, add people who are fans but don’t “like” them or aren’t even on Facebook and still probably have well over 1-1.5M people who streamed, pirated or otherwise didn’t pay for their album. So that’s close to 20M from those people listening once. Many of them will listen a bunch of times, many will listen to a few songs a bunch of times, etc,

      Then there’s new people. Many will just listen out of curiosity. Many will like a single or two. Many will hear them in a playlist or something. Etc.

      I don’t think it’s sustainable for years and years and years, but it can be a good income stream, not to mention huge driver or other income streams.


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      1. GGG

        This, of course, is based on a world where more people are streaming. Not necessarily right at this moment. Like any company, Spotify is going to make themselves as good as possible so I don’t even believe these numbers are as normal as they’d like us to believe. I imagine it’s still very case by case at this point.


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      2. David

        If a ‘breakthrough indie’ is defined as an artist who regularly gets albums in the Billboard Top 10, like Arcade Fire, then I agree they can get the kind of streaming numbers quoted by Spotify. But at that level there is not much difference, except maybe in hair styles, between ‘indie’ and ‘mainstream’. Below that level there are dozens if not hundreds of artists who are far from unknown but who would struggle to get more than 10 million streams a year at current streaming usage numbers.


        Reply
        1. Paul Resnikoff

          It’s a good point David, we’re talking about a tiny, tiny sliver of winners here. I agree with your earlier assessment, that these categorizations are at best a stretch. In reality, Arcade Fire is one of the very thin crust.


          Reply
          1. Anonymous

            How many artists make $17k from iTunes a month? Out of interest?


            Reply
            1. Paul Resnikoff

              No idea. Though I do that iTunes doesn’t publish claims like these.


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              1. Anonymous

                You ask them to be transparent and now you’re giving them crap for it. Make your mind up.


                Reply
                1. Paul Resnikoff

                  I asked for a lemon snow cone, not dog piss on a patch of ice.


                  Reply
                  1. Me

                    Good thing you didn’t ask for a cherry snowcone…


                    Reply
                    1. Anonymous

                      Or a chocolate one


          2. R.P.

            dude, that’s always been the music industry in general, even before digital and streaming, a small number of winners… What’s your point? That every monkey that decides he or she wants to be an artist get rich off of spotify?


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            1. Anonymous

              Nailed it….


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        2. GGG

          Arcade Fire gets so high because nobody buys records anymore, so 150K can be number 1 or 2, whatever they were. AND they flourish in the scene that buys vinyl the most. But if you think they are on the same level of visibility as a band like Maroon 5, you’re wrong. Remember the whole “who is Arcade Fire” thing when they won the Grammy?

          But anyway, I agree they are a bigger band so obviously putting up higher numbers, but the takeaway of streaming is moreso that however many records you can sell, you can have 5, 6, even ten+ times that many fans who were not going to buy the record for whatever reason. I always say this, but think back to the height of CD sales. A band that sold 10M records was HUGE. They didn’t only have 10M fans, though. Adele’s sold like 25M records, she’s got 50M Facebook likes and god only knows how many people that enjoy her music. Many people just don’t buy music. Normalized streaming can monetize that MASSIVE demographic dramatically.

          So I certainly don’t disagree that many bands won’t get 10M at these levels, which is why people should stop fighting it. Push physical, push for higher royalties for streaming, but don’t continue to try to turn people away from streaming.


          Reply
          1. David

            Who are Maroon 5?

            But seriously, I’m not gunning for Spotify, but if they want to put persuade musicians, they don’t help themselves by cherrypicking extreme examples.

            Incidentally, I’m not sure even Arcade Fire would come up to the level Spotify are quoting. I just checked their artist profile, and their 10 ‘popular’ tracks total about 20 million cumulative streams.


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            1. GGG

              Oh, I agree, I’m sure they picked high examples that are not as normal as they say, in order to look better, as any company would.

              I’m still trying to figure out how the top ten works, because it isn’t JUST plays. I’ve seen top tens where the 3rd or fourth most popular track by millions was at number 7 or so behind some newer releases. The fact that every top ten is from Reflektor sort of makes it more confusing, as well. I would imagine songs like Wake Up, Keep the Car Running and a couple others would have more plays than some of those Reflektor songs. It must be some sort of up-to-date system, where if 10M people listen to a song one day then never again, even if 10M is the highest listened song, a 4M might pass it if it’s currently popular.

              I also think it’s interesting that all the top ten are Reflektor because maybe that says something about listening habits. Maybe the format/functionality are conducive to people listening to more tracks from an artist instead of picking out singles like on YouTube/iTunes.


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              1. David

                I hadn’t noticed they were all from that album. That’s unusual, as the other artists I have checked all have a mixture of different albums. I suppose it could be because it’s the only Arcade Fire album release since Spotify started in the US. But that would apply to other artists too. E.g. I just checked for Rihanna, and the ‘popular’ tracks come from at least 4 albums.


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                1. GGG

                  That’s what I was thinking at first, too. But if you look at Lady GaGa, Applause at #1 has 40M listens then the next 9 are from her brand new album, with #10 having 793K and most others around 1M. There is no way in hell some of her older hits have less plays than that. So I think it must be popularity relative to a shorter period of time, not all time, which they think will maximize listening of new material maybe?


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                  1. David

                    I can’t find a source for this, but from memory Spotify’s definition of ‘popular’ is based on what is *currently* most often played, but the figures given are cumulative for the total number of plays since the track went onto Spotify. If that is right, then there could conceivably be tracks for a particular artist that are not on the list, because they have had more cumulative plays, but are not currently played as much as more recent songs. That would explain why e.g. Rihanna’s ‘Umbrella’ doesn’t show in her ‘popular’ list, though I still find it surprising. Likewise I just checked Katy Perry’s list, and it doesn’t include ‘I Kissed A Girl’.


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                    1. GGG

                      Yea, that’s what it is I’m sure. Would be interesting to know what the time frame is, though. Week, month, day?


    2. DUDE

      I would presume that all the figures in that breakdown with the exception of the classic rock album are for albums released in July 2013 or close to it. Wouldve been nice if they’d specified so we could know for sure cause Im betting the release week marketing push etc makes a HUGE difference in the number of streams — if my assumptions are correct then these figures would represent a high water mark for Spotify’s payments on those albums rather than a reliable average

      A ‘breakthrough indie’ album reliably clocking 10 million streams a month is not really believable but a crossover indie album on the scale of Bat for Lashes clocking 10 million in a month at the peak of its hype then falling off afterwards is far more realistic


      Reply
  4. HansH

    “Written while listening to The Bloody Beetroots.” Written? This is more like copy paste. Great example of lazy journalis ;).


    Reply
    1. Paul Resnikoff

      “Great example of lazy journalis”?

      Just saying.


      Reply
      1. HansH

        Funny. It’s because this blog has no edit option to correct a typo.


        Reply
        1. Paul Resnikoff

          Well if you weren’t so lazy about proof-reading, you wouldn’t need that. ;D


          Reply
  5. Anonymous

    People will walk away from this thing EVERY indie band makes 3300 bucks a month from this. Couldnt be further from the truth. Highly talented and promoted bands/artists are lucky to make 33 dollars a month!


    Reply
  6. TuneHunter

    It is more prudent to spend all investments related to music production on local state lottery.

    Streamers and YouTube cannot and will not support growing number of musicians.
    Total and complete access to most hidden tunes at virtually no cost ( YouTube = NO COST, period) is preventing all logical methods of monetization. If we do not stop it or change “proven business model” (Mr.Ek) we will erase iTunes, Amazon MP3 and many superb opportunities will never have a chance to materialize.

    Current “proven business model” will deliver at the best 45B industry by 2025.
    If we can interrupt and modify we will have 100B dollar industry by 2020.

    If RIAA and labels will not start valid moves into sanity we have to convince player like Google to make few bold moves and take over half of the new 100B industry.
    Time to act!


    Reply
  7. Anonymous

    Can we get a higher-res version of this please? My eyes are dying!

    Otherwise very informative (the bits I could read anyway)


    Reply
    1. David

      Click on the link.


      Reply
  8. Chris

    What’s left out of the discussion is wether 70% of their revenue is enough to support the music creators. For example, I build a bird house…..lets say it cost me $10 in materials and a couple hours of time. A seller of bird houses comes along, takes my bird house and sells it for $5.00, when I complain, he comes back to me and gives me $3.50 and says I should be happy because he’s giving me 70% of the revenue. Sorry, I’m still out 2 hours of my time and $6.50 in material costs.

    In a free market, the creator of a product gets to set the wholesale price, not the vendor, and that price is set to allow the creator a reasonable return. In Spotify’s scenario the only profit is being made by Spotify…..


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    1. Dave

      If Spotify really wants to lift the veil, they need to explain what 70% of “revenue” means? 70% of Gross Revenue and 70% of Net Revenue are two very different numbers. Assuming its net revenue, then this is all pointless unless they disclose the other deductions that were made before they got to the 70/30 Rev Share bottom line. Starting with Daniel Ek’s extremely bloated salary – Ek has purportedly already earned £190 MILLION from Spotify (google it).


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      1. Jon L.

        Hmm. You’re right. It says “Total Revenue.” I suppose that could be total gross or total net.


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      2. David

        Surely it’s 70% of gross revenue. Net revenue is profit, and Spotify is not making a profit.


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      3. Casey

        Almost none of that money is from his salary. It is the value of his stake in Spotify.


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    2. jw

      An artist expecting to make a living off of Spotify payouts right now is like an artist expecting to make a living off of iTunes payouts in 2005. The difference is that track sales & cd sales were a ~1:.1 ratio, & since the math was easy, artists’ expectations were managed. Spotify might be generous in their categorizations, but what’s not mentioned is that Spotify is still in its infancy & the numbers will grow exponentially over time.

      The birdhouse analogy doesn’t work because Spotify is not selling products, it’s selling access (or giving away access subsidized by ads). It’s more like you’re selling birdhouses, & Spotify comes along & says, “let me rent out your birdhouse & charge customers per use.” The value of this rental model can’t really be determined by how much consumer is spending, because you’re going to inherently increase your user base. People who have previously purchased a birdhouse are now paying per use, giving you money on top of what they’ve already given you. And people who wouldn’t have made the commitment of buying might rent once or twice to check it out. And ultimately the plan is to, rather than selling birdhouses at the magic price (i.e. you could sell 2 birdhouses for $100 or 200 birdhouses for $1, the magic price is somewhere in the middle that maximizes profits), Spotify is putting your birdhouses in everyone’s yard & charging everybody per use (or subsidizing the uses with ad revenue).

      Now, right now, Spotify hasn’t put your birdhouse in everybody’s yard yet. Just ~24m homes across the world. As they continue to put your birdhouses in folks homes, the payout is going to increase proportionately.

      If you make crappy birdhouses & people aren’t going to use your birdhouses more than once or twice, you’re getting a bum deal here. The value of your birdhouse is going to be corrected by the market. (How many times have you bought a product, music or otherwise, that you didn’t get what you paid for? This is no longer an issue when birdhouses are distributed this way. Essentially, you’re paying for exactly what you get.) But if you’re making great birdhouses & people love to use them, the potential upside is huge. Yes, it’s a redistribution of revenue (the *correct* distribution), but ultimately it relieves the burden of risk from the consumer & puts it on “birdhouse labels,” who stand to gain the most by underwriting the birdhouse makers.


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      1. TuneHunter

        “…grow exponentially over time.” TO WHERE ?
        XM serves to top earners and has 25 million subs.

        Spotify serves 13 to 35 tight budget crowd and freeloaders!
        Giving credit to Ek’s genius let’s hope for 100 million subs by 2025 At $6 avg. sub it will generate just $7.2 billion dollars.

        Streaming in current form is just wrong path to sunshine and happiness for all involved!


        Reply
        1. jw

          Eventually streaming will be the way that everyone listens to music, whether it’s users streaming their own collections from locker services, streaming radio like Pandora, or the type of all-you-can-eat access that Spotify is offering. Local storage of media makes no sense going forward, & any company basing it’s model on downloads is building an infrastructure for streaming if they want to survive in the longterm (Amazon Cloud Player, Apple’s iCloud/iRadio, etc). Digital downloads will eventually be replaced by streaming lockers (which is happening), & CDs will become relics like vinyl. The CD will endure as a secondary market only because there’s so many of the goddamn things out there, & used cars with CD players will still be around for some time.

          Spotify is struggling to enter the mainstream, but once they do, 100m worldwide subscriptions is a very conservative estimate. And at the point that Spotify goes mainstream, it will have heavy competition from Apple & Beats, among others. If (and I’m pulling these numbers out of my ass) Spotify is at 100m WW, Apple is at 75m, Beats is at 50m, & Deezer & Rdio are each at 25m, that’s ~$20b (halfway to peak worldwide recorded music revenue), & 275m total streamers is conceivably a tiny fraction of what total worldwide streamers could eventually look like.


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          1. TuneHunter

            I agree with you that stream delivery is only and best way to go – but it does not allow for adequate monetization.
            $10 subscription does not cover the goodwill hidden in The Echo Nest similar tune machine.

            I am open to free streaming with shift for money collection to discovery moment.

            39 cents, or much less, if we execute it right. Proper implementation might allow for just 25 cents for purchase or addition of the tune to your playlist.

            The only parameter that should matter is 100 billion dollar industry in 2020.

            Today’s golden boys will deliver at the best 35 – 45B by 2025
            Terrible outcome considering we have been there in 1999 in 1999 dollars.


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    3. hippydog

      I’m also thinking it can only be Gross Revenue..
      Net is not possible or artists would be getting zero..


      Reply
    4. Danwriter

      <>

      Spotify profitable?


      Reply
  9. hippydog

    What I find interesting is, (if i am understanding things correctly)
    ALL artists will be able to check out how much they are getting paid for royalties..

    Even the ones under Labels..
    if true
    It will then be up to the labels to explain to the artists why the money isnt coming down the pipe.

    http://musically.com/wp-content/uploads/2013/12/spotify-rivals.jpg


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  10. Joey Flores (earbits.com)

    Why is nobody who covers this mentioning that they have different royalty rates with different rights holders, and that while 0.6 to 0.84 cents might be the average per stream rate, that is surely swayed by the higher rate they pay the major labels, and the fact that those major artists make up the bulk of the streaming. Let’s apply an 80/20 rule and see how this could also look:

    Let’s say there are 1,000 streams on Spotify, and they earn $10. They’re going to pay out $7, which is 0.7 cents per stream.

    Major labels get streamed 800 times out of 1,000. Indies get played 200 times. They should pay the indies $1.40, but what it probably looks like is….

    Majors get paid $6.25 with their most favored nation contracts, and indies get to split the $0.75. That does mean they pay 70%, and it does mean they pay an average of 0.7 cents per stream, but this information they published was intended to convince artists that 0.7 cents is the average rate they can expect to make from Spotify. Why isn’t anyone asking what rate specifically does a Tunecore artist average, or an indie label?

    This is the equivalent of Walmart saying they pay their workers an average of $22 per hour because their CEO makes $100 million and their floor people make $7. They are still paying dogshit wages to their floor workers. Averages and totals don’t mean shit when you’re paying certain rights holders more than others. I picture Daniel Ek sitting next to the NSA in a hearing and saying, “I provided the least dishonest answer I could.”


    Reply
    1. Anonymous

      Major albums can negotiate better deals because they have more desirable music. Something more desirable is worth more. That’s you know is how a free market works.


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  11. David

    Reading the Spotify statement again I was struck by one point I was unaware of, which is the claim that in the United States they are required by statute to pay publishers about 21% as much as they pay the recording copyright owners. That means that if the total payout is, say, 0.6 of a cent per stream, then publishers would get about 0.1 of a cent, and the recording owner (usually a record company) would get 0.5 of a cent. Assuming the usual 50:50 split between publishers and songwriters, the latter would get about a twentieth of a cent per stream. That is not very much, but it is still higher than some claims.


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  12. Stephen Aristei

    Thank you David for reviewing the numbers and bringing a little more “clarity” to this whole thing…..I also find Joey Flores’ conclusion of the comparison to “Walmart” pretty appropriate….And the “fly still in the ointment” is the music publishing revenues….because all though many may feel differently, it is the “song” that is the “single” that is driving the business and if the creator of that song can’t make a living, we will all ultimately loose !

    It makes me sad that there are so many virtually “lying” (deceiving, not telling the truth, omitting the facts – what ever you wish to call it)…to make or preserve/protect their continuing to make fortunes on the backs of creative people….The internet was supposed to make the field more level and this kind of deception was supposed to be eradicated in the 60′s……By watching the sophisticates of our business, as well as those in politics, I see that we of my generation and the generation before it have failed ! How sad !


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  13. David

    A few more points strike me. If I understand Spotify’s statement correctly, the payment received by a label or an artist for streams in the same accounting period and territory should not be affected by the varying proportions of free and paying listeners to those streams. These will affect the overall payment from the territory concerned, but not its division between artists or tracks. So for example, if there is a higher proportion of paying subscribers in Sweden than in Spain, then artists and labels will get more money per stream from Sweden than from Spain, but apart from that the payment for each ‘Swedish’ stream or each ‘Spanish’ stream should be the same. So it shouldn’t make any difference if an artist (say) has a high proportion of teenage listeners who don’t pay, or a high proportion of solvent adults who use the premium service. But this conflicts with some other reports, such as the recent one on DMN about a Finnish artist claiming a big difference in payouts for ‘free’ and ‘paid’ streams. If Spotify’s statement is correct, then either the earlier report is incorrect, or Spotify have recently changed the system.

    The second point is that nothing in Spotify’s statement suggests that there is any deliberate difference in the rates Spotify pays to different record companies, or that there is any difference in the rates for record companies and non-signed artists paid through Tunecore, etc. The only factor affecting the payment rate is the territorial location of the listeners (which affects the proportion of free to premium users, and the advertising revenue). This could indirectly affect the payment rate to different companies, if e.g. they have a lot of listeners in ‘poor’ territories, but in principle a company like Sony should not get a higher payment rate than a small independent company or for that matter Tunecore. But this conflicts with the general belief that some companies, especially the majors, have got a better deal than others. Am I missing something in the statement? Or is the general belief just a myth? I note that the statement says nothing (that I can see) about up-front lump sum payments, which is one common ground for suspicion (and particularly the suspicion that labels were allocating these payments to artists’ accounts in proportion to the number of tracks on the service, and not to the number of streams, which would enable the labels to pocket much of the money as ‘unrecouped’). Are these up-front payments just a myth, or are they now just ancient history which no longer distorts payments between different labels or artists?


    Reply
    1. Casey

      I’d say they left out some information. The report doesn’t even mention the existence of the $5 Unlimited plan or the payout rates associated with that tier. They seem to allude to the idea that there is no difference in payout between Free and Premium (or the non-existent Unlimited) users, but I think we have seen too much information proving Free users and Premium users are on different pay scale to believe that.

      The major labels did get equity didn’t they? Perhaps they don’t get a different rate per stream than indie’s, they just get equity to spice up the deal.


      Reply
      1. HansH

        Most probably major labels get a percentage of the revenues according to their marketshare, Streams don’t count unless they exceed the amount of the revenue share. (The greater of…) One thing I know for sure, there is a difference in pay out for Free, Unlimited, Mobile and Premium users. I have the statements to prove this.


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      2. HansH

        Makes me wonder. If a label gets a percentage based on marketshare, will an artist still get paid per stream by this label?


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        1. Colin F.

          The labels still get a spreadsheet of streamed artists so they have the ability to account on a artist-by-artist basis. Whether they do that is questionable, at best. In addition, if the artist recouped its advance, then they should get their whopping 12-15% (per their crappy contract) of the label’s cut for that artist. If not recouped, then an artist will receive $0 from its label.


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  14. Digital Breakage

    What is left out of this explanation is that Spotify (and every other on-demand streaming service from Apple to YouTube) provides other revenue/compensation to some, but not all, “rightsholders” which goes unshared with artists and distributed labels. These other forms of revenue/compensation are sometimes referred to as “digital breakage”.

    Digital Breakage monies are delivered to the majors by the services under the single line item accounting statement reference(s) of “deal fee” or “guaranteed minimum revenue” or “annually renewing advances” and are considered by the majors and larger distributors as “direct to profit” revenue. They are monies/payments to these major labels and large distributors that aren’t “earned” by numbers of streams but rather are related to clout or previously asserted market shares of those labels/distributors. The payments are negotiated to enrich the bottom line of those so-called rights holders and, insidiously, are often gained in negotiation at the expense of the per-stream royalty. It’s legal, if not moral, because the labels/distributors would claim that it’s payment they’re seeking to in return for content delivery or time spent negotiating the deal(s) or taking the “risk” of bothering to get into business with the services (who may not and often don’t survive). It’s immoral or unethical because it’s sucking the revenue oxygen from the digital music economy for artists and independents.

    Here’s an attempt to provide an example of how: service i offers label U a penny a stream as a royalty bearing rate but label U instead counters asking for an upfront flat payment or guaranteed quarterly minimum payment unrelated to number of streams generated or revenues generated by service i with a per stream royalty bearing rate of, say, half a penny a stream. Label U then only shares with their artists or distributed labels a royalty share of the half penny and keeps the vig or skim…DIGITAL BREAKAGE. Service i then goes around with the half a penny rate – in this example – and offers it to smaller distributors, indie artists and labels and says (with a straight face), “we’re offering you the same royalty that we offer the majors”.

    This is what is happening in nearly every direct digital streaming license and is at the root of why artists and most indie labels are starving from their streaming royalty income.


    Reply
    1. David

      Well, if that’s true – and you seem well-informed – it makes a nonsense of Spotify’s statement. That’s why I mentioned the question of ‘advance payments’ in my earlier comments. Spotify’s statement claims that 70% of all revenue is divided in proportion to streaming usage (on a territorial basis) and 30% retained by Spotify. That doesn’t leave anything to go to ‘deal fees’ of the kind you describe. The only way to pay deal fees would be to take them out of capital rather than revenue. Conceivably that is what they are doing, though obviously it would not be sustainable as a permanent business model.


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    2. jw

      This seems to be very true, in addition to the labels receiving equity in the service, which will not trickle down to the service. The labels will get a giant payday when Spotify goes public.

      There is generally, as I understand it, a clause written into artist contracts that forfeits any rights to income received by the label on the merit of the entire catalog. Of course most of these contracts were signed when this type of economy was inconceivable, which is why the solution is probably a class action lawsuit by artists. The labels were just waiting for a scenario like this, & negotiated in bad faith on behalf of their artists, imo.

      As far as I can tell, Spotify’s hands are tied when it comes to this type of thing. They could refuse the deals & have stayed out of the US, but at the end of the day the artist is signing his or her own name to the contract & is responsible for any repercussions thereof.


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      1. David

        I have also seen something similar about ‘entire catalog’ clauses, but with a twist. The claim was under many contracts, any money received by the label with respect to its entire catalog, and not attributable to any particular artist or track, would be divided in some proportion (e.g. 50:50) between the label and all titles in its catalog. The neat trick with this is that a high proportion of all tracks would be unrecouped, and the label would just pocket the money for those tracks. Since by and large unrecouped tracks would not be played much on the streaming service, the labels would get a higher proportion of the total payout than if it were genuinely in proportion to streaming usage, as Spotify are trying to convince us in their statement. They need to be confronted directly to confirm or deny whether such payments are made.


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  15. buck

    Lost in the confusion of this ‘explanation’ is how these royalties are actually distributed. Labels (if applicable) only distribute a portion of the purported ~70% gross revenue allocated to royalties. The publishing royalties are paid through in a much more convoluted manner. As part of the 2011 CRB settlement, Spotify is required to pay a minimum of 10.5% of gross revenue to publishers/songwriters. Presumably, this is included in the 70% that Spotify claims is paid out to ‘artists.’ Publishing royalties are split into two parts, (1) streaming mechanical royalties and (2) streaming performance royalties. Streaming mechanical royalties are distributed to publishers by HFA and, unless the publisher is an actual HFA affiliate, these royalties are difficult to obtain. Streaming performance royalties are distributed separately to writers and publishers by their PRO (ASCAP current distribution system, btw, systematically prevent all but the most streamed tracks from receiving any royalties at all. Don’t believe me? Check your ASCAP statement for streaming royalties…)

    While the overall royalty payouts by Spotify are certainly small, most artists don’t take into account the three different revenue streams when arguing the pittance of their Spotify payments. Hell- most artists probably don’t realize that there are three different streams.


    Reply
  16. Nope

    This “streaming is the future” rhetoric is mostly BS imo.

    Has anyone even tried to enjoy an album’s worth of music while battling spotty network service? How can anyone in a major city using any kind of public transportation, underground or otherwise even begin to justify relying on their wireless carrier for their music experience?

    Until the networks become completely ubiquitous and rock solid you can bet my 64GB card will power my phone with the 128GB following shortly.


    Reply
    1. Casey

      Nearly every streaming service with direct label licensing has the ability to “cache” or store music for offline playback. So poor network coverage is pretty much a non-issue.


      Reply
      1. jw

        Yeah. You just check “available offline.” Easy as pie.


        Reply

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