On Tuesday, metal label group Century Media abruptly removed its content from Spotify, citing paltry payments to its artists.
Now, Spotify has issued a statement to Digital Music News responding to that removal, as well as broader claims that its service undercuts rights holders.
“We are sorry that Century Media have opted not to offer its music to their fans through Spotify. Spotify has one of the biggest music libraries in the world – of over 15 million tracks – and is committed to offering our users the widest possibleselection of music across artists and genres from around the world.
Spotify was launched out of a desire to develop a better, more convenient and legal alternative to music piracy. Spotify now monetizes an audience the large majority of whom were downloading illegally (and therefore not making any money for the industry) before Spotify was available.
“Spotify is now generating serious revenues for rights holders; since our launch just three years ago, we have paid over $100 million to labels and publishers, who, in turn, pass this on to the artists, composers and authors they represent. Indeed, a top Swedish music executive was recently quoted as saying that Spotify is currently the biggest single revenue source for the music industry in Scandinavia.
“Spotify is now also the second single largest source of digital music revenue for labels in Europe (IFPI, April 2011). Billboard reported in April that Spotify territories saw an average digital growth rate of 43% last year. By contrast, neighbouring countries (without Spotify) saw only 9.3% digital growth.
“We are very proud of the positive contribution that Spotify makes towards growth in the music industry.”
That is a great response from Spotify, very professional and to the point. As I see it there are only a couple companies trying to push the industry forward Spotify, Echo Nest, Hypem, Soundcloud, Music180 and a few others. I wish more people in the industry would see that things need to change and the old labels are quickly becoming a thing of the past.
” the old labels are quickly becoming a thing of the past.”
Uh.. Spotify IS owned by the labels of the past.
Labels have to agree with the terms but artists get nothing from plays … sounds like a rip-off to me. But then again, when does the artist NOT get ripped off, in terms of money for sales? Indie.
I am so glad Spotify released this message, I agree with it 100%. Artists get compensated in proportion to the number of plays they got. Even if the compensation is small, it is still better than nothing and artists have known for many years that they cannot depend on income from recorded music, so they should have adjusted their business plan accordingly. If Spotify was sooo bad for artists, then more would be speaking out about it. Bottom line is that Spotify really is finding a solution to piracy because now there is absolutely no need to illegally download a song if you can just stream it on Spotify. In my opinion, labels who do not want to be a part of this are stuck in the past.
Spotify says: “Spotify now monetizes an audience the large majority of whom were downloading illegally (…) before Spotify was available.”
The IFPI says in its Digital Music Report 2011 (p 11):
“The introduction of new legalisation and a landmark court decision on The Pirate Bay in 2009 helped make Sweden a positive case study for digital music. Yet 18 months later, lack of active copyright enforcement threatens to reverse the gains the market made (…) At the start of 2011 however, there are signs that the Swedish success story may be a risk. New figures from research company MediaVision indicate a recent increase in piracy levels. This conicides with a sharp decline in physical sales in Sweden in 2010.”
So what is the effect of Spotify? My guess: A sharp decline in physical sales in Sweden in 2010.
Spotify says: “Indeed, a top Swedish music executive was recently quoted as saying that Spotify is currently the biggest single revenue source for the music industry in Scandinavia.”
How can Spotify be the “biggest single revenue source for the music industry” when digital revenue was, according to the Grammofonleverantörernas Förening (local IFPI body), less than 30% of all label income in Sweden in 2010? And are there no concerts in Scandinavia?
The “music industry” is not the “concert industry.” They are two totally different things.
A polished reply, but come on!
The major labels – read old labels – own the largest equity stake of Spotify, about 18%. So they or the majority of their artists are not going to start openly criticising it.
But a label like Century pulling their music is very interesting as it gives the outside world a glimpse of the continuing uncertainty on that particular business model.
we have paid over $100 million to labels and publishers”
For how many streamed songs?
This is the only figure I want to know : $/per stream?
Running a new swedish music company (used to run a rather success full indie label some years back…so I think I can see things from old and new perspectives) that is based on new thinking, new business and contract models to cope with the new realities.
See Spotify as a saviour after ‘all’ the record stores going out of business, and heavy illegal downloading taking place before Spotify entered and got going.
Streaming income is many small streams, but adds up and if the model grows into big territories, more and more premium paying users it will be a great thing. US, UK, Germany whereever.
Seeing good development every month from Spotify income, better money per stream all the time.
Spotify in these neck of the woods is a household word, and where people young and old consume music these days. And where artists and label are paid. both majors and Indies up here praise it’s service. There’s no other way really, it feels. So big thumbs up for ém!
I think everyone is missing the point here. Spotify is an amazing promotional tool for artists. Artists shouldnt be adding their music on there and expecting to get rich! Spotify relies on subscriptions and advertising revenues. Both markets are in their infancy and will grow greatly over time.
Spotify should now be used to promote your music and get it heard by the world. The more listeners you have.. the more people will come to your concerts, buy your merchandise… etc. etc
“Even if the compensation is small, it is still better than nothing and artists have known for many years that they cannot depend on income from recorded music, so they should have adjusted their business plan accordingly.”
“I think everyone is missing the point here. Spotify is an amazing promotional tool for artists. Artists shouldnt be adding their music on there and expecting to get rich”
I’m amazed at these type of comments … Are these written by Spotify’s PR task force ? How can you ask artists to treat Spotify as promo and not expect any compensation , from a company that is expecting exactly the opposite for itself , and had attained close to 1 BILLION dollar valuation on the market , and just got another 100 million dollar of cash from investors, etc…
Is this some new type of digital slavery ? These arguments are so insulting , they should rename it SPITIFY , because it’s how it feels , we’re being spit upon as artists by this kind of brainwashing attempts. Artists are not THAT stupid. In case you didn’t get the memo, slavery is over.
Of course, Spotify will quote Swedish(Scandinavian) music executives who receive a disproportionately larger share of revenues, unfairly I may add.
What is the difference between illegal downloading music for free and legally streaming an unlimited music library for free? Nothing, they are both competing with the other while cannabalizing sales from legitimate sources of revenue for artists and labels.
Instread of trying to find a poor alternative to music piracy, controlling piracy through effective legislation and enforcement is the best way to proceed.
As someone in the comments above has quoted, the gains in Sweden are direct result of legislation and enforcement but now Spotify is threatening this success with legal streaming of an unlimited library.
Spin this anyway you like, Spotify is out to screw labels and the artists.
In the USA the majors are unfairly receiving a disproprotionately larger share of Spotify revenues which is why they agreed to sign up.
Obviously, independent artists and labels are going to get shafted by Spotify and the majors once again.
Unfortunately, the majors appear to be short-sighted as they are being shafted as well with whatever compensation they agreed to. Spotify pays less than peanuts to the artists and labels.
I don’t buy the poor Spotify argument that someone who has always illegaly downloaded would never buy music. Spotify is providing an alternative not to buy music.
No one will buy music unless the gonvernment actually pursues every single copyright infridgement lawsuit… Sadly, people are used to getting recorded music for free
There are plenty of other places on the internet to give your music away for free, you can even find some that don’t lie about potential income 🙂
I am an independent artist. I signed up with Spotify a year ago. I recieve dozens of plays a month per my payment sheet from CDBaby. And the answer to your question Big Boss is $.03 per play. It is more of an experiment than anything. I only have 3 of my releases up, and am not sure if it spurs the listeners to purchase other releases. I will continue with Spotify, as I am interested in how the whole digital distribution is evolving. I will not put a down payment on the Mercedes Benz yet. 🙂
Spotify money is not peanuts anymore…
Got an artist who is starting to do pretty good on an indie level, none of the big swedish acts really yet, but yeah got good numbers of Spotify plays and growing steadily.
In the month of April we sold a total of 30 physical CD’s of their old album here in Sweden (CD market is not in a good state to say the least, and this was actually a good CD month for this title).
That gave a margin after manfacturing (no marketing costs involved in these calvucations) of say 150 USD (* CD prices way higher here so margins higher). That was the income from physical sales.
Spotify for the same record, that month paid out approx 1750 dollars for streaming of that record (streams in Sweden only).
So… from my perspective, I think the peanuts you talk about are much needed, and that these peanuts really ads up and becomes a big bowl.
With more and more people paying for premium, volumes will add up. It´s definitely going in the right direction.
Note: don´t have a stake in Spotify… Or have ever heard of swedish labels getting a better deal than others from Spotify. Same deal as other
Well, it seems that the exodus has just begun.
Indie Jazz/classical label Mode Records has quit Spotify as well.
But in the way that piracy impacted digital music sales – Spotify is now driving paying customers away from the serious revenue streams. Spotify is great for listeners but not for artists.
Probably not from forward thinking labels.
Guess the pirating is driving away the money stream. not Spotify. They are offering a pretty good solution, that can and hopefully will improve.
I am using Spotify since long and am more than happy with it. Things can always get better, but to me they are offering what I want in music, instant access and also availability in my cellphone anywhere, anytime
Hard to see how things can go back to the past, CDs is not gonna resurrect.
If you want to put this matter to rest, care to share the number of spins you received and the revenue per spin?
“We Are Not Ripping Off Artists…”
This is why I was initially interested in them.
I think I found the problem everyone!
“Spotify is now generating serious revenues for rights holders; since our launch just three years ago, we have paid over $100 million to labels and publishers, who, in turn, pass this on to the artists, composers and authors they represent.”
Spotify assumes the money is “passed on to the artists, composers, and authors they represent”….
how naive! They need Lyor Cohen to sit on their board, teach these young gunnas a lesson or two!
sad. pass throughs often never happen, leaving artists broke and last to get paid.
Spotify’s “better-than-nothing” business model IS a rip-off. They would not tell you that, of course, but they average over 600 streams per users/month. Should they pay like most other providers, that is, 7-10 US cents per steam, the average Spotify fan would have to pay $42-60/month, just to cover the license cost. And how much do they charge a paying user per month? Here is the problem, you see.
Spotify might have paid $100M in license fees, but they should have paid 5-7 times as much and not over three years but each year. No wonder close-to-nothing is left for the artists (the labels get their share). No wonder the average spending on recorded music per fan is falling down…
Spotify’s users streams over 600 times a month, on average. Divide it by the average fee paid by the Spotify user (including non-paying ones), and you will get the number. It is appalling.
This is like when labels had to license iTunes as a legal alternative so a court would shutdown Kazaa and Limewire. Now it sounds like some labels would rather complain about consumer behavior than change their business practices.
As far as compensation on a per stream rate, there is a difference between an independent artist who gets their music into Spotify’s database via TuneCore, and an artist who is signed to a label who gets their music into Spotify’s database via the label’s distribution department.
When an artist signs to a label they sign away something like 85% of their rights, so when a label artist gets their royalty they are only getting a percentage of the total money/stream. If Spotify pays $0.001/stream to the label, the artist gets their 15% royalty which equals $0.00015 (and only if the band has recouped its advance.)
Independent artist $1 = 1000 streams
Label artist $1 = 6666 streams (only if recouped)
Spotify isn’t paying labels on a per stream basis. They are advancing money to the labels for the rights to access their whole catalog (not individual songs or albums), and making deals for a certain percentage of revenue or a per stream rate, which ever is more or less.
Labels don’t payout advances to publishers or artists because advances are not itemized which is neccessary for ensuring accurate accounting.
I don’t think Century Media articulated their position properly.
You gotta understand there’s a lot of bitterness from artists who see Spotify as major-label owned and screwing them.
Artists get no money from Spotify. It’s not a promotional tool at all. Spotify gets rich off adverts and off the artists hard work.
Tough times in the US I guess.
It averages out at about 0.2 US cents per play.
10 plays = 2 cents
Ask yourself how many times, on average, you play tracks you have purchased. Some favourites you may play 100 times? Many others perhaps only once or twice. Let’s say the the average over all purchased tracks is, say, 10 plays.
An iTunes purchase earns an independent label between 40 and 50 US cents.
Applying the putative global average of 10 plays per track that is 4-5 cents a play.
As opposed to 0.2 cents a play.
A Spotify play – on this very rough calculation – is worth 20 TIMES less.
This is the underlying basis of why we feel Spotify rips off artists.
Spotify cannibalises genuine sales. It is not purely a conversion system from free.
Spotify is powered by spin and lies.
No Josh you are wrong.
Spotify are offerring a shite solution.
They are exploiting the problem of free “illegal” downloading purely for their own interests.
They just exploit artists – they have no interest in providing a decent income for artists.
Visitor, does the number of spins matter really. I told you the amount I received from Spotify versus CD sales to give an idea. Itunes sales are not much to report as Itunes are not that strong here,
With the illegal downloading I could never see how many downloads there was and I/artist got nothing. With spotify hey I got 10 x times what I get from physical sales now, and its growing. So naturally I praise them.
What you get paid per stream depends on if streams are from free users (ad money pays your streams) or premium streams by paid subscribers. More and more lately, growing month from month. the later make up the big parts…
Try to find figures about Veronica Maggio and how many Spotify streams and how much money she made on her recent very succesful album. The whole kingdome of Sweden pretty much pushed the computer/Spotify button the very same day the record came out, meaning massive number of streams.
But Steve…who doesn’t exploit the artists. Itunes cares about the artists? The Major cares about the artist? Well…to some extent they all do, including Spotify. The Pirates, do they care? Well lets skip that question for now…and also to what grade the indies care about the artists.
Seriously Spotify is a commercial actor, as is….(fill in the blanks). No better or worse than anyone else in a moral sense…just offering a new plattform, a new form of listening/consuming music, in a good way. At least for me.
From what I hear there is more and more postive voices from artists, from labels about what they are doing, and the direction things are going. With more cash to the artists and the labels.
Spotify works for the major labels — it’s the vast old catalogs that is where the $ capital is at.
What the independent artist gets paid is another question. That small percentage of a PENNY is the 21 century equivalent to a
RACE RECORD (from the 1920’s-1930’s) – royalty payment. And yes the major labels are still profiting from those long-gone artists on platforms like Spotify. Was that a relationship of exploitation back in those days?
Perhaps, it is worth mentioning at this point of the exchange that some labels were vihemently against a deal with Spotify. But it was the big investors and…. publications like DMN that could not wait for Spotify The Savior of the industry, calling the manager opposing the deal names… Right, Paul?
@simpleman – respectfully, in most cases (for artists signed to labels) the artists actually get paid FIRST.
they get an advance against sales/licensing income. after paying that advance, the labels then have to spend money marketing/promoting/manufacturing, etc. to try to interest enough fans to buy (or stream) that artist’s music to recoup their investment and make a living. all of the money that a label spends on an artist helps that artist generate other revenue (tours, merch, performance royalties, mechanical royalties if the artist writes her own music, etc.).
it’s the stuff of amateurs to make the blanket statement that artists don’t get paid.
“Spotify was launched out of a desire to develop a better, more convenient and legal alternative to music piracy. Spotify now monetizes an audience the large majority of whom were downloading illegally (and therefore not making any money for the industry) before Spotify was available.”
This is a disgusting, disingenuous, and straight-out thuggish argument. Essentially Spotify are saying: “We only rape you, instead of raping you and then killing you. Are we not merciful? Are we not in fact your saviours?”
It is pathetic to justify behavior by claiming that the behavior of others is even worse. Spotify is actually benefiting from and capitalizing on piracy, and shamelessly cashing in on the desperation of musicians in the face of rampant lawlessness and disrespect.
The proper baseline of comparison for any legitimate distribution pricing is not piracy, but an evaluation of the actual worth of music. Spotify has valued music at almost zero.
When I first read this article I was thinking it was going to be because they felt spotify is infringing on copyrights, which is true. However I found it sad that it was because they felt artists were getting ripped off because it brings down the amount of money an artist could make. Physical sales are dead and they will not be seeing that kind of money they used to from it. They need to help cultivate new ways to get their artists known and bring in revenue streams.
Then remove your content from Spotify. If you feel like it’s not working for you that’s all you have to do. You sound like one of those people who complains about a TV programme being offensive or whatever when the remote control is sitting right by hand.
Best anyalysis of the situation so far in this commentary. Exactly right. Major labels groups each got a share of $400 million (doubt it was accounted as ‘royalties’) plus a piece of ownership. Unless Spotify tightens up freemium and gets more advertising, it remains a losing proposition for indie labels and artists. However, it is better that Grooveshark, which is a total rip off.
1. I wrote a white paper entitled “Music 2.0 business model” about the impact of streaming services on the revenues of the music industry players, either artists or labels.
2. Based on pricing levels of downloads & streaming services and on contractual rights defined between players, a business case study has been done to define the number of downloads or streams needed and the number of true fans required to expect different levels of revenues for each player and how these revenues will evolve with a growing fan base.
3. The conclusion is that the revenues generated by audio streaming paid services are far from being negligible and are a real complementary revenue opportunity offered to the music industry; it was demonstrated that 3 years would be needed with the same true fan base to come-up with similar revenues, comparing both download & streaming digital services: 10 000 true fans either consuming an average of 23 streams (or plays) a month based on a an 0.0125 euros cost per stream or downloading one 9.99 euro LP will generate in 3 years around 48 000 euros revenues for a label, 55 000 euros revenues for an independent artist, 7000 / 8 000 euros revenues for a singer/songwriter or 3000 / 4000 euros revenues for a songwriter.
4. This white paper is available free of charge on
I think your statement is that of an amature. Artists never get paid first and if they do it is indeed an advance but that advance is recouped. The label gets its return from all of the income streams you had mentioned before the artist is paid hence the term (recoup). In this day and age of digital disruption there is no more advances, being that there is no money to advance. What planet are you living on? When major labels make deals with companies like Spotify the labels are paid not the artists, it is then the labels responsibility to pay the artist but the artist won’t recieve anything because the label still needs to recoup what they advanced to the artist puting you in the red and them in the green. Yes, Spotify is better than piracy but that’s also like saying riding my bike 100 miles is better than walking. Get real, the solution has not happened yet just like the solutions in Washington. The trickle down theory has never worked as you can see where that has left us here in America. The artist is what matters most, there would be no Spotify, iTunes, etc without the artists. Until there is a solution for the artists and all rights holders it’s still the wild, wild west with lower sound quality , lower income and the history of recorded music only availible on mobil devices playing through tiny ear buds. If you feel this is better or innovative you’re sadly mistaken. Technology companies have hijacked the music industry and are in bed with the majors because the majors are the only ones who can teach them how to continue ripping off artists.
What we are really started to see is the shift in music pricing that was due long ago. People rebelled against $17 CDs when they were the norm by downloading from Napster. Kazaa came about as an alternative to $0.99/track downloads. Now, trying to squeeze as much money out of the paying consumers as possible, labels increased their floors so digital music partners had to raise their prices to $1.29/track, hence leading the way to more piracy and streaming alternatives.
I’m not trying to argue that music has no value, quite the contrary I feel there is a value to music. The current ownership model is not the proper value to music though. It’s simple economics, take the law of supply and demand. Supply is now limitless but for some reason less than 10% of people who consume music make a purchase and over 90% pirate (steal) the music. Maybe, a reasonable person would take a look at this ratio and decide that single tracks and albums are over-valued by the powers that be and consumers are not willing to part with that level of their income.
Take the average consumer’s digital file library, let’s put the number for arguements sake at 3000 files. In that case, you’re asking the consumer to spend over $3,000 dollars on their entertainment. Amie Street had a viable solution for music valuation, it just never took off like it should have due to the lack of inclusion by the major label groups.
Stop trying to bring back the past, live in the present and think to the future. There is opportunity and money to made in music, just not the way it once was.
Hey Chris De Palmer your figures are totally out of whack.
Your estimated figure for per stream of 1.25 euro cents (= 1.5 US cents) is entirely wrong.
(I quote you:- “based on a an 0.0125 euros cost per stream”)
I checked your paper and you based your per stream estimation on false information, not on the actual documented income received by actual labels and artists.
The average income for an independent label from Spotify is 0.02 US cents. That is 7 1/2 times less than in your bogus estimation.
You have overestimated per stream income by 750% !!!!
How do you account for this alarming and catastrophic error that you have made?
Criminals from the past / present / and the future must face the law. That is how civil societies work.
Note that this study is based on paid subscription packages: it means that all true fans pay a premium package (5 or 10 euros a month) to service providers like spotify or Deezer who can generate 0.0125 euros per stream to the music industry.
Fans using free audio streaming services will generate 10 times less revenues to the music industry, ie only around 0.00125 euros per stream.
That’s why producers are encouraging audio streaming services companies to offer only paid services to maximize the revenues.
Note that Spotify “has already signed up 1.4 million U.S. users for its free trial, according to a source familiar with the company’s operations. At least as important: Spotify now has 175,000 paying U.S. subscribers, less than a month after it finally opened its doors in America” )
This is encouraging for both labels & artists.
It will be interesting to see how long it takes them to join the other labels leaving.
But where did you get the average of 23 streams (or plays) a month from?
According to my sources, the average is 600 streams per users per month. Given the fix subscription prices of $5 or $10, the actual total revenue per stream is a negligible fraction of a fraction of a US cent. And mind this: this is total.
Then, you have to consider Spotify’s costs, 7Digital’s comission, then labels’ cuts, publishers’ cuts, etc., before anything of the tiny crumb of peanut will ever land in the artist’s pocket….
My average of 23 streams a month / artist is based on my assumptions and is quite conservative compared to the stats from last.fm (refer to my white paper for the details).
It will be the responsability of the labels (or independant artists) to stimulate the fans to listen to their favourite artists songs more often.
Hence a potential trend of more EPs and less LPs in the future.
Chris you seem to be assuming that virtually the whole subscription monthly payment is channelled to the labels/artists that the subscriber streams.
But sadly this is not the case.
The bulk of the subscription goes to:- SPOTIFY
Yes the per stream payment on subscriptions is higher than on Spotify’s fee service – but the fact is that less than 20% of the subscription fees are channelled to labels/artists.
How come you do not know this?
If we look at the real world: the revenues are even higher. As a producer, and based on my quarterly royalties report, I have earned 0.0137 euros per stream from Deezer service last March from users subscribing paid packages. On top of that, this was the amount including the 10% service rate of Zimbalam, digital aggregator. Not bad at all and very promising.
I also had also streams generated by Spotify, but only from users with unpaid packages, which mean around 7 times less.
So producers have to push Spotify and other music services providers to convert their subscribers into paid subscribers. 5 or 10 euros a month for unlimited music anywhere is a great thing.
If you’re a producer, use those streaming services for your EPs or LPs and you’ll see how the revenues look like.
Thankyou for admitting that you have no practical knowlege of per stream income from Spotify.
I do not understand how you can dare to pontificate on a thread about Spotify when in fact you are ignorant about Spotify.
This is a thread about Spotify, not about Deezer, which is an insignificant service based only in France.
You are arrogant.
Maybe, a reasonable person would take a look at this ratio and decide that single tracks and albums are over-valued by the powers that be and consumers are not willing to part with that level of their income.
Consumers would be willing to part with the price of music as it stands, if they did not have the unethical option of simply pirating it. Compared to “free” piracy, even 0.0001 (dollars or Euros, take your choice) is too much for those with no conscience.
Furthermore, the creators and owners of content have the right to set the price at any point they wish, just as an artist can set the price of painting at any point, or a fashion designer can set the price of clothing. Consumers do not have the right to choose those prices. These are luxury goods, not necessities. Either pay the price, or do without.
A return to the past? Only in the sense that work should be paid for, unless the content owners and creators explicitly choose to make it free. Otherwise we have the digital equivalent of the lootings in London.
What about the evil zombie Spotify tracking cookie?
When do we finally find out how to kill this monstrosity?
My question pertains whether Scandinavian labels and artists automatically receive a better rate than everyone else. I can understand if your Spotify streams revenues are larger than CD sales if your stream rate is much larger than everyone else’s.