On Wednesday, Brooklyn-based Projekt Records pulled its catalog from Spotify, while blasting the company as ‘not a viable way forward for the music industry’ (article and full letter here).
Now, Spotify has offered this detailed response to Digital Music News, which includes direct challenges of several parts of the Project missive.
We asked about specific, details payouts shared by Projekt, in particular a $0.00029 per stream royalty. This was Spotify’s response.
“Spotify does not sell streams, but access to music. Users pay for this access either via a subscription fee or with their ear time via the ad-supported service [just like commercial radio] – they do not pay per stream. In other words, Spotify is not a unit based business and it does not make sense to look at revenues from Spotify from a per stream or other music unit-based point of view. Instead, one must look at the overall revenues that Spotify is generating, and how these revenues grow over time.”
Projekt referenced an extremely low payout for Lady Gaga, which Spotify says was mis-reported by the Guardian years ago.
“The Lady Gaga rumour to which your article refers is totally false.
“It relates to a short period of time, just after Spotify had launched back in late 2008, and is not an accurate or current reflection of the total royalties paid out to an artist and composer like Lady Gaga. It also only relates to royalties due from STIM (the Swedish collecting society) in respect of plays in Sweden ONLY and none of the other markets.
“It is also important to note that the STIM royalties were performance/publishing royalties, exclusive of royalties for the master rights paid to the record company (unlike US terrestrial radio, we actually pay for master rights, in addition to public performance), and excludes the royalties paid to Lady Gaga’s record company across all of the launch markets over the previous 12 months. To get a little technical here, “Poker Face” itself was classified as a ‘split track’ at this time (meaning the song was co-written by a Swedish and US composer), so only a fragment of the money was paid to the Swedish composer who is a member of STIM.
“This figure would only represent one of several revenue streams for the Lady Gaga track in only one country (ie. Sweden), at a time when Spotify had literally just launched. We compensate collecting societies, who pay on to publishers, and the record companies (who in turn compensate the artist and songwriter) for use of a track.”
DISCOSALT
Gaga tears?
Nick Mango
“paid out to an artist like lady gaga”. Essentially favoritism. Or dare I say, Kickbacks.
“Spotify is not a unit based business and it does not make sense to look at revenues from Spotify from a per stream or other music unit-based point of view. Instead, one must look at the overall revenues that Spotify is generating, and how these revenues grow over time.”
But payout is determined on plays right? So, to get payed you have to get played.
Secondly, how do you look at the overall revenue? They are asking you to look at imaginary numbers, even if so to speak, someone heard you on spotify and then bought your album. This is virtually impossible to track.
Payout isn’t necessarily determined by the per stream rate.
Spotify give a certain percentage of the money collected from subscription fees to the record labels (ie. Rights holders).
If the stream rate is greater than that percentage, then yes, they pay the per stream rate. If not (and it usually isn’t), then they forfeit a percentage of the subscription rate to the record labels, who in turn pay their artists.
Therefore, Spotify is correct in saying that you should look at the overall money being generated (and not the per stream rate) because the bulk of the money being paid to the artist is coming from subscription fees.
I’ve read these responses before.
http://www.hypebot.com/hypebot/2011/09/spotify-responds-to-artist-payments-controversy.html
The Gaga pay out:
http://www.telegraph.co.uk/technology/7590782/Spotify-rejects-claims-that-it-rips-off-artists.html
Spotify sure is good in copy paste 😉
Jeez, can we get one honest non-vague response out of Spotify? They won’t tell us payouts, they won’t tell us how much they paid majors, they make statements like some shady politician. Oh wait, the reason is that are shady, they are not a friend of the industry or artists. This is just a scam for investors and major labels.
Indies need to BOYCOTT SPOTIFY.
That’s the ONLY way they’ll pay reasonable rates for the music.
No Music, No Spotify. It’s that simple.
“Spotify does not sell streams, but access to music.”
Spotify have made this exact statement before on these pages. What on earth does this mean? On what bais do they pay artists and writer if not on the basis of streams? We want some honest and direct answers.
– Versus
Spotify give a certain percentage of the money collected from subscription fees to the record labels (ie. Rights holders).
If the stream rate is greater than that percentage, then they pay the per stream rate. If not (and it usually isn’t), then they forfeit a percentage of the subscription rate to the record labels, who in turn pay their artists.
Therefore, Spotify is correct in saying that you should look at the overall money being generated and not the per stream rate because the bulk of the money being paid to the artist is coming from subscription rates, not the per stream rate.
Labels and aggregators calculate on a per stream rate so that they know how much to pay the artists. But spotify pay a percentage of the subscription fees to the labels and aggregators and that money is then divided up by market share for each label.
For example, if spotify pay out 70% of a $10 subscription, then the labels split the $7 they recieve based on market share. So if Record Company “X” is 20% of the market, then they recieve $1.40. Then Record Company X splits that $1.40 with their artists based on what music got streamed. If you are an artist signed to Record Company X, and that month your music accounted for half of the streams, then you would get paid $0.70 by your label.
Spotify in turn, use their portion of the subscription fee (in this example, $5) to run the service, pay for bandwidth, pay for staff, etc.
“Spotify does not sell streams, but access to music. Users pay for this access either via a subscription fee or with their ear time via the ad-supported service [just like commercial radio] – they do not pay per stream.”
This is CRAZY!!!
Our label’s Orchard releases have monthly accounts show Spotify income as number of streams and amount per stream.
Our label’s IODA releases have monthly accounts show Spotify income as number of streams and amount per stream.
We have some other releases that we have licensed elsewhere show Spotify income as streams.
What is going on here? Surely if Orchard and IODA – the two biggest digital aggregators – account Spotify income as per stream then it must be indeed per stream!
It seems obvious that the number one problem with Spotify is not just the pitifully low income, particularly for indie labels, but this MASSIVE LACK OF TRANSPARENCY.
Is Spotify a Ponzi scheme?
They always say they are better than free as if that’s the end of that argument. But that’s a cop-out: so if you pay me $2 an hour, that’s okay because I used to be homeless? That’s what companies said in the Depression.
Daniel Ek: if you really want to save the music business then start with the artists instead of disrespecting them. This isn’t Goldman Sachs or some country club you can’t talk down from the mountain very long. Eventually you won’t have any support from us.
Thank you for pointing this out. This is exactly what I have elsewhere called a “thuggish” argument. The thug says you should consider yourself grateful if he only extorted your money, and didn’t also kill you. How benevolent of Spotify.
Essentially, Spotify are then exploiting artists on the basis of the current general lawlessness (that is, piracy) of music commerce.
– Versus
Rhapsody pays roughly $.01 (a penny) per stream when subscribers pay $10 per month. They have been consistent over many years at this rate. Important: the number of subscribers do not affect the stream rate… think it through. Only the monthly subsriber fee affects the stream rate.
Rhapsody is likely playing it fair with indies.
Rhapsody is the benchmark to compare all other subscription services.
Spotify is fooling with your minds and wallets… and Paul Resnikoff is not asking the right questions…What is the truth Paul?
I thought it was fairly common knowledge that Spotify was paying $.007 per stream. Now, depending on the track the payout may have to be split a few ways, depending on what was negotiated.
Sounds to me like blaming Spotify because hardly anyone is streaming your tracks.
No Artie you are wrong.
1. There is a massive variation of the per stream income reported received by various labels and artists through various accounts. But 0 .7 US cents per stream is higher than any recorded payment. What is your source for this?
2. Spotify proclaim that their accounting to artists and labels is not done on a per stream basis – sounds kinda ridiculous I know – but the extremely opaque lack of transparency from Spotify is the root of all these severe doubts.
Are you the same Artie Fufkin who begged Spinal Tap to kick his ass?
Great discussion! Now, I get that Spotify, Mog, Rdio, Rhapsody, etc does not pay the artists enough money. But what about the people, the so-called fans? They have been trained into wanting their music for free. If we had to pay for all, or most of our music, piracy would shoot back up, right? And the people willing to pay represents a minority. Only 2% of the people on Spotify are paid members. That says a lot. How do we remedy that?
Spotify is more opaque than the Vatican, the CIA and the NSA combined…
“We can’t tell you what a stream costs, we can’t tell you how much we pay, we can’t tell you what we pay to the Majors, we can’t tell you how we calculate things , we can’t tell you nothing.
Just give us your music , and go away please, we’re too busy putting the money in our bank”
Part of that is Spotify, and part of that is the negotiated terms of the contracts with the labels. If the label’s contract with Spoitify stipulates that they cannot releasethat info, both sides have to honor the contract.
Then there should be a single standard set of pay terms that applies to every contract with every label.
The big firms should not get more favorable terms. That is a might-makes-right scenario. Again, thuggish.
– Versus
“there should be a single rate paid” to everyone…
That is called a statutory rate – like the sound recording performance royalty rate collected and paid by SoundExchange from non-interactive services like Pandora and SiriusXM – and it is great for indies because we know that our music is receiving the same per stream rate as the majors.
This is a discussion about Spotify, I know, but I want to use this platform to spotlight for those that don’t know: SiriusXM is trying to bully independent labels and artists (threatening them with withholding airplay) into giving up the statutory rate and signing a direct license (with secret percentages all paid to labels).
As angry as any of you are about Spotify, please keep your eye on and speak out against Sirius’ attempts at breaking the best working system for indie labels and artists.
Everyone, please read this:
If you think Spotify is a scam then you’re right. I’m inside a major so I know: and these companies have stakes in Spotify and even some execs are getting private stakes on this if/when there’s a sale or IPO. Just ask some of the people at Universal Msuic Group including Rob Wells head of digital.
On top of that every major demands a big fee before they license anything or not discussion (why do you think Warner Music took so long) plus a big % on every play which obviously leaves less for indies. So ask yourself is this really better than piracy?
Plus you notice no one has any idea how much people are getting paid ever? well that is on purpose, because it is not that way with others like Rhapsody, the more confused you are the better in their minds.
The shame here is that the groups that are supposedly defending the indies like A2IM, Merline or AIM are really just playing along saying nothing — so it takes the indies themselves on the edges of this to take a stand even though they get hated on for “fighting technology” or whatever when what they are really righting is dishonesty. There’s a BIG difference and that’s what this is.
This commenter above is incorrect (only because he is misinformed) about what Merlin, A2IM & AIM are doing.
You’ve heard Merlin (and these other groups) speak out against unfair treatment for indie labels before. If they aren’t speaking out against Spotify and that seems odd to you perhaps you should join Merlin (it’s FREE to join and is open to all indies, http://www.merlinnetwork.org) and find out what deal they have for their members.
$.007 is not $0.7
$.007 is quite crappy
It is interesting how they turn this into an accountant’s discussion of fractions of pennies, while ignoring the over-arching my reason for pulling Projekt from all-you-can-eat services:
In the world I want to live in, I envision artists fairly compensated for their creations, because we (the audience) believe in the value of what artists create. The artist’s passion, dedication and expression is respected and rewarded. Spotify is NOT a service that does this. Projekt will not be part of this unprincipled concept.
Right.
Translation: “We make plenty of money for you, just trust us. And don’t try to quantify us based on anything you actually do.”
Even the record industry was not that brazen.
Spotify responds….. WITH UTTER NONSENSE!!!! “Spotify is not a unit based business and it does not make sense to look at revenues from Spotify from a per stream or other music unit-based point of view.” WHAT !?!?!?! As an artist used to earn Spotify money, I certainly think we should look at revenue on a unit basis !!!!
I’ve a premium Spotify account for more more than 18 months now; since then I can listen to (almost) all music everywhere and always, discovered tons of bands I’ve never heard of before, bought tickets for the shows of some of them, taking friends along who are now also fans, oh and I’ve spent more than €180,- in subscription fees and will add another €10 every month automatically for the next couple of years, and I can assure you that’s a lot more than I’ve spent per month on music before I had Spotify. In other words I’m a happy music consumer, discovering new music and I’m paying for it in a recurrent way. If artists or labels decide to not have their music on Spotify than that’s their free choice, but don’t think I, and with me many other Spotify users, will try to find you somewhere else on the web when we have millions of others at our fingertips, and so many other distractions to pay attention to.
MUSIC CONSUMER–you basically have just repeated the mantra of Spotify and others who feel indie bands should quit complaining because they get exposure they wouldn’t have otherwise. You get people to hear your songs, you may get them to buy the album. A Band would get better results by allowing iTunes to give a song away on Free Tuesday–because I would buy the album if I liked the free song–and I have done this countless times since iTunes started. I found a Projekt album, Dark Cabaret, at a retail store chain called Hot Topic.
You brag you’re spending over 100 euros on Spotify, and you go to shows, but you never mention buying tracks outright, the bread and butter of the independents. Shows are not cash cows for indie bands like they are for the majors and especially if America based Projekt had a band go to Europe to tour, how much money could they expect to make after expenses?
Fine, you’ll miss out on Projekt’s music, but there is a principle at stake here, fair and equitable treatment. I’ve been a designer/photographer for the last 25 years and I’ve been underpaid every single one of them, but I was just starting out back then and breaking away from working in a foundry (anything is better than pouring molten aluminum) so now my industry is grossly underpaid and crowdsourced for peanuts. The salary being offered now is equal to what I was paid in 1993–when that amount was actually worth more than it is now. I have a kid in school, mortgage to pay, but you expect Projekt to accept .007¢. Broadcast radio stations pay 35¢ per play.
I applaud Sam for articulating (publicly) his belief. I know a lot of other indie labels who feel the same way – about Spotify, about streaming royalties in general, and about fairly paying artists. Few state it publicly – and even fewer artists do – because they don’t want to be ripped apart by tech loving bloggers.
I wonder, though, does Sam take the same position on YouTube, Grooveshark, Soundcloud, etc.? These are all services where you have no choice about your music being made available. Spotify pays what they pay, and you may think it’s peanuts and not worth it, but it’s a creator’s/owner’s choice to be on their service or not. Not true for these other services and I think that makes them far worse than anything Spotify does. Makes me wonder why so much heat is directed at Spotify solely?
Oh, and I forgot…to the commenter directly above, there isn’t a broadcast radio station anywhere that pays $0.35 per play. In the U.S. on the terrestrial dial they pay ZERO and Digital Music News is always quick to say music labels and artists are wrong to want them to
Great points “Food For Thought”!
It’s become so popular to ‘hate on’ spotify and labeling them as the bad guys. The reality is, the economics of the music industry don’t work like they used to.
I remember when people would complain about iTunes when it first launched – saying that it cannibalized album sales and that the portion to artists from a $0.99 download wasn’t enough.
While that may be true, artists have to understand what consumers would be willing to pay for. The higher the retail price is, the less likely the consumer is going to participate.
After all, we are all competing with “free” these days…