Spotify: We Pay 70 Percent to Rights Owners

Slowly but steadily, sensitive information continues to spill on Spotify’s royalty payouts.

And this time, it’s coming from the company itself – specifically, Spotify ‘Artist In Residence’ D.A. Wallach of Chester French.  Spotify tapped Wallach to help convince artists that Spotify is a worthwhile deal for them – now, and in the future.

In this discussion with Hypebot, Wallach – a Harvard alum – revealed this.

Anyone who doesn’t think we’re paying a fair cut hasn’t seen the numbers we pay out. By far the vast majority of the money we’re making goes back to the owners of the music – about 70%. When compared to iTunes, the average listener spends $60 dollars a year into the creative community, whereas Spotify Premium users spend $120 per year.

Up to this point, Spotify itself has declined to share specifics related to label payouts of any sort, citing confidentiality agreements.

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17 Responses

    • Zoso

      uh… huh… what? if spotify wants us to believe what percentage they’re paying out how about some transparency? We all know that Itunes takes a 30% margin…

      And speaking of how much the “average” itunes user spends per year… what the source on that? Also… Spotify is about 1/10th the revenue of Itunes…

      A lot of spin going on here… all to justify the fact that artists are not making squat from Spotify… all the rationalizations in the world don’t change the checks people are ACTUALLY getting…

      • Kirk

        1/10 the revenue of iTunes? Try 1/100, or 1/500 perhaps.

        200 million iTunes users; a few million people paying for Spotify Premium. A huge difference. That was, in fact, quite a disingenious statement to compare how much each user spends a year.

        • FarePlay

          Spotify should really open a fruit stand.

          They love to compare apples and oranges. Its’ like comparing leasing a car and buying one.

  1. HansH

    It’s old news 😉 Check Billboard.biz

    Still good to have it confirmed once again.

  2. Question

    I would like to know how much do Spotify Premium users spend per year for their cell phone (hardware & communication fees combined).

    Does any reporter dare to make that comparison or is it too hard on their tech blogs’ ad feeds?

    • Casey

      Why does it matter? It would be a completely irrelevant comparison.

      • Larry

        It is a very important question. Spotify presents $120 as “big spending”. Let’s see what the average Spotify user spends on hardware and telecom fees.

        Problem?

        • Casey

          Spotify refers to the $120 per month as big spending when it comes to music services. And in reality, it is, Many people would not be willing to pay more than that for a subscription service.

          What they pay for their cell phone bill is truly irrelevant, because the service has nothing to do with music. The money is off limit to artists. Comparing what Spotify charges to what Verizon or Sprint charge is pointless, the services are nothing alike. It is like asking how much they spend on gas every month. This is not a contest to see who can charge the most.

  3. Steven Corn (BFM Digital)

    You can disect the numbers any which way. But the 30,000 foot view is that most labels, distributors and artists are making 10-20x as much money from their iTunes sales as they do from their Spotify uses.

    But that doesn’t mean that I wouldn’t want to give up the Spotify revenue currently coming into BFM. It’s proving to be a nice added revenue stream for many of our labels and artists.

    Still, Spotify has a long, long way to go to match or overtake iTunes in simple terms of gross revenue.

    The key is for Spotify (or any other subscription or freemium services) to convince more music users to spend money on their music consumption. It’s ironic that most people would rather spend $1000’s per year on their daily coffee than they would on their beloved music.

    • steveh

      I agree with your 30,000 ft view. Thanks for a fine balanced well written post.

      Another recent Billboard article of interest here

      • Steven Corn (BFM Digital)

        Yes, this is a very accurate article, in my opinion. One interesting thing to note is that the “wholesale” amount on the Walmart sales are generally closer to 50% (as opposed to the 65-70% paid by Spotify). So, $525mil translates to $262.50 mil paid to the labels. That is not so far from the $175mil Spotify paid to the labels. Of course, the $262.5 mil is for US sales only while the $175mil is for worldwide sales.

        The point is that for some labels, Walmart sales will be a much higher percentage than Spotify due to the nature of the release. Walmart handles a very narrow slice of available catalog and fewer titles make it into the big box store.

        I could easily see how some labels are having Spotify show up as their 2nd best revenue source depending on their releases as well as the vitality of their back catalogs.

  4. @muiscn3rd

    Spotify finally reveals what it pays to rights owners.

    • Obtuse

      But still does not talk about whether the labels get a higher percentage of per stream royalties than the indies.

      • HansH

        True, but do the labels get a higher percentage when calculating the payout per stream? They got upfront payments and shares. Can’t have it all I hope.

        Than again with the big labels you never know.