Spotify Executive: “We’re Totally Transparent, and We Definitely Live by That Principle.”

We asked Spotify what they pay artists, and they refused to answer us.

We asked them again, and they told us they pay labels, not artists.

We asked them what they pay labels, and they refused to answer.

We asked labels what they pay artists, and they didn’t answer.

We attended an interview with U2 manager Paul McGuinness, and he said labels own part of Spotify, and that there was ‘insufficient transparency‘ from all sides.

We asked artists what they get paid by Spotify, and they all seemed to have a different answer (we think it’s around half-a-penny a stream).

After a band posted its payouts on Digital Music News, Spotify replied and told us that it doesn’t make sense to look at per-stream payouts.

The New York Times asked Spotify what they pay per stream, and Spotify “declined to comment on its rates.”

The Wall Street Journal asked Spotify’s CEO if artists are getting unfairly low payments, and he said labels pay artists fairly.

We asked a music industry lawyer what labels pay their artists on Spotify streams, and he said the answer is often nothing.

We walked right up to a Spotify executive at a conference and asked him if Spotify payments are improving now that subscribers are increasing, and he told us to talk to their press person.

We then asked their press person, and never got a response.

We asked a K-Pop label in South Korea what they get paid by Spotify, and they said they were getting slotted into a lower tier than American artists.

Triple J in Australia asked Spotify in a radio interview what they paid artists and labels, and they said they didn’t know.

We asked a prominent manager what he gets paid by Spotify, and he also said he honestly had no idea.

“We’re totally transparent about what we’re doing, and we definitely live by that principle.”

Spotify chief content officer Ken Parks, in a recent interview with Music Ally.

49 Responses

  1. Morgenthau

    David Lowery got it right. The new boss is worse than the old boss (old boss gave you tour support, new boss gives you “exposure”)

  2. Vail, CO

    Spotify is…
    Great for fans.
    Great for major labels.
    Great for Spotify investors.
    Not so great for artists.

  3. visitor

    Spotify doesn’t pay the artists directly. They pay the labels and the labels pay the artists directly from the contract that the artist sign with the label. Which mean Spotify doesn’t know what it is paying the artist.
    Spotify pays the labels directly. And it would be STUPID to reveal the rate to the world. You would lose negotiating advantage to the next label.
    “Hey, you pay label X and label Y $0.009, you should pay me $0.009 too.”
    It’s like asking Apple what they are getting from each iphone sold on AT&T and Verizon and Sprint. Once leaked, AT&T, Verizon, Sprint will use this number to their advantage to ask for a better rate.
    If you are running a business, revealing what you are paying to supplier X and supplier Y and supplier Z would be the stupidest thing ever.
    As for indie labels getting less than major labels. Welcome to the real world. Payment Rate is all about negotiating power.
    If you are an indie author and want to sell your book at Barnes and Noble, I bet you would not get as good a rate as a MAJOR PUBLISHER book….
    Welcome to the real world.

    • Central Scrutinizer

      You are correct. Spotify will not reveal specific details.
      However, I think that spotify is more concerned about their perceived image with the consumer and individual recording artists than about their bargaining power/negotiating advantage with major labels.
      I think it is naive to assume that the major labels (and remember there aren’t that many) don’t know some or all of the specific details of other labels’ deals.
      In any event, the public will eventually know more details about the agreements after the inevitable lawsuits brought by recording artists against major record labels for shady accounting practices.

    • shoegazer

      Spotify pays rights holders, which is not always the same as a label. Thousands of rights holders in Spotify are the artists themselves via CDBaby, TuneCore, Dittomusic, etc.
      Those thousands of artists DO know what they are getting from Spotify (minus the Merlin cut)

    • shoegazer

      “If you are running a business, revealing what you are paying to supplier X and supplier Y and supplier Z would be the stupidest thing ever.”
      Unless you are Apple. iTunes takes the same 30% cut for every single song.

    • Composer at Large

      Umm…so I take it you don’t know what your regular income is? Do you know if you’re paid by the hour? By the job? Yearly or monthly salary?

      The question is ‘what is the rate’ – i.e. general standard.

      Even Apple, AT&T, Verizon, Sprint understand a general standard which acts as a benchmark – otherwise services and contracts would have no value whatsoever.

      In the world of royalties there is a general standard – what these inquiries are trying to determine is if streaming services are living up to the general standard AND if they aren’t, how are streaming services trying to reach that standard.

      This issue is compensation within existing legalities, yet there’s no transparency regarding whether or not streaming services are meeting the legal standard.

  4. Spotify to pay right holders $

    According to an article in today, Spotify CEO said at the Founders Forum Event that Spotify is expected to pay the right holders $500 million in 2013.
    This is the equivalent of what they have paid from 2008 till 2012.
    2008 – 2012 = $500 million royalties payment
    2013 = $500 million royalties payment
    Which mean Spotify is growing at a fast rate.

  5. Radio

    How much does radio pay labels/artists? $0
    (I guess that is pretty transparent)
    How much does radio pay the publishers/songwriters per listen?

  6. SiriusXM

    What does SiriusXM pays the labels/artists?
    Are they also transparent?
    What about Rhapsody/Muve Music/Deezer/Rdio/Xbox Music/Sony Music Unlimited?
    What about Grooveshark?
    Asking Spotify what it pays the label is like asking AT&T what they are paying Apple for each iphone and paying Samsung for each Galaxy S3…….

  7. Michael Silverman

    We’ve consistently received about half a penny per stream. It does add up though. Im happy with Spotify. I don’t understand why the often repeated story about Lady Gaga says she got $200 for a million streams. I think that’s a myth. It would have been $5000.

    • Central Scrutinizer

      She probably did get $200 bucks or less after the split with label, publisher, agent, publicist, lawyer, stylist etc. etc. etc…….

  8. Adam

    Considering how you bash Spotify on a daily basis maybe itäs YOU they donät want to talk to?

  9. Spotify

    Paul never contacted us at all.
    Visitors must know that this site can hardly be regarded as a reliable source.
    The reason why Paul bashes our company is obvious. It attracts visitors and that increases DMN’s advertisment revenues.

  10. Walter Jnr

    Must be a slow news day if once again you are posting a pointless story about Spotify.
    This really is quite simple.
    If you are an artist and you do not see the value of having your music on that platform, whether that value is through royalties or exposure then do not put your music on the platform.
    Spotify do not yet control enough of the audience/market (your fans) to make it indespensible to artists. You should be telling your fans where to consume your music, so just ignore Spotify and keep focused on platforms that are of value to you.

  11. Adam

    The music industry is a shady, shady world. I’m glad we have people like Paul to bring a little bit of balance and shed some light. Unfortunately, though, this shouldn’t come as a surprise to anyone. This information SHOULD be public though. Very sad that its not.

  12. Agreed

    CD wholesale is fairly transparent, what iTunes’ cut is, so why can’t this be true? It was a flat rate when Youtube signed a licensing agreement with Sony Music back around 2008. It was $0.0006 for views over 30 seconds.
    Why can’t their be a flat rate or a tiered rate that’s transparent? I know it’s business to have negotiating power but not when you have that many content providers. The mobile phone analogy doesn’t hold up because Apple limits this to 3 companies, not hundreds of labels with a plethora of artists under each. When you have that many players going on, you start having payout friction just like this! Also, Sprint, Verizon, and AT&T KNOW what they are getting for the the money regardless of what each are paying for it; not a elusive “put it on our platform & and we’ll pay you something…maybe.”

  13. GoodGroovz

    The majority of signed artists are unrecouped, yes? So it’s not just Spotify–unrecouped artists aren’t getting royalty checks anyway.

  14. Visitor

    Secret societies and cults are supposed to have charismatic gurus.
    Spotify also fails (miserably) on that account.

    • steveh

      Spotify”s guru is Daniel Ek.
      Daniel Ek is an arrogant asshole.

  15. hippydog

    Quote “We asked artists what they get paid by Spotify, and they all seemed to have a different answer”
    in the end.. Its the artists who are the ultimate bosses..
    THEY are the ones who need to go to their respective Labels and demand an answer..
    and if they dont get a reasonable answer, they then need to go to their “labels” and agregators and demand that their music is removed from spotify until clarity happens..
    until this happens everything else is conjecture and we are just banging are heads against a cement wall..

    • Central Scrutinizer

      Major labels are not going to willingly tell their artists anything. The labels might agree to say something if the artist signs an NDA.
      It requires an angry major artist with deep pockets to pay lawyers and accountants to ask the label “what’s the deal?” Even then it probably will be barred from becoming public knowledge.

  16. Visitor

    I manage a Major Label artist.
    When we asked the label for any streaming data information, their reply is that they do not recieve “granular” data from their distribution providers, but that we can see our quarterly royalty statement for any other needs (which is our net payout).

    Meanwhile, every week I am emailed a spreadsheet from the label that shows worldwide digital, and physical sales per territory, with with net revenue numbers included.

    Does anyone else see our frustration here???

    • Visitor

      That’s because a major label gets a percentage of the revenue based on their marketshare and not the number of streams

      • steveh

        Why can’t this manager get the same detailed per stream weekly breakdown as he does for download sales?
        Why? Why? Why? Why? Why?

        • Visitor

          Thanks Steve,
          Our frustration also lies in the fact that this is incredibly useful metadata. We can use it for everything from routing tours to putting together setlists.

          Aside from the fact that it would be nice to know that the number they’re feeding us is more than arbitrary…
          Oh, and then there’s the % that PRO’s are taking from the writers side…that’s another thread completely.

  17. perspective

    iTunes today announced 25 billion songs sold since 2003. If all songs were 99cents, after Apple’s cut that makes $17,500,000,000 paid to rights holders since 2003.
    That’s an average of $1.75 billion per year to rights holders.
    Spotify expects to pay rights holders $500 million in 2013.
    So Spotify payments are 0.2857% of iTunes.

  18. jw

    I guess no one remebers this, but Spotify spent more than 2 years negotiating with labels to launch in the U.S. Access from U.S. computers was blocked from sometime in 2009 through July 2011. The rates that they pay are the results of those negotiations.
    Why doesn’t Spotify offer an across-the-board rate? The labels were trying to squeeze every penny they could out of Spotify, Spotify didn’t have the leverage to negotiate a standard rate. Spotify isn’t Apple.
    So it just doesn’t make any sense for them to release these rates, based on the climate dictated by the labels at the negotiating table(s). It could even be that they’re contractually obligated to keep the rates private.
    The circumstances aren’t the same as Apple’s.
    What’s obvious is that the labels were negotiating on behalf of themselves, rather than the artists that they represent, which is reprehensible, & the independent artists were left with scraps.
    What’s becoming common is that technology companies can be used as a scapegoat. We’ve seen this for years with Ticketmaster, with artists & promotors profiting off of service charges, & Ticketmaster taking the heat for it. Steve Jobs has the foresight & the leverage to avoid this by instituting fixed rates, which is what made him so great, but Apple is the exception, not the rule.
    Spotify isn’t the “new boss,” it’s just that labels have found a new way to screw artists, make loads of money, AND look good by comparison in the process.
    When consumers move from an ownership mentality to a streaming mentality, Spotify will have the leverage to renegotiate, & when streaming is the only game in town everyone will have no choice but to come to sustainable terms. That’s the way economics work.

    • steveh

      “when streaming is the only game in town everyone will have no choice but to come to sustainable terms”
      This would be a total complete fucking nightmare.
      This is why the whole Spotify transparency issue is so important – because at the moment artists and labels simply do not trust Spotify – and that vile Ek asshole – one millimetre.
      Stop trying to pass the blame onto everybody’s traditional whipping boy the major labels.
      If Spotify wants us to begin to trust them they must start with the transparency – NOW!
      The vision of Spotify as a monopoly corporate behemoth that can do what it wants with our (indie label) catalogue is mega-scary.
      Please let us keep some diversity in how we consume recorded music.

      • jw

        I didn’t say Spotify would be a monopoly, I said streaming would be the only game in town. That means Spotify, Rdio, Deezer, probably an iTunes offering, etc.
        I dunno how you can say “stop trying to pass the blame” when 2 years of negotiations bred the current situation.
        You think that the labels, after two years of keeping Spotify out of the U.S., having all of the leverage, just all of the sudden caved & got an unfair deal from Spotify? To me, that just doesn’t stand to reason. It makes more sense that Spotify had to whittle the labels down to a take that they could afford & still stay in business. And we all know that the labels’ take, specifically their ownership stake in the company, doesn’t correlate to streams & thus doesn’t trickle down to artists.
        I mean that’s just what makes sense to me, given what we know. If you think things are different, please explain it to me.

        • 99%

          “What’s obvious is that the labels were negotiating on behalf of themselves, rather than the artists that they represent, which is reprehensible, & the independent artists were left with scraps”
          I bet the majors held Spotify over a barrel.
          But that doesn’t excuse Spotify. The independents didn’t have any negotiating power, just like Spotify didn’t have any power with the Majors. What does Spotify do? Treat the indies just like the majors treat Spotify and throw them some “scraps”. More of the same “rephrensible” corporate behavior.
          Spotify can pay lip service to artists all it wants but if they were a real innovative company they would create an equity pool for them so that everyone, not just the suits, can share in Spotify’s success.

          • jw

            I get the impression that Spotify is paying independent artists what they can, every bit of what’s left after the major labels are satisfied. To say that Spotify is treating indie artists like they were treated by major labels implies that there’s more to give, or that they’re diverting more funds to major labels that exceed their obligations, & I just don’t get the impression that that’s the case. I don’t think that Spotify is slighting the indie artists because they don’t have the leverage to make demands, I get the impression that it comes down to share of plays adjusted by privately negotiated multipliers, & that dictates a pie chart by which the payout pool (whatever that is, let’s say, hypothetically, 70% of gross revenue minus whatever payments to the labels were agreed upon up front, which don’t trickle down to artists) is divied.
            So if you just took # of plays divided by the total payout, you would get an average per-song payment, & I feel like it would be much higher than what the average indie artist is getting, & perhaps substantially less than what some major artists are getting. Or it could be much less than what major artists are receiving & it may reveal just how much the labels are taking off the top for themselves. Releasing that number isn’t going to satisfy anyone, I don’t think. And I believe that’s what Spotify is getting at when they point to the total payout, rather than a specific rate. If they gave out specifics, one could conceivably extrapolate the the terms of the deals, & that’s going to reflect poorly on Spotify, even though it’s not their fault they had no leverage to negotiate with. And it could be that they provide these specifics to the labels, but it’s the labels concealing things.
            At least that’s the way I understand it all to work.

          • Visitor

            That should actually read…
            “Or it could be much MORE than what major artists are receiving & it may reveal…”

      • hippydog

        Quote ” That’s the way economics work.”
        The science of Economics works by being able to analyze the information gathered..
        If there is NO information being allowed out, then I wouldnt use the word “economics”..
        This is an example how monopolies and insider deals work..
        and another example of how the music industry can take something useful and turn it into a bad thing.. How? by keeping everything a secret or so confusing you need to be an economic major just to figure things out..

      • Nice Guy Eddie

        The points you make are valid.
        However, the article is about spotify touting how transparent they are when they are not.
        Spotify should put up or shut up.

        • jw

          What’s really the problem here? Don’t independent artists get these stats through distributors like cd baby? Wouldn’t it make sense that labels get the same breakdowns? Wouldn’t they HAVE TO in order to divie payments amongst artists?
          It seems to me that Spotify is transparent with everyone they have an agreement with, & whether those parties (labels, distributors) are transparent with their artists doesn’t fall on Spotify. And to ask for a “rate,” that’s almost like asking the President of General Motors how much they charge for a car. It’s not a simple answer, and an average rate doesn’t tell the whole story, & can easily be twisted into something it’s not. (Or it could reveal more than Spotify wants to reveal about just what degree of financial obligation they have to the major labels.)
          As far as I can tell, this whole issue comes down to people not making an effort to understand Spotify’s pay structure, & Spotify taking a lot of heat for the way that the labels go about their business. And there’s a little bit of trolling here, on Paul’s part, also, trying repeatedly to get an answer to a pretty asanine question.
          At least, that’s the way I understand it.

          • Nice Guy Eddie

            Ok you are correct.
            I stopped being lazy and read the original Music Ally article. The article implies that Spotify isn’t talking about artisit payouts at all when Parks makes the comment about transparency. He is merely saying spotify is more transparent than pirate sites. OK I’ll give you that one.
            He does avoid giving a direct answer to specific questions about artist payouts. He says “We have teams of people who engage with artists and artist managers every day, we take input from that community, and we make sure we are aligned.”
            Then the follow up question should have been “Do you think it’s possible to create a successful on demand streaming business model that has a totally transparent licensing scheme?” I must assume that he would say no. Follow up with “Why?”

          • Nice Guy Eddie

            Another good follow up question would have been
            Do you think that the interests of artists and artist managers are the same interests as those of the rights holders that you make agreements with?

          • jw

            I definitely agree that those would be great follow ups. Here’s how I would answer, based on how I understand the pay structure to work. To clarify, I have no association with Spotify whatsoever, this is just how I, personally, would answer, based on my understanding of how things work.
            Q. Do you think it’s possible to create a successful on demand streaming business model that has a totally transparent licensing scheme?
            A. Because we cannot reliably predict how many songs a user is going to listen to during a given month, we cannot prescribe a standard rate to each play. We must, instead, rely on an artist’s share of all plays in order to determine his or her or their share of a given month’s revenue pool. This is further complicated by certain parties’ reluctancy to license their catalogs to us. Their leverage allowed them to demand, not a higher specific per-play rate, but a multiple that exagerates their share of the revenue pool. These multiples were negotiated in private, and we keep them private. This is a standard business procedure, & no distributor I’m aware of publicly releases the terms of it’s deals with it’s suppliers, regardless of public outcry. There are competative disadvantages to that, and it just wouldn’t be fair to the supplier. So as long as streaming businesses are paying out based on a share of all plays, no, I do not think it can be totally transparent. At least not until all rights holders are happy enough with their revenue that we can give everyone a multiplier of 1, & pay out strictly based on share of plays. Regarding current transparency, we provide play data to the rights holders that we have agreements with, & can not force them to provide that data to the artists they have agreements with, & it would be unethical of us to offer the data without the rights holders’ concent. We’re fully transparent to everyone we CAN BE transparent to. We do, however, periodically release statistics like total plays over time or total revenue paid to rights holders, from which you could extrapolate an average per play payout, but that wouldn’t necessarily mean anything, since a given artist could be getting paid more or less than that. We do think this information is useful, however, & where it can be leveraged without revealing sensitive information, we leverage it (an example of this is sorting by popularity in the Spotify software).
            Q. Do you think that the interests of artists and artist managers are the same interests as those of the rights holders that you make agreements with?
            A. This is something that an artist or artist manager must consider before they sign their rights away to a label. We certainly sympathize with artists who, for instance, are not receiving all of the data we provide, but we would put our catalog in jeopardy to circumvent the parties that we have agreements with.

          • Nice Guy Eddie

            I would say thanks for clarifying “We are totally transparent and we definitley live by that principle.” and clarifying waht you mean by sligning your interests with the “artist community.” In a snarky tone of course.
            Also, am I wrong or doesn’t apple itunes pay the same no matter who you are? or is this something they just tell the public with a wink and a nod to major label suppliers?

          • jw

            I’m sure the labels came to Jobs & tried to negotiate a better rate, & Jobs said, “Our cut stays the same, if you want more money, you’re going to have to try & get it from consumers.” And that’s where $1.29 pricing came from. I don’t have any doubt that iTunes was run on the up & up under Jobs, & I don’t have any reason to believe that’s changed.
            As a note, I don’t think Apple tries to manage public perception on these types of things, the public perception is just a reflection of the artists’ perception, & the artists’ perception is that Apple is on the up & up.

  19. JTV Digital

    For sure Spotify has no clue about their payout rates, the calculation rules are so complex….

    Royalties on streams are paid depending on the play duration and the subscriber’s plan (free or paid subscriber), and the country of sale (= of stream).

    These are the main ponderation criterias.

    This is why for a given track from a given artist, you can have different payouts, going from 0.0009€ to 0.0169€….