Spotify CEO Daniel Ek has long asserted that per-play payments would increase over time, especially as more subscribers and advertisers piled on. Unfortunately, the exact opposite is now happening: according to royalty data just published by David Lowery at Trichordist (above), per-play payments are now in a tailspin, with sub-$.005 payments the norm (i.e., less than half a penny per play).
“The monthly average rate per play on Spotify is currently .00408 for master rights holders,” Lowery noted.
Lowery tracked an indie, mid-sized label catalog of roughly 1,500 songs over a 48-month period, from June of 2011 to May of 2015. In total, those songs received more than 10 million plays, making this a substantial, real data set for analysis (both the label and Lowery authorized our re-publication of the numbers) . “This confirms our long held suspicion that as a flat price ‘freemium’ subscription service scales the price per stream will drop,” Lowery continued. “As the service reaches ‘scale’ the pool of streaming revenue becomes a fixed amount.”
“The pie can’t get any larger and adding more streams only cuts the pie into smaller pieces.”
Lowery isn’t the first to identify this issue with actual payout data: earlier this year, indie cellist Zöe Keating noted the the same trend, while publishing her entire royalty statements to back the claims. Others, most notably Jeff Price at Audiam, have also publicly posted aggregated data to show continued payout-plunges for artists (his diagram is above).
Price is seeing this effect not just for Spotify, but for streaming services overall. “The decrease in the per-stream rate is occurring due to the number of streams per month growing at a more rapid rate than the revenue,” Price asserted back in June. “In other words, it appears anyone that pays $10 a month for unlimited music streams a hell of a lot of music.”
“In addition, as the rates drop, the money is being spread over a larger number of artists, causing the money to spread more ‘thinly’.”
One solution might be to re-allocate the ways that royalties are paid, including a shift towards paying artists for the actual streams they receive. That means that users are actually contributing money to their favorite artists, instead of throwing their money into a giant pool. “If someone pays $10 a month, and only streams songs from the album Broken Boy Soldiers by the band The Raconteurs, the money from these streams would only be paid for the use of these songs and not impact/dilute the royalties to another rights holder,” Price described.
That hard, per-stream data sharply contradicts with a picture of increasing royalties being painted by Spotify, though importantly, only top-level revenue figures are cited. “As we grow, the amount of royalties we pay out to artists, songwriters and rights holders continues to climb faster than ever,” Ek recently blogged. “We have now paid more than $3 billion USD in royalties, including more than $300 million in the first three months of 2015 alone.”
“That’s good for music, good for music fans… and good for music makers.”
Correction: In the first publication of this article, in the top diagram, we showed the far right date ($0.00408) as ‘May 2014’ when it should have read ‘May 2015’. It’s now corrected, pardon the mistake!