Spotify Per-User Royalties Have Dropped 35% Since 2013

That’s according to music industry researcher David Touve, Assistant Professor and Director of the Galant Center for Entrepreneurship at the University of Virginia.  Touve posted the intial finding ahead of the Thanksgiving holiday, with more backing details coming in the following days.

Stay tuned.

21 Responses

  1. Rick Shaw

    Which is still 100% more than artists got from Spotify prior to it existing.

    • superduper

      Yeah, but royalties from selling music are a hundred times better than streaming on Spotify.

      • Annnnddd...?

        Not sure what the point of your statement is, everybody is well aware of that….nobody buys CDs anymore so let’s move on to more productive discussions.

        • superduper

          I like so many others still buy CDs. Your point is technically inaccurate. People do buy CDs whether you like to think so or not.

          But that’s besides the point anyway, the point is that CDs are far more lucrative as an income generator than streaming, and if that continues to be the case, you should expect far more artists in the future abandoning streaming in favor of selling music both physically and digitally.

        • Me2

          CD’s are still something like 50% of all revenue from recordings.
          But with the majority of news feeds, how would anyone know?

          • Me2

            “Total Sales Revenue” to clarify.
            IFPI, RIAA’s typical 30-40% plus an estimated 20-25% unscanned physical sales globally.
            “25” will shift CD’s up by a considerable number points this year no doubt.

      • Rick Shaw

        You’re incorrectly assuming that this takes away from other revenue.

        • FarePlay

          Rick Shaw. You do realize that you crossed the credibility threshold sometime ago and are now spewing your or their opions into a hollow void.

  2. Adam

    Its obvious that as user growth increases the rate per play is going to decrease. Overall artists will be making more money because there will be more plays throughout the whole network.

    • DavidB

      a) It isn’t obvious at all. Some people have argued precisely the opposite. Please explain your reasoning.

      b) As stated in the article, what has fallen is average royalties paid per user, not per play. The effect on pay per play will only be the same if the average number of plays per user is constant, which is not very likely.

      • GGG

        It depends what you look at, i.e. individual acts or the whole payout to rightsholders.

        If you add 1M more users, the per stream rate is going to lower because Spotify hasn’t figured out how to better monetize freemium users, or push them to paid, and ad rev doesn’t go up anywhere remotely parallel with user growth.

        So User X’s per stream rates, and hence the royalty total they are responsible for, will drop as more people join, and User X’s plays are worth less. But it’s possible the total payout stays the same, or even goes up, as long as the math works out. In other words, (to use random numbers) if 10M users were worth $2.39 each, that’s what, like 15M needed to be worth $1.55 for Spotify to pay the same amount. Maybe it drops to each user worth $1.25, but there’s now 25M people. That total Spotify is paying out will be greater, BUT individual artists MAY get less, depending who these new users stream. So it’s not a problem, and it is a problem.

        It COULD also mean users are simply streaming less but I highly doubt that’s the case. What it will really come down to is if there’s a bottom limit, where per stream averages aren’t overly affected by new users.

        • DavidB

          “If you add 1M more users, the per stream rate is going to lower because Spotify hasn’t figured out how to better monetize freemium users, or push them to paid, and ad rev doesn’t go up anywhere remotely parallel with user growth.”

          According to Spotify, the proportion of paid users has stayed steady, at around 25%, as user numbers have grown. For freemium users, advertising revenue is usually on a per-play basis, so in theory it should increase pro rata to total plays. Regardless, my comment was that Adam’s claim was not ‘obvious’ at all, and I don’t think you have shown otherwise.

          I suggest that there are two main reasons for falling revenue per user:

          a) Spotify is giving very generous ‘introductory’ rates to new users.

          b) Online advertising rates generally are falling, so the revenue per freemium user would have fallen anyway.

          But I agree that Spotify may also have a problem in increasing advertising revenue to match the growth in user numbers. From my own casual observations, Spotify’s advertising performance is really, really bad. A handful of ads are repeated over and over again, and many of these are music-related ads that the major labels are probably getting for free or at cut rates as part of their deal with Spotify.

          • GGG

            I mean, it’s obvious because it happened and there was data to prove it. The per play average shrank continuously as it grew. Mainly because, as you said and I alluded to, advertising rev does not keep up with user growth, for numerous reasons, number one being just the way reach vs price increases work.

            Having said that, my latest report shows them going back up actually, with US rates actually averaging at .006, after it was closer to .004 for a long time. So who knows what’s going on there.

          • FarePlay

            GGG. At what point does the cheerleading stop and reality set in? The Spotify model that has been emulated by so many others was DOA and without obscene amounts of outside financial support Spotify would have collapsed by now.

            Is there another business model for a scaled back version of interactive music streaming that CAN work for both creators and music streaming providers? Absolutely.

            That’s what we need to be talking about.

          • GGG

            So make one and I’ll be your number one cheerleader. I’ve always been a cheerleader for the theoretical possibilities of streaming, I’ve never said “Yes, I love Spotify’s low payouts!”

            It’s also about perspective. You have the luxury of sitting on the sideline looking at all this with no skin in the game. But I don’t know how many times people like you, and Paul, and others on this site need to be told it’s not a black and white issue across the board. If you want to tell Adele and Taylor Swift not to stream, I wouldn’t argue. If you told people to window, I wouldn’t argue. But when you’re talking about smaller acts, it’s a different story.

            I brought this up in another post, so I’m sure you read it, but for the abridged version, a band of mine that released an album 2 months ago made a significant amount more money on Spotify, to the point where I doubt the sales they lost would have made that same amount. And the reason has nothing to do with how much Spotify pays (if those lost sales were the only streamers, of course it’d be a different story), it’s about being heard. We were on playlists, we’re in people’s weekly discovery, we can target ads directing to Spotify and people are much more willing to click because the end game is not buying an album from a band you never heard of. Tens of thousands of streams were from people that literally did not know we existed until they played that song. That’s a very, very powerful thing.

            Maybe Adele sells 10M albums. Great for her! She’s got 60M+ fans on Facebook, which itself is a fraction of her fans I’m sure. So best case scenario Adele sells music to 16% of her fans. Fortunately, she’s got the numbers and clout where 16% is a huge chunk of change. But how about 16% of a band with 60K. That’s like $100k in sales, and 16% sales reach is pushing it for non-superstars. There’s a power to being able to monetize that huge percent of fans that historically never bought music AND monetize people just checking you out.

          • Me2

            No lost irony that paid conversion is a concern, while top artists can’t opt to be on the paid tier only.
            Progress is likely on pause until something is done about YouTube.

  3. An Indie

    This is entirely tied to Spotify expanding into new territories/countries. If you looked at the per user royalties generated by country – in more mature markets – you’d see that they are not shrinking in the US, UK, etc.

    Global per user royalties are naturally negatively impacted as Spotify launches in countries with weaker economies and local currencies, an influx of new users who are first trying Spotify and a new advertiser base who need to be sold on the value of advertising on Spotify.

    It’s much more important to note that per user royalties are increasing in the U.S., for instance, as Spotify continues to show an increase in premium subscribers in more mature markets.