Spotify’s losses may be mounting, but its salaries are exploding.
Buried within Spotify’s 2015 financial filings, released this week, was an interesting wrinkle: this is actually a great place to work. Outside of the obvious perks of working in tony areas like downtown Manhattan, Stockholm, or London with younger, talented people, there’s the money. According to Spotify’s annual report, the average employee, from receptionist to CEO, earns an average salary of €151,180, or $168,747 in current exchange rates.
That figure spans the range of compensation, including direct payments, social security, tax-deferred pensions, and company shares.
152% increase in salaries over 5 years…
Those salaries are rapidly increasing, according to the filings. Last year, the average Spotify employee made approximately €135,000, or $150,687. Back in 2010, Spotify had a much scrappier compensation policy: €60,000 ($66,972) per year, on average. That means the average employee compensation has ballooned by 152%, despite losses that have nearly quintupled to $188.7 million during the same period.
But that represents only part of the increase. Because Spotify has been rapidly expanding its workforce (and places to put that workforce). That includes a 300 person expansion last year alone. Perhaps more telling is the outright explosion in salaries for the highest executives and board members. Amongst that group, annual compensation reached €16.9 million ($18.9 million) for the year. That’s a whopping 300% increase since 2014.
That’s dragging averages up, though all boats are rising here (for every employee, that is).
So why the monstrous increases in compensation?
This is borrowed money after all. Literally: Spotify just secured debt topping $1 billion. And that ads to its previous equity financing of $1.56 billion according to tallies tracked by Crunchbase. This is one extremely-leveraged operation. And the question is whether all of that cash is merely raising the willingness to spend freely on everything, including people.
Spotify says that stronger salaries are required to be competitive, and innovative. “If we cannot maintain Spotify’s culture as we grow, we could lose the innovation, teamwork and focus that contribute crucially to our business,” the company’s filing defends.
But the uglier part of that explanation involves artists, a group that is witnessing its per-stream royalties sink over time. That is, despite promised increases from CEO Daniel Ek. In essence, the employees at this company are getting richer, while the artists powering their success are getting poorer.
For its part, Spotify says its royalty payments have never been higher, which is correct. But most of that expense seems to be going towards labels, without trickling down to that other group of ‘creative employees’.
Time to turn in an application…
Meanwhile songwriters (who create the basis for this business) are struggling to pay their bills… ——– Mientras tanto los compositores (quienes crean la materia prima de este negocio) estan teniendo series dificultades para pagar sus cuentas…..
They agreed to have their product used….
No, they actually didn’t agree. And they weren’t able to negotiate rates.
It’s called compulsory license. Get a clue.
Gee, is that rate not based on the estimated per-listener royalty rate for terrestrial US broadcast? Perhaps the assumption that a ‘typical’ terrestrial broadcast reaches 14,000 listeners is wrong. It’s said that the broadcast radio audience per station has shrunk dramatically. Maybe the per-play terrestrial broadcast rate for sw/publishing royalties is currently *too high*…. I don’t think so, myself, but when one starts prodding at the numbers, certain ‘ironies’ may emerge.
Artists have no say in this scenario. What a throwaway line on your part.
Songwriters write a song once. Shlubs at Spotify are probably working 60-hours weeks all year long.
In response to this shlub Roger Bixley who stated: May 27, 2016
“Songwriters write a song once. Shlubs at Spotify are probably working 60-hours weeks all year long.”
Are you fucking serious? What a clueless asshole.
Yes, he is.
You must forgive me if I don’t fall for people like Taylor Swift crying over low returns from Spotify.
Do you really think Taylor Swift represents a “typical” songwriter?? Of course not… you just think that type of hyperbole will detract from the obvious flaws people pointed out in your original posts.
While we’really at it… songwriters are actually required to license their works under the terms of a compulsory license. They don’the get to choose. Services like Spotify are merely required to notify the songwriter when they choose to make use of a compulsory license… and as David Lowery has demonstrated, they didn’t even bother to do that!!! Clueless indeed.
Please… go write a hit song. Let us know when you’re done so we know how many hours you invested. I will gladly pay you based on the number of hours you invest and the amount of money Spotify charges me to listen to it on their free tier.
They’re putting in the extra hours to collect more dough that they don’t have to share…….they know sooner or later it has and should end…the gravy train…the trough they’re stealing from. A great song…..can take days, weeks, months to write and at times it’s because the writer is inspired by a broken heart…or about being ripped off. A good write has paid their dues on some level at some time….and then took the time to write it down in a manner that’s taken years holed up in some rehearsal room or bedroom to get it down just right that sells their idea and emotion. That’s priceless. The Spotify peeps…yeah they put the time into finding out how to exploit the songs…the artists. And with any new media….there’s struggle to who gets what ’til the playing field is even. The Robert Johnson stories….all the early field hollering tunes …or the handed down tunes that developed over years handing down melodies and stories…..someone at one point took it upon theirselves to exploit the music and take credit for it. Ain’t right when someone who didn’t create the art is taking credit for it…or taking advantage of it. It’ll catch up the Spotify’s…the Pandora peeps…..it’s only right that it does.
oh look the industry is pretending to care.
too bad most of the money they get never goes to artist.
pathetic.
Did you write you ever write any kind of music? You know how long it takes to write a good song and good music? Or how long it takes to play an instrument really well, these are thousands of hours… What an ignorant post.
Buy directly from the artist, go see live music, pre-pay on artists sights for them to create new music. By-Pass the middleman.
good call
Um, the average salary, of course if you include the CEO is high. but median average wage is more like the average wage in stockholm – 30,000 USD per year..
How did you calculate the median value? The details required to do that were not included in Spotify’s annual financial statement.
I’m sure the CEO’s salary probably causes the average to skew a little higher than it really is.
Thats a good point. I wonder what the breakdown per position is.
Without the top-level execs, CEOs, board members, etc., the average salary is about $156,000 per annum.
Top brass are taking about 7% of the total compensation pie, keep in mind that’s a small group out of 1,600-something total employees, but wouldn’t dramatically alter the average.
Including social security and especially FAS123 stock compensation in a calculation of an average salary is poor journalism, poor finance, or both.
It’s common practice within both human resources and accounting disciplines to include these costs. The most commonly used term to describe this figure is “total compensation”. In fact, DMN didn’t choose to add those costs. They were already represented in that manner within Spotify’s annual financial statements. Paul couldn’t break those costs out even if he wanted to because those details aren’the included in the financial report. This is all entirely normal within that context.
Your choice to insult people while demonstrating that you know nothing about the topic you’re discussing is priceless.
how doesv that matter at all. shoukd the doorman make more than the ceo? You are paid what the owner thinks you are worth. You can quit at anytime.
Unless you’re an artist. Yes, artists that bring in all the income SHOULD make as much as the CEO. All of the work is done by them at their cost, Spotify is just slapping their name on it.
Is this top heavy? What does the receptionist or office admins make?
these people agreed to be paid what they are being paid…
“Average Annual Salary for a Spotify Employee: $168,747”
No, it’s closer to $5,82.
Jealous much?
This perspective always fascinates me. Am I jealous of greedy people who consume more value than they produce? No.. no I am not.
I think Spotify has produce an awful lot of value for the 100m+ users who love it.
yes at the expense of the artists who get a half a cent per stream.
It’s pretty easy to look up the ratio of revenue that goes to artists vs the service, but why do that when you can make baseless allegations of impropriety?
No one is forcing the artists. Radiohead, Beyonce, Swifty, etc all opting out.
Don’t like it move on. But don’t just sit and complain.
yes, but those artist were approached, accepted and can pull out if they did not agree to a bad contract.
I think y’all don’the understand the difference between an asset’s true value and a benefit produced by distributing the value of an asset to a particular party.
Sure, a consumer may feel that they benefit from free music. Beyond the actual experience of listening, they may even save a few dollars by eliminating the need to purchase those songs. But none of that establishes a value for the song or the service that distributes all of that free music. You can’t calculate a return on investment for the musician or Spotify based solely on the perceived benefit to a consumer.
Similarly… if the list price of an asset is $1 , but I choose to sell it for only 10 cents… the real world value of that asset has been diminished by my actions. Conversely, if I choose to share 70% of that 10 cents with a 3rd party… the value of the asset hasn’t changed at all.
The market defines the value. Always.
@Roger Bixley
Bullshit. Songwriter play value in the US is set by rate courts, not by the “market” at all. Wake up.
@NCS You still don’t fucking get it numbskull. Songwriters have no say. Mandatory license.
I wonder how many Black and other people of color work in key positions at Spotify?
I don’t.
The fact that you jump to that thought tells us a lot about how messed up our society is.
Why?
Well, the music industry’s cumulative devaluation had to cash out somewhere. May as well be these suits with pathological rationales for keeping recording musicians from getting too cocky.
Pure BS. It’s not the average salary but averaging the salaries. Big difference. One implies that this is the amount made by the average employee, while what this figure actually is is the averaging of salaries, meaning if 8 people earn $35,000 a year and then the CEO and CFO’s combined salaries are $10,000,000, it drives the averaging of the salaries up considerably, but doesn’t mean that that would be the average salary for a typical employee.
That’s the definition of an average, yes, though I think you’re looking for something that better addresses the different strata of workers. I’m trying to find that to offer more perspective, though I’ve partially answered it above.
Stay tuned for more.
Paul is a stickler for definitions of words, unless he can use those words as clickbait for an article. Only way someone could be dumb enough to interpret taxes, benefits, stock comp, and payroll taxes as part of an average salary.
It’s common practice within both human resources and accounting disciplines to include these costs. The most commonly used term to describe this figure is “total compensation”. In fact, DMN didn’t choose to add those costs. They were already represented in that manner within Spotify’s annual financial statements. Paul couldn’t break those costs out even if he wanted to because those details aren’t included in the financial report. This is all entirely normal within that context.
Your choice to insult people while demonstrating that you know nothing about the topic you’re discussing is priceless.
$168,747? Hire me! I’ll proudly stand besides my new spottily employees and crush artists everywhere!
see you in hell bitch
Way to not get it…and let everyone know you don’t get it.
What’s the average salary of Apple employees?
This article is a pile of shit spreading ignorance and unnecessary disinformation. Freedom of speech will win, noobe can stop the future.
For REAL information check http://www.GD78music.com
They are the REAL wiki leaks of the music industry not this “digital news clown”.
Oh man, where even to start. Clicked on it looking for these “REAL leaks”, only to find some “Freemium” service site. Clearly, you’re not in a position to discuss journalistic integrity.
“Outside of the obvious perks of working in tony areas like downtown Manhattan, Stockholm, or London with younger, talented people …” With “younger” people? Because working with older people is such a buzzkill, they should, like, totally pay you extra for every old you have to deal with. Older people! So lame. I don’t see why they don’t all just kill themselves for being so, like, lame.
T
I’ve never had an employer include their company-paid portion of payroll taxes when quoting me on a salary offer. I’ve also never had the FAS123 stock compensation expense that the company has to record included when being offered a salary, stock options are a separate component in any offer. It is a dumb exercise to drive average annual salary based on the Personnel Costs of a company’s financial statements, let alone one with a 6-10 billion dollar valuation like Spotify.
A 2011 Spotify stock option will have a lesser strike price than a 2015 stock option, and thus far more upside to the employee, but the 2015 stock option is recorded as a much, much larger expense on the company books due to the current FMV. It’s likely that this encompasses 20-40% of the personnel costs and the author failing to realize this is poor journalism.
I appreciate your effort to level set the dialogue. Let my try and reciprocate. Average compensation by itself tells us very little about the financial health of a company or whether that level of compensation is financially justified for that matter. At a minimum, you’d need some basis for comparison to similar companies or a more nuanced breakdown based on each job function.
For many of the reasons you outlined, EBITA (earnings before interest, taxes, and amortization) is commonly used to represent the health of a company’s balance sheet. For a growth minded startup who has recently taken on considerable debt, that number is likely to paint a bleak picture as the business plan relies on a big payout after a dominant market position has been acquired.
Within the context of an offer to an employee, these forms of compensation aren’t typically represented in the discussion. You are 100% correct in this regard.
The original context is a required financial statement for shareholders. FAS123 explicitly requires those expenses to be represented in these reports because they represent a variable expense/liability for the shareholders. These accounting rules were overhauled in 2006 after several Silicon Valley companies were found to be abusing stock options (e.g. back dating the option to inflate it’s value to the employee).
Which reminds me… especially when talking about a start-up company with a unicorn valuation, it’s very dangerous to assume value will increase over time. There are already a number of reasons to believe that Spotify’s value has decreased given the hoops they have jumped through to avoid a “down round”.
Employer paid payroll taxes are typically represented in every paycheck. But, as an employee… no one notices because they don’t seem relevant. They tend to only become relevant if one considers starting their own company or working as a consultant… because those situations typically require them to pay both the employer and employee portions of those payroll taxes.
An experienced auditor could probably extract more meaningful statistical indicators of Spotify’s financial health than Paul can. I guess that didn’t really bother me b/c I didn’t perceive Paul as claiming to be an experienced financial analyst. He basically calculated a simple average, stated that’s a big number that continues to get bigger, and then provided some context without really asserting a specific conclusion. I consider DMN to sit somewhere between a blog and a genuine news outlet. It’s broader than one person’s personal experience, but it’s not the Washington Post, either.
Thanks, great post. Learned something here.
as a software engineer who has tried to make a living as a musician, the work required to maintain the corresponding lifestyle is similar for both careers. it’s hard, and you are compensated fairly for the work you do.
also, spotify is selling you a product. you”re an asshole if you don’t understand that being an artist is not the same thing as being a skilled professional.
Artists aren’t skilled or professional? Where you at? Probably not a skilled, professional artists, all I can say.
edit – skilled, professional artist” – so some moron with nothing else doesn’t go trying to nullify the point over an “s”.
and yes @poopoocaca, that’s for you
I’m looking at the Spotify financials right now, and this math just doesn’t add up.
The personnel expenses are broken down on page 27. Quite a bit of those expenses are not salaries; e.g. 45,981 Euros are spent on social security expenses. In fact, the amount paid in “Wages and Salaries” is 155,262 Euros. That is split among 1,610 employees.
So, the average annual salary for a Spotify employee is 96,436 Euros, or $107,360 at current exchange rates.
That’s still a lot, of course – much more than I make – but it’s significantly less than what this article claims.
Talking about increase in expense means very little without talking about revenue. What is their % revenue growth vs % salary growth?
Everybody here keeps complaining about Spotify, it’s not the problem or the reason why artists/writers are not getting paid what they deserve. The problem has been the same since the beginning of the music business. The labels, especially the big ones, take all the money and do whatever they want with it. The reason why Beyoncé, Taylor swift, and radiohead opt out of Spotify is because they’ve gotten lots of label money already and have been around long before Spotify even existed. As an independent or new artist it is nearly impossible to get anywhere in this business without help, unless you’re a 15 year old YouTube sensation who magically gets a record deal because he has great abs…. Sigh. I think Spotify might be overpaying their executives, but the fact remains that the labels are really to blame for the state of the current music business.
Two wrongs don’t make a right. 🙂
Spotify do not develop new artists, they piggyback off of work done by record labels. record labels won’t give out deals that aren’t profitable, and they aren’t profitable because spotify has driven down the value of music.