Elon Musk is suddenly getting a close-up look at what artists are getting paid by Spotify — as well as other streaming platforms.
Artists have been screaming about this for years. Maybe even a decade. Now, Elon Musk is blasting Spotify for its ‘crazy low payouts’ to artists, especially his new girlfriend, Grimes.
After sifting through a few of Grimes’ royalty statements, Musk expressed shock at how little artists are making. In the case of Grimes, a giant chunk of the royalties are paid through a label, with a contractually-agreed portion paid to the artist.
In a Twitter exchange, Musk was asked whether it’s better to stream or purchase music from artists. In response, the Tesla founder displayed this streaming royalty breakdown from Statista, which demonstrates the the “crazy low payout” received by labels, with “the artists only [receiving] a small fraction of these numbers”.
Of course, Spotify is just one part of this low-paying picture.
But Spotify is the third-worst among a seriously low-paying group, with per-stream royalties averaging $0.00397 according to Statista’s research. That’s a tiny fraction of a penny, which of course requires absolutely immense stream counts to produce anything tangible.
In other words, you have to ‘make it up in volume’. But virtually no artists can amass enough plays to accrue a substantive, recurring payout from Spotify.
Tellingly, a successful artist like Grimes is probably receiving only a modest paycheck from Spotify, despite being planted on numerous high-profile playlists. And payouts from YouTube and Pandora are even worse. All of which is sad, because Grimes is one of the most celebrated artists of the past ten years, with Pitchfork even declaring ‘Oblivion’ to be the best song of the decade.
+ What YouTube, Pandora, Spotify, Apple Music & Amazon Are Paying Artists In 2018
But despite that acclaim, Grimes is nowhere near the spin volumes of a superstar like Beyonce or Taylor Swift. In fact, we heard a rumor at Musexpo recently that just 15 artists on Spotify account for 85% of all the royalties dispersed. Sounds unbelievable, until we found out that ratio is even more lopsided on Pandora.
All of that starts to look extremely exploitative when juxtaposed against extremely luxurious Spotify offices, a billionaire co-founder Daniel Ek, and more than $1 billion in share cash-outs by the likes of Warner Music Group and Sony Music Entertainment (though in fairness, both labels have pledged to redistribute some of that money to its sub-labels and artists).
Statista sourced its information from The Trichordist, a leading advocate for artists’ rights in the streaming era. Part of that advocacy involves exposing royalty statements from actual artists, something streaming providers have always refused to disclose.
Suddenly, it looks like Elon Musk’s romance with Grimes is more than just celebrity fodder.
For years, Tesla has been rumored to be pondering its own streaming music service. But up until now, Musk’s complaints have largely revolved around issues like user interface and the clumsiness of current dashboard solutions. Now, that outlook also includes the payout picture to artists, a newfound perspective that could change the way Tesla finally enters the music game.
He can talk to his good friend Larry at tell him how to double his Google in 5 years on genuine, NERD FREE, music business!
$300B music industry will bring happiness to ALL musicians and ALL and NERDS submerged in UMG induced $17.3B streaming and advertising SUICIDE.
Paul, are you serious? Grimes – as well as most “indie” music – is inherently obscure and strange – in any era or context. This is Elon griping for his girlfriend, without considering how much money artists like Post Malone are raking in by the hour. We aren’t talking about a popular phenomenon like the Beatles getting ripped off here. While streaming platforms like Spotify may have begun illicitly and still retain an unreasoned share of the profits (as the bygone record industry did and was more guilty of), they have done a great deal to deflate an enormous bubble in commercial music that supposed anybody could be a star.
Spotify has never made a “profit”.
A bit semantical, no? They may not be making a technical profit on the rules of their own balance sheet, but Daniel Ek is a billionaire in a lavish office suite who pays 3,000+ employees living salaries – however justified the degree of compensation for their work actually is. And all for providing a rather simple interface to click and play other people’s content (although their efforts in algorithmic song generation and other features are promising)…
Why are we still talking about this nonsense of how little services pay? 70PERCENT of their revenue goes right out of the door. VERY SIMPLE. Just like the 70/30 split Itunes did for many many years. If there’s a problem with the checks artists receive, follow the money so we can start to talk real solutions for real problems.
Spotify are deliberately pursuing a business model in which the majority of their users bring in very little revenue. Spotify may well pay out 70% of it, but 70% of diddly-squat is still diddly-squat. That’s why Apple Music and Amazon, without a large proportion of low-value users, are paying out about twice as much as Spotify, let along Pandora or YouTube.
Dear Reality – Paying out 70% does’t mean much when you are selling Ferrari’s for the price of a Volkswagen. Streaming needs to have a fixed transactional price per stream baseline. Consumption is growing while compensation is flattening. In simple terms every stream is worth less every year. That’s not good for artists, Elon Musk is right.
Compensation is flattening? The trade organization said that the entire industry went up 16% last year due to streaming; which means more paid subscribers and freemium users who indirectly create more ad revenue. If you’re a popular artist, and not an obscure indie artist like Grimes, you’re bringing in the bucks. Even she’s making more through Spotify than she did, due to the bigger pie her listens are sliced from (although yes, some of that may be offset by the loss digital download sales, which would only affect her recent releases).
Welcome to the music business.
Welcome to apathy.
The chart in your story is garbage.
“Data based on a mid-sized indie label with an approximately 200+ album catalog now generating over 200m+ streams annually.”
Seriously? 200m ANNUALLY? For over 200 albums?
This is a sample size way too small to be representative of anything other than the ONE indie label which provided the data.
Maybe, just maybe she should consider restructuring her deal with the label?
So many variables are in play such as recoupment of an advance and other costs.
If after a label recoups and is paid out by their distributor of choice , the chances of her getting only 18% from digital are possible. That would change things in this scenario. Whereas other independent artists doing well are in a better place financially.
Seems like a lot of streams across a lot of releases. Can you better explain why this is not statistically representative?
Interesting insight. Sadly, Spotify has accomplished what it set out to do. Destroy the recorded music business.
Besides, Isn’t this the MO of Silicon Valley anyway? They have no interest in the overall health of the business sectors they enter. Music is just one of many.
But then again. Their initial popularity was built on the great content made by others and their ability to steal it.
Whether it is using the loophole in copyright protection or giving it away for free to build their subscriber base.
Mr. Buckley, I love the firing line, but have you ever listened to Grimes? She’s not exactly the Beatles or Michael Jackson, let alone a popular alternative/indie act of yesteryear from the 80’s and 90’s with a solid hit under her belt… Are you aware how much popular artists are making through Spotify, at least at the juncture where the checks are received at their labels? A current popular star like Post Malone – who probably isn’t one for the history books – is making an easy $600+ *an hour* at this moment. And that’s only from Spotify. I’m not one for defending Spotify and even the 30% share of the revenue, but they have done a lot to deflate a bubble in the record industry.
Maybe Musk should start paying his Tesla factory workers a fair wage before he starts berating Spotify for how they pay artists….
I have two major problems with Spotify:
1: They‘re clearly more interested in growing their user base than increasing revenue to share with contemporary musicians. The people actually creating Spotify’s content are stuck, if you’re not on Spotify (and other streaming services) you almost don’t exist, so how are we supposed to bargain with Spotify? Especially when labels are happy squeezing out pennies from their decade’s old back catalogue. That only makes sense for artists Sweden, they already have free healthcare…
2: I don‘t listen to Post Malone, why does he get such a large share of *my* subscription fee? If it’s true that 15 artists are taking 85% of the payouts, that‘s infurating!! I’d like to see a model where *my* subscription fee is split exclusively by artist *I* listen to. If this were the model, more consumers would see their personal favorite bands well compensated, and we’d all have a much more diverse (and well funded) range of new music coming out. In the 90s, we were told that the internet was going to enable a large middle class of musicians to find their audience. Great, how about a streaming service that let’s this audience actually support their favorite artists?
Wooo gotta join the comment party on this one!
1. Spotify’s trying to win the DSP battle for supremacy vs Apple and every other major player that’s coming for their lunch. It’s a race to achieve maximum scale and cement themselves as #1. Their model is all about driving user engagement which locks listeners in as they basically become dependent on Spotify’s “well” of music consumption. Once they have that type of security and don’t need to invest so much in expansion, we’ll see a focus on new products and, importantly for rights owners, decrease in the proportion of discounted subscriptions. Maybe they’ll even establish enough of a lead/subscriber dependence that they’ll feel comfortable enough raising premium rates past $9.99, a la Netflix!
2. I think you overestimate how much your portion of $10/month, after deductions, going directly to your favorite artists would actually support them. I’m no math guy, but I want to say that your model, across the platform and every other (outnumbered) listener that also supports those assumedly non-pop-type artists, would have the same net effect as the current model. If 15 artists are taking 85% of the payout, it’s because they account for 85% of the total streams on the platform.