In an interview with Israeli financial newspaper Globes, former Spotify exec Tristan Jehan explained why artists receive notoriously low royalty payments from Spotify and other streaming music services.
For background, Tristan Jehan co-founded The Echo Nest in 2005, while working out of the MIT Media Lab. Then, in 2014, Spotify acquired the AI and music-data platform for a reported $58.7 million (€49.7 million), delivering the vast majority of the payment in SPOT shares.
Jehan stayed on as the Spotify’s director of research until February of 2020. He just recently commented on streaming royalties in an interview about his current employer, Israeli startup incubator TechnoArt.
The former Spotify executive squarely blamed record labels for taking most of the money from streaming. Imbalanced artist contracts and huge upfront payments end up dramatically reducing the amount that musicians earn.
“The artists are paid low amounts [from music streaming], but the blame is on the labels,” Jehan said. “Today, streaming is a big chunk of global music revenues, and I think the future is positive, and that streaming is going to help artists in the long run. But that model is not reflected today in artists’ contracts.”
From there, Tristan Jehan emphasized the large portion of total revenue that streaming companies pay to record labels: “Companies like Spotify return 75% of the revenue to the industry, but they never pay directly to the artists, but to the labels. The problem is that today, artists still only get 10-15% of the revenue, and the labels keep the rest.”
Suspiciously, the interview has since been pulled from both Globes’ Hebrew-language site and its English-language counterpart. Globes hasn’t addressed the sudden takedown, and at the time of this writing, the piece didn’t appear to be available elsewhere on the web. However, Music Ally accessed (and used Google to translate) the article before it was removed.
Update: the piece is now live again (thanks Music Ally for the tip).
The low per-stream royalties of Spotify (and other streaming services) have long been a source of controversy and debate in the music community.
Just last month, two developments pushed the issue back into the spotlight. First, Spotify CEO Daniel Ek told musicians to release more music if they wish to enhance their streaming royalties; musicians promptly responded with advice of their own.
Separately, Kobalt Music subsidiary AWAL made waves after claiming that “hundreds” of its artists earn over $100,000 per year from streaming, in addition to stating that streaming puts $1 million or more into the pockets of “dozens” of its artists annually. That suggested that top-ranked artists can earn a sustainable living, though ‘hundreds’ is statistically insignificant when measured against the millions of artists currently on Spotify.
It’s unclear whether the window between Jehan’s departure from Spotify and the Globes interview has anything to do with SPOT shares’ touching $291.75 apiece eight days back. The entrepreneur and executive may have capitalized on the considerable (since lost) value by selling his interest.
pure bull crap
As opposed to unfiltered and chunky?
The reason Artists make so little is that the per play payout is too low. Yes, the big labels have lousy terms in their older agreements, which did not anticipate streaming at all. However, the drastic reduction in revenues from streaming verses the physical product market is the real culprit, not the greed of the major labels. It’s the streaming services’ that have priced their product too low and have forced the creative community to accept the pitifully low payment share by leveraging against the free downloads available from pirates. They are the ones who refuse to pay for the content that the monetize at a reasonable price point. They need to go back to business school, first you determine your cost, then you price your product. The cost of creating high quality content should dictate the per stream payout price, and the cost of that should determine the price to consumers/advertisers. If that model does not work, then perhaps you don’t have a viable product…….. which we know is not true, consumers want streaming. It’s a good product, but it’s priced too low and the only folks making money are the greedy middlemen like Spotify and YouTube.
Your points are valid. However, model is not priced too low. The labels don’t properly account to the artists and don’t share the large upfront licensing payment they received. Then on the royalty side it’s 10-15% instead of 50%. All the labels fault and strategy. Labels also own or owned shares of Spotify. That conflict doesn’t benefit the artists. Only one distributer has shared stock payout to their artists. Universal didn’t event sell when it was at the all time high.
You are correct when talking about the major labels behavior but I can attest that on the Indie level we have shared 50% of our revenue from streaming with the artists from the onset, just like we share 50% of our licensing revenue with them. We never got advances or ownership shares from streaming either. As I’ve said before the per stream rate is too low to sustain a quality music industry, especially for the indie sector.
Yes I agree. I am my own label and I’m not cheating myself out of revenues.
I agree with Tom. I’m an independent artist and per stream pay is ridiculously low. Impossible to make more than pennies a month unless you’re achieving millions of streams a week and at least with downloads I would receive 70 cents a download but few pay downloads anymore. So this business model of streaming is generally not profitable for independent artists and probably many label artists too.
“oldindieguy” – You are so invested in the Spotify Hate that you ignore the reality of artists signing shitty contracts for decades and then wondering why they never got paid that much. Artists are that dumb and you’re that dumb to eat it up. Your cognitive dissonance level is off the charts.
oldindieguy is exactly correct. Streaming diminishes short-term revenue but inflates long-term revenue. You make $100 over 100 years instead of $10 once and in its entirety. But the only labels that can ride out diminished short-term revenue are WMG, UMG, and Sony (i.e. the same companies that negotiated the royalty rates with DSPs.) Streaming is merely a means for the 3 Majors to cut out and swallow up indie labels. Or at the very least, it’s an obvious side effect of their goal to generate more revenue.