SPOTIFY Clarify Their Payouts, Which May Not Be So Bad After All
- Posted by Kevin Juliff on November 30, 2012
Your sleepless nights can now end! Cue that glowing, floating butterfly in the Lunesta commercial. Thousands of musicians, fans and right holders now have the information they need to clear up any misconception they had about the streaming music service known as Spotify.
Spotify has been criticized for not properly disclosing and paying the artists and associated entities for the music they stream, that's why specific labels (e.g. Metal Blade, Sumerian) have pulled out of Spotify. Last week, we published an article with artists breaking down their royalty rates from the streaming giant and it didn't look pretty. Turns out, their breakdown may not have been accurate.
In an article published this week by hypebot, David Macias starts to shed some light on exactly what is earned from the spotify service.
The writing started by referencing another article by Damon Krukowski in Pitchfork which stated that spotify pays out .005 cents per stream. David Macias goes on to show that this math is off by a multiple of 100. According to figures, Spotify pays out .005 DOLLARS (a half cent), not .005 cents, per stream. While a half cent doesn't seem like a lot, the total starts to really add up in the end.
Let's take that half a cent per stream and compare that to buying a download. Owners of masters receive 70 cents from iTunes for a download. Once that sale takes place, the transaction between artist and consumer is complete. But if you are a fan of an artist or a song, and you choose to listen on Spotify, then EVERY LISTEN earns an additional half a cent. Just as a point of information, I sorted my iTunes playlist by plays, and the artist that I had listened to the most (Anais Mitchell, in case you were wondering) was over 1400 plays each on a handful of songs. Had I listened to her on Spotify, she would have actually earned 10 times the money for those particular songs. It's the difference between buying a car and renting one. After a purchase, the transactional relationship is over. But if I'm renting (streaming), then the transactional relationship begins anew with every listen.
David Macias goes even further to assure consumers that those who pay for the premium service are sure that money finds the pockets of those deserving. David explains what happens with that $9.99 subscription fee by saying,
Of the $10 that I spend monthly for Spotify, $6 goes to the owner of the recordings, $1 goes to the owner of the publishing copyright, and Spotify keeps $3. That is exactly the same proportion by which revenues are shared in the iTunes model, and that 70% which is shared by the owners of the recording and publishing copyrights is a higher percentage than they share for goods sold at physical music retailers. That's about 60%, but when you consider that an actual CD or LP had to be shipped, retail staff paid, etc., that's fair value. My point in bringing this up is that the economics of Spotify conform to the economics that have existed in the music business for some time. It's just a perceptual shift in the transactional relationship. It would be the same as if you stopped paying $20 for your water bill at the end of the month, and started paying 50 cents for every shower and 10 cents for every glass of water. You would be paying roughly the same amount. It just would feel weird until you adjusted to the new norm.
There are other questions that still need to be answered and Spotify should make a formal announcement about it's business model but whether that will ever materialize is yet to be seen. It seems as if we the public will have to piece together the truth using little dribs and drabs of information from a variety of different sources.
I implore you to read David Macias' article in full. What we have mentioned here is just the tip of the iceberg. David goes on to explain how Spotify compares (or should not compare) to Pandora, how artist's contract deals with their labels also directly affect how much the artist receives and more.
So is Spotify evil? Is Spotify a money sucking whore? Personally I say no. I say that spotify is just the beginning of the musical revolution and as it grows and evolves we should hopefully move closer to an entertainment industry that begins to thrive in the post CD world. I am going to embrace the technology, crank my spotify up to 11 and wait eagerly to see where the next incarnation of spotify and streaming music services takes us.