(Credits: Far Out / Spotify)
By its own admission, Spotify controls a huge percentage of the market for consuming recorded music. Press statements from the company push the claim that it’s the industry number one “revenue generator” because it pays out over $40 billion a year for the music streamed on its platform. It gets most of this money from subscribers to its streaming services, which account for roughly a third of the billion plus music platform subscriptions worldwide.
But when Spotify pays these gigantic revenues to other stakeholders in the music industry, who exactly do they go to? And how much do its payments amount to per individual stream on its platform?
The company’s own website tells us, “Spotify does not pay artist royalties according to a per-play or per-stream rate,” which is technically true. As they explain, ”The royalty payments that artists receive might vary according to differences in how their music is streamed or the agreements they have with labels or distributors.”
Still, that doesn’t mean we can’t estimate the average payment per stream by analysing the data available on individual payments against the number of streams likely to correspond to each payment while factoring any other relevant payout variables into the analysis. That’s precisely what Business Insider did back in 2021, and found that Spotify pays between $0.003 and $0.005 on the whole. What’s more, their data sources showed that their average has decreased over time.
But what do the artists get?
In an interview with CBS last year, Spotify founder Daniel Ek was at pains to point out, “We don’t pay artists directly.” His platform simply liaises with record companies and music publishers to acquire the rights for streaming a song. “We pay out to those record companies and those publishers, and don’t know what individual deals these artists may have.”
In short, he pushed the question over to traditional industry players and, with it, any blame for artists being under-compensated for their work. A 2022 report by Billboard found that 64% of rights payments from music streaming and download platforms went to record labels, whereas the artists themselves only took a 16% cut for their recordings. That’s after the platform has already taken a cut of the average revenue generated from the stream, which is around 30% in the case of Spotify.
In other words, Spotify gets 30% of the payment per song streamed, record companies (the largest of which own shares in Spotify themselves) get 45%, and artists get a measly 11%.
And so, in the end, artists only get paid between $0.0003 and $0.0005 per Spotify stream. There’s now an extra zero after that decimal place, just to be clear. This amount might be fine if you’re Ed Sheeran or Taylor Swift, with monthly streams in the hundreds of millions. But it amounts to a pittance for most musicians with less of a brand behind them, who need to eke out a living to be able to make their art.
If the world’s largest audio streamer can’t see why many artists might be upset with them, we certainly can. After all, they control which record labels’ songs are available for streaming and on what terms.
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