For its global podcast and music offerings, downloadable streaming platform (DSP) Spotify has secured its position as a streaming juggernaut. But this naturally invites the question around artistes’ earnings.
That said, on March 18, Spotify Inc launched Loud & Clear, a website that aims for transparency and data about the streaming economy. This announcement comes on the heels of the worldwide protests held outside Spotify offices on March 15 in a fight for greater transparency within the streaming service and a move towards a user-centric payment model.
The protests came from The United Musicians and Allied Workers Union (UMAW), who started a new campaign titled ‘Justice at Spotify’ last October, which, among other goals, is demanding that the platform raise its average streaming royalty from US$.0038 to a penny per stream for all artistes.
In theory, the site should clear up the doubts around Spotify’s generosity when it comes to paying artistes. They have also received a great deal of flak for their lack of transparency about how much artists should even expect to make per stream.
So what does Loud & Clear offer? The site includes a number of resources for artists and industry professionals that claim to break down the royalty system, the players, and the process. One can expect a look at revenue generation over the years, showing how many artists globally generated how much — across recording and publishing for their catalog — for each of the past four years on Spotify.
Daniel Ek, Spotify’s founder and CEO, states on the Loud & Clear website, “In 2020 alone, Spotify paid US$5 billion-plus and makes up for global recorded music industry revenue, more than any other streaming service.” Ek says he understands the urgency of the debate around artistes’ rights especially since, “streaming is thriving nad has been key to helping find a global audience.”
Complex and controversial systems
For years, Spotify has been a sore spot for artistes for its pro-rata basis royalty system — and these payout rates have changed over time. The platform says it makes money for music from two sources: Spotify Premium subscribers and advertisers on Spotify’s free tier. “Roughly two-thirds of this money is paid out to music rights holders,” says Loud & Clear.
Ek adds, “From streaming on Spotify alone, we’re seeing growth from artistes at all stages of their career: since 2017, the number of artistes generating more than US$50,000 a year is up 80%, US$1,00,000 a years is up 85%, and US$1,000,000 a year is up 90%.”
- Spotify’s Q4 2020 earnings reveal 345 million monthly active users (MAUs) of which 155 million are subscribers. Spotify stated its gross margin was better than expected, having generated €74 million of free cash flow. Meanwhile, podcast hours nearly doubled year-on-year and 25% of the platform’s MAUs currently engage with podcasts, up from 22% last quarter.
- “In Q4, we added 25 million MAUs and benefited from faster growth in India, US, and Western Europe, with India serving as a notable source of upside vs. our forecast driven by successful marketing campaigns. Based on the behavior we see when users first join Spotify, we are confident that podcast usage has been a factor in the accelerated net additions,” said Spotify’s official Q4 2020 shareholder letter.
There is also an interactive tool that contextualises monthly listener and monthly stream numbers, as of the end of 2020. One can look at some artiste profiles on Spotify detailing who they are, how streaming has changed things for them, and features some projections on what the future might look like. (There is also a video that breaks down how the money flows from Spotify listeners to artistes.)
The royalty system is a complicated and controversial one, especially because artistes are paid monthly. The company allegedly keeps count of the total number of streams for each of an artiste’s songs, and proceeds to determine who owns each song and who distributes it. Why? Because first, the rights holders are paid, and then the distributor is paid. Sometimes, these two are one and the same. Lastly, the artiste is paid.
Finally, there is also insight from The Music Managers Forums’ reports series titled ‘Dissecting the Digital Dollar’. This third-party resource helps artistes and managers navigate streaming businesses and the impact the shift to digital has had on the wider music industry. Look forward to advice on how to map royalty chains, check databases to avoid data clashes, undertake a complete data and royalty chain audit, and compare income from different royalty chains to identify disparities.
“The research we’ve seen to date suggests that a shift to user-centric payments would not benefit artists as much as many may have originally hoped — a study from the National Music Centre (CNM) found that the change would result in ‘at most a few euros per year on average’ for artists outside the top 10,000,” says Loud & Clear on its website, adding, “We are willing to make the switch to a user-centric model if that’s what artists, songwriters, and rights holders want to do. However, Spotify cannot make this decision on its own — it requires broad industry alignment to implement this change.”