In 2006, in Stockholm, Sweden, Spotify was founded by David Ek- former CTO of Stardoll, who had become wealthy enough that he decided to retire before realizing he wanted a new project which came to be Spotify- along with Martin Lorentzon, co-founder of Tradedoubler. It appeared at a time when music had been plagued by piracy and revenues were declining.
It found some high-profile critics among Radiohead's Thom Yorke, who called it "the last desperate fart of a dying corpse" and Taylor Swift, who in a Wall Street Journal editorial equated streaming to piracy (however, Swift and Spotify buried the hatchet in 2017, when her entire catalogue was made available on the platform). Although the idea of having access to the entire history of recorded music seemed untenable initially, music streaming, led by Spotify has become the backbone of the music industry.
But whether Spotify is good for artists, especially those who aren't big superstars, is contentious. Spotify primarily makes money from 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. It pays out its royalties on a pro-rata basis. All the revenue gets dumped into one pool, from which artists are paid according to their share of all streams on the platform. So, if a group of artists is getting 90% of the streams, they're also getting 90% of the money. But even among this group, the majority of the revenue would be captured by the world's biggest stars, not to mention the big cuts taken by the label and distributors. This leaves a very small portion of the pie for the rest of the 10%, barely enough to make ends meet.
According to Forbes, industry estimates vary slightly but for 1 million plays of a song, artists receive roughly the following payout from these streaming services: Amazon Music $5000; Apple Music $5000-$5500; Google Play $12000; Pandora $1400; YouTube $1700. At Spotify, which holds upward of 36% of the market share, 1 million streams will earn an artist in the $3000-$6000.
However, there has been some political action. The Union of Musicians and Allied Workers has been making gradual progress with the “Justice at Spotify” campaign. The British government, concerned that “music streaming in the UK brings in more than $1 billion in revenue with 114 billion music streams in the last year, however, artists can be paid as little as 13% of the income generated”, launched an investigation into the economics of the streaming industry, led by the Digital, Cultural, Media, and Sports Committee. Or you could be a little old-fashioned and buy a CD or Vinyl.
Daniel Ek, The CEO of Spotify, issued this statement in front of investors in 2018: It wants “to unlock the potential of human creativity by giving a million creative artists the opportunity to live off their art.” It seems like it might take a while before Spotify can fulfill its grandiose core mission.
REFERENCES:
• Ingham, T. (2020, August 3). Spotify dreams of artists making a living. it probably won't come true. Rolling Stone. Retrieved July 1, 2022, from https://www.rollingstone.com/pro/features/spotify-million-artists-royalties-1038408/
• Dotcom, A., 2022. Council Post: The Future Of The Music Industry: Artists Eye Ancillary Income. [online] Forbes. Available at: <https://www.forbes.com/sites/forbesagencycouncil/2022/06/13/the-future-of-the-music-industry-artists-eye-ancillary-income/?sh=711577e5255a> [Accessed 30 June 2022]
• Nast, C., 2022. Reasons to Abandon Spotify That Have Nothing to Do with Joe Rogan. [online] The New Yorker. Available at: <https://www.newyorker.com/culture/cultural-comment/imagine-a-world-without-spotify>[Accessed 30 June 2022].
• Dotcom, A., 2022. Council Post: The Future Of The Music Industry: Artists Eye Ancillary Income. [online] Forbes. Available at: <https://www.forbes.com/sites/forbesagencycouncil/2022/06/13/the-future-of-the-music-industry-artists-eye-ancillary-income/?sh=711577e5255a>[Accessed 30 June 2022].
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Nast, C. (2014, November 17). Spotify: Friend or foe? The New Yorker. https://www.newyorker.com/magazine/2014/11/24/revenue-stream
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