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back to article Spotify coining it at home in Sweden: But are artists getting any?

New figures from the Swedish music market suggest that streaming services are good for music. Revenue from streaming services grew 79 per cent in the first half of the year, making up for declines in CD sales and digital downloads, according to local trade body GLF. Spotify launched in Sweden first, in 2008. CD sales were barely …

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WTF?

How come

Spotify is allowed to pay such a pittance? Are the Spotify rights specified differently in the standard industry contract?

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Re: How come

Cellist and composer Zoë Keating recently published her Spotify revenues on a public spreadsheet. While she commends it as an "awesome" listening platform, she earned just $281.87 from 72,000 plays, or around three-tenths of a cent per play. For comparison, for a five month period she earned $46,477 from iTunes downloads.

Spotify is more like radio on demand than owning a CD/mp3. I wonder how much she earned from radio broadcasts which could be listened to by millions? I suspect a lot less than $281.87.

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JDX
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Re: How come

A handful of plays on BBC3 would earn her that much. Radio and download may be different, but if people are paying to use Spotify the artists should get their fair cut because users think by paying for a subscription they are supporting the artist and therefore don't need to buy an album.

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How come? Here's How Come...

http://thecynicalmusician.com/2012/06/the-great-gig-in-the-cloud/ (Faza Wiszniewski, The Cynical Musician. See other posts at his blog to get a fuller understanding of the current situation.)

Above is a link to a blog that analyzes and quite clearly explains the problem with any service like Spotifly, and why they pay so little.

Basically the income needs to be shared, and that depends on

A) the total income per user - *not* total income via expansion of the user base.. (An aggregate increase in subscription fees via expansion of the user base means an increase in the number of plays among which the income needs to be divided; this will not lead to increased revenue per stream for the artist. An increase in each user's subscription fee might increase the pay-per-play, but will restrict expansion of the user-base. Moreover, it is possible that new users joining will be high-volume music consumers. It is possible that higher subscription fees will drive away low-volume music consumers for whom the service is no long a "bargain". This in turn could *lower* the payout per stream. )

B) and the manner in which it is shared. There are two basic models for sharing revenue:

1) Per-user revenue distribution: Each listener's subscription fee is divided among the streams to which that person has listened and no others. Problem:: The more tracks a listener streams, the less each stream earns.

"the involved music fan that lives and breathes music is the worst kind of listener you can have.

How could that possibly be? Let’s stick to our prior assumptions and say that each subscriber pays $10, of which $2 go towards the running of the service. Thus, once again there are $8 to be divided – this time only amongst the songs (and thus artists) that the subscriber listened to.

Starting with the most extreme example, let’s say that our fan listened to but a single song over the whole month. That single play was worth $8 to the artist. Woot!

Obviously, that subscriber doesn’t really care for music very much. What about someone who is deeply passionate about music and has the service running all the time, listening to a large number of songs from a large number of artists? Let’s assume that our passionate music fan has managed to clock up 100 artists whose songs they have listened to over the month and, to make our life simpler, let’s also assume that each artist received roughly equal time on that fan’s playlist. At the end of the month, each of those artists is entitled to the princely sum of 8 cents from our passionate music fan. "

2) Aggregate revenue distribution: All subscription fees are pooled and disbursed according to the percentage of streams each artist enjoyed. Problem: Well this is not as easy to simplify as the first scenario, but roughly, we have to deal with Pareto's Law. I am going to copy-n-paste a few more paragraphs from the url at the head of this comment:

"Under this model, [...] if plays of an artist’s songs have accounted for 1% of all songs played during a given period, that artist is entitled to 1% of the total amount raised.

[...}assume a monthly fee of $10 and to keep things realistic, we’ll set aside 20% of that ($2) to cover the costs of running this operation. Thus, all the artists in the system get to divvy up $8 from that fan, based on how much they are listened to by all the users.

Thus, if Lady Gaga manages to account for 10% of all plays, she gets 80 cents from your $10 subscription. If your, somewhat obscure, favourite artist only accounts for 0.01% of all plays they’ll get 0.08 cents. Do you begin to see the problem? Depends on how you feel about Lady Gaga, I suppose.

In an aggregate distribution scenario, your money will be going primarily towards paying the most popular artists, regardless of your opinion of their music."

In short, this and other posts show that it is extremely improbably that Spotify or any service like it can ever pay enough for an artist to make a living wage.

Notice please that I have not even mentioned the problem that Spotify and other streaming services not only pay a pittance, but that pittance is obtained by cannibalizing other sources of revenue, be they iTunes downloads, CD sales, etc.

(There are various stupid people who think that the cause for artists' dissatisfaction with the net is that they will not earn millions of dollars. Ignore them The *actual* cause is that it becomes impossible to simply earn a living worthy of the name.)

Read http://thecynicalmusician.com/2012/05/cargo-cult-business/ for more information of what Spotify is, and why it will never be anything else.

(Apologies to Faza if I have used too much of his original post here.)

(J.L.)

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Re: How come? Here's How Come...

@turtle - mostly correct except you take into account the 'per user' revenue without factoring in the number of users. 0.08 cents per user per month (an artist with 0.01% of plays) is certainly a pittance, but if the service expands enough (something like 100 million users worldwide), then 0.08 cents per user per month is $80,000 a month.

Of course because of the 'long tail' effect, the lion's share of revenue will still go to the major artists,and it's more likely that a more niche artist will be getting 1 play in a million (more like 0.0001% then), even then it would be $800 / mth, not too shoddy

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Anonymous Coward

Please...

Steaming, radio or simulcast is not the same as purchasing. Renting will always be considered cheaper than purchasing if the customer values it that way.

"The customer is always right". The customers demand influences the prices here. It's the best anyone can do.

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Re: Please...

Have to agree. What else can anyone do? People don't seem to want physical media lying around as much. People will not pay 'per play', and buying DRM infested MP3s is subject to storage failure and portability issues (granted i-tunes is good for this).

So i want to be legal, Spotify is clear, you get to play it as long as you subscribe, after that you lose the lot. The problem is the record companies and Spotify creaming off too much, not the users. Its a shame because the internet could potentially remove the middle men altogether.

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$281.87 from 72,000 plays

She earned $281.87 for a single recording session probably lasting a couple of hours.

Don't get me wrong, I think she clearly deserves a bigger cut from the service but it's not like her fingers are bleeding having played the same tune on those abrasive strings 72000 times.

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Re: $281.87 from 72,000 plays

So how does that compare with busking?

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Re: $281.87 from 72,000 plays

Except that she surely didn't just decide to record a track, step into the studio and play whatever came into her head. It would have involved many hours of composing and rehearsing to refine the tracks before she even went near to a studio. And that's not even taking into account the thousands of hours of practice to have taken her to the level of proficiency required.

What's missing from the article though is how much the punter is paying for the streaming service? It's one thing if she's making a third of a cent per play and the service is too cheaply priced (say half a cent per play), in which case whoever's running the service is a muppet who is vastly undercharging for their service.

It's quite another if the punter is paying 5-10c per play of which she gets 1/3c, in which case whoever's running the service is robbing the artists blind

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Re: $281.87 from 72,000 plays

When your song is playing on the radio, and 72,000 people hear it, how much money do you think you get for that as an artist?

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Re: $281.87 from 72,000 plays

She earned $281.87 for a single recording session probably lasting a couple of hours.

More than a couple of hours - a couple of days at least I'd expect, at a cost easily into four figures. Just because anyone can afford Ableton or download a cracked copy of Logic doesn't make them a competent engineer and producer, in the same way that being able to download a C++ compiler doesn't automatically make anyone a great programmer.

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JDX
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She earned $281.87 for a single recording session probably lasting a couple of hours.

And how much do you think it costs to hire a proper recording studio for a couple of hours?

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Anonymous Coward

Re: $281.87 from 72,000 plays

By that logic, it's fine for me not to pay for your software since you've already written it and it's not like your fingers are bleeding from having to re-write your app when I download it.

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Re: $281.87 from 72,000 plays

Wrong website - slashdot is around the corner.

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Terminator

Yawn

...another Orlowski piece demanding that consumers pay more so the creative types can attain the lifestyles enjoyed by the Stones, the Beatles, Bowie et al.

Because it's the consumer who will pay - god forbid that Daniel Ek, or the oily big-media execs should take a drop in income.

I use Spotify and pay a Tenner a month for it. Currently I reckon it is good value. If they revise the pricing upwards so the artists can get a bigger wedge, I'll have to consider the point where it ceases to be worth it.

Simple as that.

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Re: Yawn

Even if it went up £5 or £10 a month, it's still awesome value. Consider £20 as 3 new albums via Play / HMV / Amazon a month. You can play/store as many as you want from however many thousands of albums stored on Spotify. I do agree it takes away your scrutiny to buying specific albums of interest to what you really like/want and having a physical copy that will last forever (unlike Spotify where the service could pull certain tracks or shutdown altogether).

On the subject, I have noticed some tracks disappearing from availability here in UK recently though. I wonder whether that's because record companies are pulling tracks/albums from the UK streaming market by request of the artist because it's not worth it?

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Anonymous Coward

Re: Yawn

It isn't awesome value at £20, how many people are willing to pay to listen to radio which is effectively what spotify is and the majority of people do not buy 3+ albums every month. Even £10 is pushing it which is why they have said they are struggling to get subscribers and why they changed the terms of the free version so you can only listen to song a few times.

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Anonymous Coward

Re: Yawn

No, it is more a case of Spotify getting a lot of success and the artists, those who actually DO the creative work, not getting much in return.

The days of huge financial success in the music business are probably gone for good, just due to the way our sources of entertainment and expenditure have changed, but that should not mean the middlemen get a bigger proportion, if anything, it should be the other way.

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Re: Yawn

The disappearing tracks are probably those that the record companies put up there illegally in the first place - apparently its not called piracy if they do it.

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Breach Of Fiduciary Duty

I do not understand how a major label can invest in and have in interest in a streaming service, and give that service the right to stream the work of any given artist that the label represents, and not be sued for and found guilty of breach of fiduciary duty, by that artist.

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Re: Breach Of Fiduciary Duty@ Turtle

Easy - the record labels probably recognise that many people (like me) use Spotify to trial recordings a few times before buying them. As a result of Spotify I've probably bought three times as many recordings as I would based on other sources of inspiration. As for fiduciary duty, I'd be very surprised if the contracts willingly signed by the artists weren't quite specific on responsibilities of both parties, so fiduciary duty doesn't really come into it.

As others have pointed out, the difference between iTunes revenue and Spotify revenues is chalk and cheese, and the original article really should have identified this, and ideally added some value - I know broadcast royalties will be complex, but somebody has attempted to make the check:

http://davidtouve.com/2011/12/13/uk-radio-versus-spotify-a-comparison-of-the-value-of-spins-versus-streams/

And if this is even half baked, it would appear that artists don't do so badly from Spotify compared to radio. And, with all such things, if they don't like Spotify or radio royalty rates, then they shouldn't engage with those media - go busk.

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@Ledswinger Re: Breach Of Fiduciary Duty@ Turtle

Let me explain the problem.

Whatever radio and Spotify have in common, they have one very important factor differentiating them.

Any specific listener has no real ability to have the radio play tracks according to what that specific listener wants to hear at any specific time. If you want to hear whatever track you want, when you want to hear it, then you have to find another way to do so; the radio will not accommodate you.

Spotify however allows you to hear whatever you want, whenever you want. In fact, it is very much like owning the track you want to hear. In general, the only reason owning a track has any utility is that ownership allows you to to listen to it whenever you want. But since Spotify fulfills that same purpose for its subscribers, at a faction of the cost of actually purchasing the track, there is no reason for most people to buy music anymore. For most people it is far cheaper to rent the tracks from Spotify.

Nearly all musicians understand the difference. That's why I read and hear numerous complaints about Spotify from musicians, but have never heard any musician complaining about getting radio play, or the royalty rates that radio pays.

Radio gives useful exposure and helps create a market for an artist's work. Spotify cannibalizes other markets while decreasing the value of the tracks.

I am entirely unfamiliar with the argument that Spotify helps increase sales. I have read complaints from musicians and indie labels noting an inverse correlation between plays on Spotify and income from other sources. If you can point me to such studies about Spotify increasing sales, I would be interesting in reading them.

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Meh

While I think it's a shame they don't get a bigger cut of the revenue, I pay my subscription fee to Spotify and if it was raised I'd likely leave the service. Consumers that use that service are doing the right thing, they are paying, it's the between the company and the artists to work out the division of profits.

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Flame

I'm Spotify subscriber too and I think it's a question of "where does my money go to". Although obviously some goes to Spotify CEO pocket and some goes to artists, I have this nasty feeling that labels' executives might be pocketing most of it. Shame that the article entirely skips the middleman fees.

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FAIL

When money is not enough

Artist's always complain about how "cheap" Spotify is. David Lowery does it too.

Yet at the same time he bitches about spending per capita on music being so low, and complains about how it's been dropping since the 90s.

What he fails to mention is that if you have a year long Spotify subscription you pay several times the per capita music spending (compared to what it is now, in the 70s, or *ever*). Moving music consumers to a subscription model (as the person to whom he writes the letter to) means more money for artists than they could ever hope to make.

Sure Spotify's payout model may have problems, but this is (again) because of the labels, not the consumers. The labels who essentially do shit when you're at the point where you record your own music and put it online at minimal technology costs.

People are willing to throw cash at musicians, but artist keep insisting on having it delivered the way they want (preferably an upfront payment for something which is for your ears only) they are going to keep starving.

This is never how people wanted to consume music in the first place, and was only possible by near-monopolizing the distribution chain for reproducible sound waves. Technology has chipped away at that since the 70s, until we arrived in the current age where this monopoly is only a memory. Artists will have to go back to the way things always were, play the music first and when you convince people it's good they'll want to pay you for it. That tradition most certainly does not include snubbing your nose complaining whatever is payed is not handed down to you on a silver platter.

Not exactly some new "Freetard" Web 2.5 idea, but just a small step back in time. With that step back, it's also time to cut the useless fat that came along with this now lost monopoly on distribution. We all know which companies those are.

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JDX
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Re: When money is not enough

I think you're missing the point - artists are complaining Spotify take nearly all the money and don't pass it on. If Spotify took 30% like Apple do and £7 of you monthly £10 went to the artists then that'd be just fine.

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"The deals were struck when the industry was desperate to compete with 'free'. Musicians say the chickenfeed royalties they receive from Spotify mean that the label bosses have sold out too cheaply."

Except they're still competing with 'free', and they'll always be competing with 'free'.

People want to do the right thing by and large, which is why Spotify is popular despite piracy. If they make it too expensive to rent music people won't bother.

And comparing income from rentals like Spotify to income from purchases like iTunes is rather misleading. No-one's going to pay as much to rent as to buy, so you're always going to need far more punters to make up the difference. While Spotify et al are quite popular I'd bet they're less popular at the moment than iTunes, Amazon and CD retailers.

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Re: Some people have missed the point

So it's just the same old thing that's been going on since the record companies first appeared. Still hear all these people pointing at consumers whining that we don't pay enough.

The only real difference I see is that with records/CDs I can buy from anywhere I want, with stuff like iTunes, I can only buy from itunes.ca, or with Spotify I can't buy at all since I live in the wrong place.

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Lifetime earnings?

The purchase of the song on i-tunes will peek when it was new, but then decay, so the earnings for that song via i-tunes is all front loaded. Assuming the song is good it will find its way on to people's spotify playlists and earn money year on year, so in spotify the earnings are long term.

In my opinion this is good. In the old system a quality track earns as much as a me-too pop song even if people listen to the quality track for years and listen to the me-too song only a handfull of times. Under a spotify economy the quality song earns much more long term than the me-too pop song. This could be just what the music industry needs to encourage it to invest in more quality bands.

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Re: Lifetime earnings?

Ahh the long tail argument, which I believe has pretty much been debunked over many years of actual experience rather than theorizing...

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Re: Lifetime earnings?

"debunked" is rather a strong term - given that prior to the likes of Amazon, Play et al offering the much wider ranges than HMV et al ever managed to offer on the high street and given that these hugely diverse ranges have only really become common knowledge and simply part of the landscape over the last decade, debunked goes too far.

Even with these distribution centres, it's actually still very difficult to obtain some albums that don't fulfill the record companies' view of what we should be buying. The long-tail argument can only stand up *if* it's actually possible to buy the product - which is frequently not the case.

The other side of the argument, of course, is that if the "long-tail" is debunked, why have the media companies pushed for ever longer copyright terms in their favour? If there is no long-tail, why the need for 70 years copyright, since obviously nobody wants it after the initial rush.

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Anonymous Coward

so how much of the iTunes $46,477 income...

...was a result of the exposure via Spotify (which has a good social tools to let it's users spread the word about a musician they like)

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Facebook? No thanks.

Was going to join spotify then I noticed you have to have a Facebook account.

Thanks, but no thanks.

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Pint

Why use Spotify anyway?

When you have SoundCloud ?

Not meant as a sneer but it seems to me that SoundCloud has much extra's to provide over Spotify. For example; when I go to the spotify website the first thing I see is "listen free to milions of songs". Of course all I need to do is download software /and/ register.

My simply stance on that should be obvious: if I need to register then its not free.

With SoundCloud otoh. I go to their website (see link above) and I'm immediately greeted with several players which I can use to listen to tracks, I can further more search artists, listen to more stuff and if I want to open my own account.

It should be obvious where that can lead to... Take for example this Tribute page to 'Fall Silently'. Its just what it says; a tribute page and it shows a freely available SoundCloud player. Yes; if you put your stuff online with SoundCloud for all to hear then even fans can spread the word; even if they don't have a SoundCloud account themselves.

Gee... What would work better to get your name and music recognized....

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There are so many points of discussions in this thread that is really hard to condense everything in a single post.

Spotify cannot be compared to iTune or any other download service: it's more similar to radio, so revenues will be somehow very low when accounted for each song.

We can argue as much as we want about what is the right price level to be shared with the artist, but the reality is that streaming services are a result of commoditization of music content: people pay a flat fee to access a large number of songs, not for a very specific one.... and they will not pay a cent more for generic songs.

As Zoë Keating herself stated, spotify is a very good platform for content discovery where artists can promote themselves, make themselves known, and gain by selling their work (download, CDs, concerts, etc) in some other form.

One last comment about the numbers:

72,000 plays does not mean 72,000 unique users listening to the song.

It means that the song has been listened 72,000 times by a much smaller and uncounted set of people.

For a comparison with iTune or any other download, one should have the number of unique users (listeners) for the specific song and consider the lifetime of the song itself.

The very big difference is in the business model for the artist: with streaming services like spotify you play in the long run getting money everytime somebody listen to your song, over and over again.

Given enough songs and listeners a service like spotify can guaraantee a steady income to the artists.

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FAIL

I am a premium spotify user and probably play between 300-400 tracks over a month. Based on 300 tracks that is 3.3p per track.

If you then say 30% of that goes to the artist, that is 1.1p

Take it down to the £5 a month service and then half that to 0.55p a track to the artist at 30%.

So if you produce a good hit and get a million hits in a month. 1.1p * 1,000,000 = £11,000

Enconomises of scale, go figure.

In Short stop whining, you will get paid hansomly if you release a good track. Put my costs up to £15 quid a month I will go back to downloading from the net and you will lose my contribution all together.

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Meh

They pushed SOPA, I stopped buying new CDs and DVDs. They pushed ACTA, I stopped buying second-hand discs and cut down to just Netflix, Lovefilm and Spotify. In June Ofcom announced the three strikes plans under the DEA, so I cancelled Netflix, Lovefilm and Spotify. It seems to me that every penny you spend that goes into the hands of the "creative industries" results in lobbying to destroy your Internet freedom.

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Stop whining

I really think the musicians need to stop whining about this. The situation is simple. The customer pays Spotify a certain amount per month to listen to the music. This is set by market forces. The consumer generally does not care, and should not case, where that money goes. They are paying for a service and as long as the service is provided, that's fine.

Spotify etc. provide the service using whatever contracts they have in place with labels, musicians etc.etc. Now, if the musicians have signed silly contracts with labels etc. that don't give sufficient royalties to them, that's their fault. Yes, maybe people believe they should get more per play, but you get what your contract says. If you sign a silly contract, that's your problem, not the consumers.

The whole issue here is the relationships between labels etc. and the musicians. That's nothing to do with the consumer and is between them. If the musicians don't like it, why don't a load of them get together, leave their labels and launch their own service that will pay more? It's a bit like being an employee of any company. If you don't like the terms, appealing to their customers or shareholders is unlikely to work. You have a choice.....accept it, or move on. Same with artists.

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Anonymous Coward

This is why people should buy music directly from the artists where possible. A lot more are starting to do this to cut out the hangers on, that in todays technologically advanced world, are simply not needed anymore.

Record labels that hire people to "create an online presence" are paid £40k a year to monitor facebook and moderate a web forum or two, are the problem. The industry on a whole hasn't sorted the problem of piracy and so they dabbled with an idea (spotify) but as usual just shafted the talent for an extra cut. Re-organise COMPLETELY! get rid of the hangers on, the agents, the managers who do nothing. The world is changing and you have to change with it!

Spotify plays are about as worthwhile as youtube plays in the real world when it comes to royalties received, so where that £10 a month goes i dont know. Please dont tell me the advertising on youtube adds up to £10a month from each user.

Its a viscous circle that keeps oiling the pockets of a dying whale whilst making it look more and more attractive to go it alone, but then you get no recognition or help on the promotion side, so you are basically kept out of the chance of making it, unless you happen to have a swollen bank balance with nothing else to chance it on.

This is why x-factor exists...

Screw this, im going to listen to some hendrix on an old 12" just to calm myself down.

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FAIL

Copyright fees are a losing battle...

The cost of enforcing regulation in this space is greater than the benefit gained from copyright theft. Thus copyright enforcers will lose this battle, as they've lost the war on drugs.

Told you I'd subscribe... Mr Libertarian ;-)

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Congratulations to Mrs Zoë Keating

Whatever you think of the current situation, it is acts such as Mrs Keatings' posting of her earnings that clarify the debate and put things back on the ground of reality, allowing the public to understand what is really going on - something that the "entertainment industry" has being trying their damnedest to keep a lid on.

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