How Does Spotify Pay Artists? an answer that makes sense!

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How Does Spotify Pay Artists? It’s the biggest mystery in music. One independent artist claims to have received a measly $0.004 per stream. There was a rumor that Lady Gaga only earned $162 from a million streams. Even indie band Grizzly Bear chimed in to express their displeasure with the alleged slave wages of Spotify declaring that they only received $0.001 per stream. Some have even taken to restricting their music from the service altogether. Is it really that bad? are the payments that low?

 

In an interview with Hypebot D.A. Wallach, lead vocalist & songwriter in Chester French who works with Spotify as their “Artist in Residence.”, had this to say:

…We make money in two ways. We make money through advertising to free users, who have access to Spotify only on computer. The service is interrupted by ads, and the functionality is a lot like YouTube. There is no mobile option for free ad-supported users, either. Second, we generate revenue from selling subscriptions. In the U.S., a subscription is $120 a year. In the U.K. it is ?120 a year, and in the E.U, it is €120 a year.

We aggregate all of this revenue from these two streams, and distribute back 70% in royalties based on a pro rata share in accordance with the popularity of a piece of music. For example, if one of your songs has been streamed 1% of the total number of streams in a month, you will get 1% of the 70% of royalties we pay out to rights holders.

 

According to D.A Wallach in order for anyone to calculate what artists earn from Spotify, in say a month, a few numbers are needed.

 

  1. Spotify’s revenue for the month

  2. Amount of dollars Spotify pays out to rights holders

  3. Combined number of streams

  4. Their number of streams

  5. Percentage of overall streams a song accounts for

 

Being that Spotify is a private company, we don’t have access to their revenue figures so here’s my hypothetical scenario based on real numbers that Spotify has released to the public. According to PrivCo In 2011 Spotify generated 244 million dollars in revenue. In 2011 Spotify released U.S figures that showed there were over 13 billion songs streamed on Spotify in that year. 13 billion songs streamed doesn’t tell us how many times those 13 billion songs were streamed respectively but we’ll use that number being that that’s all we have.

$244, 000, 000/ 12 = $20,333,333 per month (Revenue for the month)

 

70% of 20,333,333 = $14,233,333.1 (Amount of dollars Spotify pays out to rights holders)

 

13,000,000,000/ 12 = 1,083,333,333.333333 per month (combined number of monthly streams)

 

20 streams X 100/ 1,083,333,333.333333 = 0.00000184615%  (artist’s percentage of monthly streams)

 

0.00000184615%  X 14,233,333.1 = 0.26276867902 (artist’s royalties)

 

0.26276867902/ 20 = $0.01313843395 (artist’s per stream royalties)

 

So, if an artist on Spotify received 20 streams out of 13 billion and Spotify grossed 244 million dollars, that artist would have earned a little over a penny per stream. It’s pretty safe to assume that the 13 billion songs streamed were listened to more than once and the higher the amount of total streams, the lower the amount of per stream payout for each artist. At the same time, the higher the amount of revenue generated by Spotify, the higher the amount of per stream payout per artist. In addition, Spotify doesn’t accept music submissions directly from artists. As a result artists must submit through digital distribution companies like CdBaby and Tunecore.

 

Some of these distributors charge up to 15% of sales, from what I’ve seem, and have arranged their own rates with Spotify so what an artist can earn through them varies. For instance, from music I’ve released through CDBaby on average I see $0.004 per stream after their 15% deduction. With music I’ve released through a relatively new company called “OneRPM” I receive $0.007 per stream, after their 15% deduction. Artists signed to a label may have arrangements that are far less favorable. Aside from the digital distribution and label fees that are deducted from your per stream payout, A 10.2% publishing fee is deducted as well. What happens to that money? Well, I’ll save that for another post.

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