April 10

Should Spotify Pay Musicians More?


Should Spotify Pay Musicians More?

Should Spotify Pay Musicians More?
Photo by Patrick Perkins on Unsplash

The music industry is making a comeback. The recorded sector, which includes CD and digital sales as well as streaming services like Spotify or Apple Music has experienced five consecutive years of growth since the 2018 recession in order to nearly reach its 2004 level again this year.

This success outside the realm of recordings also extends into publishing: songwriters are seeing their revenues from live performances grow while collecting societies such as ASCAP have seen record-breaking payouts for royalties owed to artists due largely in part by higher rates on more recent releases than older ones that were released before 1988 when copyright protections strengthened with the passage of US Copyright Act (though some argue it’s because people would rather play records at parties).

The music industry had been declining throughout much of the noughties.

One of the great debates within music today is over-streaming. This has caused a disruption in how musicians are compensated for their work, and many worry that this will cause them to not be able to make up enough money due to royalties from streams being so low compared with other forms of revenue they receive now.

The rise in popularity among paid subscriptions on services like Spotify or Apple Music combined with increased internet speeds have created an ideal environment where people can stream vast libraries at any given time without having it dramatically affecting their data plans.

However, some argue that these new business models may come back around once more listeners realize just what’s happening behind the scenes when songs play online—namely: artists making next-to-nothing.

When Covid-19 first struck last summer, there was an immediate fear among musicians everywhere; their craft had never been under such scrutiny before because it relied so heavily on face-to-face interactions.

Previously impacted by recessionary trends or pirating which would have curtailed sales of records and concert tickets but not tours as much (as other forms of media), suddenly they were going bankrupt each day without even giving themselves time enough for mourning – people had lost jobs left, right and center owing mostly to shuttered venues where these artists would usually perform.

Spotify is the lightning rod for this unrest, partly because it’s one of the biggest subscription services and most closely identified with music streaming; secondly, due to memories still being fresh from when they went public. The company’s numbers are published every quarter which only makes people more curious about its worth now that many have adopted these kinds of subscriptions.

The question of whether Spotify should pay artists more often boils down to a debate between “Spotify pays too little” and “They’re already paying us well.” The former is exemplified in petitions calling for the company to triple their royalty payments.

Articles on this side propose that because musicians are not being compensated fairly, they’ll just see it as an insult if they get paid at all. On the other hand, articles from those who feel better about getting paid less suggest we shouldn’t be so quick to judge without knowing how much goes into royalties before saying anything bad about them or Spotify altogether.

Tim Burgess, who is the lead singer of The Charlatans and has a successful Twitter listening party movement called #TimsTwitterListeningParty co-listening movement (which I’ve been following for awhile now), addressed Spotify specifically on Twitter, suggesting that “we should look at how much you give to artists.

It’s just not fair right now with your platform because it doesn’t take into consideration all the money they lost overtime when their music wasn’t being played online”.

I think this passage is really interesting as Tim isn’t just an artist himself – he’s looking out for other musicians too!

The #BrokenRecord campaign, a slogan for the need to up streaming payouts by Spotify and others are gaining support from musicians like Tom Gray.

Hoping that some of these British artists can unite American artists in their fight is not likely as US music industry figures have been reluctant to publicly take on this debate with any vigor.

This lack of public discourse has only served to create more hostility between those who see themselves as “service providers” such as app developers or vinyl record manufacturers and those they perceive to be profiting off technology without having created it – major labels, publishers, digital rights organizations (DROs), etcetera. 

A. Spotify doesn’t pay musicians

Spotify is a popular streaming service with millions of subscribers. However, it does not pay artists or songwriters in any way directly– and this could be because Spotify pays labels, distributors, publishers and collecting societies instead who then go on to compensate musicians themselves for their work.

The problem lies within the fact that these rights-holders have agreed only partially to many changes which might end up boosting those earnings; however, we can never know without talking about them first!

B. Spotify doesn’t pay by the stream

The best way to think about Spotify’s “pay per stream” is in terms of a royalty pool. It pays out based on the share of streams it has versus other services like Apple Music or Tidal, which have their own royalties pools from which they pay artists and labels.

That means you can turn your fee into a per-stream rate by dividing your payout (from Spotify) by how many times people streamed the song for you.

Spotify has been criticized lately because its system doesn’t work well if listeners are going through different platforms just so that they don’t need to subscribe to one service exclusively – meaning that while this might seem unfair at first glance, it actually makes sense when looked at closely.

The Trichordist, a great artist-rights blog out of the Netherlands publishes an annual chart detailing what they believe to be Spotify’s payout for streams.

The most recent report was from a mid-sized independent label which reported $0.00348 per stream on its end in 2019 and that made me think about how these figures are actually posted payouts because, if you do some simple math (which I won’t bore you with), it becomes clear that Spotify can only afford to triple their current payment structure by either tripling the percentage of revenue they give back to rights holders or doubling both pool size as well as total paid subscriptions. Pretty unlikely, considering increased royalties would likely lead to other streaming services like Pandora and Apple Music’s Beats 1.

C. It’s all about the pool – and how it’s divided

The key question to focus on is how Spotify can increase the size of its royalties pool. It’s been happening naturally, as their revenues have grown every year and it has increased faster than they expected when they first started out with just an idea for a new type of music business model, but many people find that this growth hasn’t managed to make more equitable royalty distribution possible for artists so far.

The debate also focuses on what would happen if there were ways in which we could divide up these pooled payments from streaming services (both before the money leaves Spotify and after) – whether those divisions are fairer or not based upon different criteria determined by stakeholders like musicians themselves who feel left behind.

Ever since the invention of digital music we, as a society, have been searching for an answer to this question: what is fair compensation? Streaming services are one idea that has attempted to grapple with these issues by asking users who listen and create content how much they believe their contribution should be worth.

However, streaming service providers like Spotify do not consider all contributors when deciding on payment rates; smaller artists receive less pay than mainstream ones.

Some people argue that it’s unfair because every artist contributes equally in generating income through streams but isn’t awarded based off of that merit alone (i).

In response, some individuals suggest using alternative methods like putting money into a pot where various investors get paid out proportionately accordingly to shares held rather than profit generated.

1. Should Spotify pay a higher percentage of its revenues out?

Spotify is never going to announce that it’s now paying 195% of its revenues out in royalties, however many people sign that petition.

But, could the company up its payout rate from 65%? In some parts of the world, such as America, these percentages are set by a board and can be changed over time; for example, there was an increase due to rise from 10.5 percent back in 2017 when Spotify first started operating within US borders (since then) with mechanical royalty rates increasing by 3%, eventually reaching 15.1%.

Spotify, along with Amazon, Google and Pandora appealed against those new rates because the publishing community believes it is evidence that Spotify will fight any attempt to get them to pay out a higher percentage of their revenues as royalties.

Step outside that row, though; if they are unsuccessful in winning this appeal or didn’t try at all in the first place then would 70% be too low? Why not 80% or even 90%, which more closely resembles Bandcamp’s rate?

Spotify has been faced with criticism for the way it spends its money. Some argue that Spotify is spending a lot on high salaries and swanky offices, while others point to their €1.8 billion of research and development between 2015-2019 as well as another €2.6 billion in sales/marketing expenses according to their financial results from 2019 alone (this doesn’t even account for all the new product developments they’ve accomplished).

Spotify will defend itself by pointing out how much they are investing into making sure that not only does the music sound good but also has an intuitive user-interface so people can actually use it which means more than just giving them access to listen.

Despite the latest backlash against Spotify’s 30% cut of download sales in a downloads-era, Apple’s taking an equivalent amount from iTunes Store. In other words, if this is a problem for people then it applies to both companies equally and not just one or two specific cases.

Photo by Annie Spratt on Unsplash

2. How do we get more people to pay for a music subscription?

The streaming music industry is being disrupted by services like Spotify that allow users to listen for free.

However, this strategy comes with a downside: the royalties pool will grow faster if more people start paying for subscriptions than listening to music on these websites and apps as they are able. It’s important that we all do our part in making sure artists get paid what they deserve!

Spotify’s conversion rate turns out not to be too bad at 45 percent of its listeners signing up for their premium service – although it does include some students who may sign off when school starts back up again or family members sharing accounts together so everyone can enjoy unlimited access without breaking the bank.

This leaves 163 million potential customers still looking elsewhere – so how might we reach them?

The music industry has been debating whether or not to restrict the Spotify free tier for years – and that debate still hasn’t come to an end. This is because, while some people feel it would be a good idea, others disagree with this decision due to its possible negative effects on new listeners who haven’t paid yet.

For example, those under three months of being subscribed could see their service cut off entirely if they don’t pay up in time; but other than these concerns, there are also benefits that may lure users over from Pandora (like better features such as personalized playlists).

It’s really all about deciding what you want out of your service: do you care more about convenience? Or fair pricing?

The IFPI states that there is a 229 million difference between the number of people who subscribed to music services at the end of 2015 and 2019.

This growth, if it continues over the next three years, could impact up-and-coming artists in various ways such as increased album sales; speeding up artist development cycles by giving more direct access to their fans via streaming platforms; or making an international tour accessible for lesser-known musicians due to collecting revenue from all parts of the world they visit (not just America).

3. What’s the right price for a music subscription anyway?

In Tom Gray’s recent interview, he proposes an increase in the monthly $9.99 price for Spotify Premium by 25%, deeming it “under pressure”. The rise will be especially important to Western developed countries like Canada and USA where music is a way of life that people are willing to pay more for.

If anything, this may help deter piracy as many users might switch over from illegal downloading sites if they have high-priced alternatives available at their fingertips on Spotify itself or other websites with subscription-based services like Apple Music (which also costs $9.99).

“Stop saying it’s price-sensitive; kids pay £8 for a skin in Fortnite and we can’t ask for £12.50 for the entirety of all recorded music? Give me a break”,  he said.

In its developed markets, Spotify has not raised the price of its standard subscription since it launched in 2008, even though some other digital services (Netflix is the frequent comparison) have done so without obviously suffering from customer rage yet.

Even if subscribers will swallow an increase to their monthly payment plan that includes access to premium content like hit songs or live concerts on demand as well as podcasts and audiobooks – which they might – increasing prices seems like one-way creators could turn this old business around.

Spotify is considering cheaper subscriptions in the future, but not until it has conducted enough tests.

In response to a question from an analyst about Spotify’s pricing plans for lower-income customers during its recent quarterly earnings call, CEO Daniel Ek hinted at exploring this market when “the economy improves.”

However, there are other options that should be considered as well: while $9.99 may seem too cheap for some people and companies have expressed concern over how much they lose on each sale of music (often more than 50 cents), many still feel that even a limited catalog and features would make all the difference – particularly if listeners could occasionally use their account on different devices without additional cost or hassle.

4. Would ‘user-centric’ payouts make streaming royalties fairer?

Many artists are struggling to make a living, but we have seen hope for change. One potential solution is “user-centric” payouts where users can decide how much they want to donate per play or download of your music and then the percentages would be sent out accordingly.

This sounds like it could work in theory, however, more research is needed into its impact on other types of income before groups may consider implementing this type of policy/practice/strategy as well as making sure that all parties involved know what their contracts say about these payments ahead of time so no one’s surprised when it happens.

Music streaming services toying with new ways of calculating royalties. These changes would give you more control over your money and how it’s being spent on music subscriptions, which is an exciting prospect for users who don’t want the hassle of figuring out what they’re paying for in their monthly service.

To explain this super-quickly: a current ‘pro rata’ system divides its royalty pool by each track’s share of streams during a given period. Drake gets 5% of the tracks streamed but if he doesn’t get any plays from someone else, his rights-holders still receive 5%. 

As a system, user-centric ‘feels’ fairer: your money goes to your favorite artists. That alone might be a helpful selling point when trying to encourage more people to sign up for subscriptions (see point 2) – the calculations required are complicated, but perfectly manageable for streaming services.

As with other models of royalty payments such as terrestrial radio and physical albums sales that go through retail chains before reaching the artist, there is still uncertainty about how much revenue an individual can expect from this model in comparison with Spotify’s current subscription fee or Apple Music’s monthly rate plan – especially considering these two companies have not yet made it clear what their slice would be under this new business arrangement either.

If you want to find the most supremely talented musicians in a given genre, it is best to not go by popularity. Instead, look for those who are musically innovative and pushing boundaries. In order to do this, we must explore what makes an artist successful on streaming services like Spotify or Apple Music’s new Beats 1 Radio station – which has been created with these independent artists as its focal point.

How many plays they get per day, their listening habits; looking at where listeners spend time within your music catalogue; whether album sales have increased since signing up with them – all of these things can help us understand why some lesser-known artists may be more valuable than others when considering royalties from streaming sites such as YouTube Red Premium service that provides free advertising 

Deezer, a streaming platform that includes the likes of Tidal and Apple Music amongst its competitors, announced last year their intent to do a user-centric trial.

The idea has been in discussion since 2017 but this is the first time there have been any clear signs towards an actual long-term plan being put into action. If successful, it could provide significant relief for artists seeking royalties from digital downloads or streams.

“Deezer wants to run a pilot by early 2020.” Deezer’s ambitions are admirably considering how difficult it can be for users who want royalty payments when using online services – especially those with limited access outside North America like Spotify offers at present.

The pilot has yet to launch… Industry gossip varies on which major label(s) are the reason for the delay, but it’s a blunt illustration of how difficult industry politics can be for user-centric payments schemes like streaming services. 

It’s not enough to give up just because this project isn’t perfect – and we know these things never go smoothly in music business circles anyway!

But, if you’re calling for user-centric payouts as a solution to royalty issues then come with some good ideas about cutting through all those layers of red tape.

5. Should musicians get a bigger share of streaming royalties?

Streaming royalties are not as simple as a single can of worms. They’re an entire chain of WormCanMart supermarkets, having their annual worm can-opening festival!

The issue is fraught with tensions that go beyond streaming services versus musicians into some long-simmering dynamics in the music industry – from dodgy artist deals to splits between recordings and songs (compositions).

Some of these issues are hard to solve retrospectively without expensive lawyers – if you have a terrible label deal, your streaming royalties will be terrible.

Photo by Heidi Fin on Unsplash

But, they’re easier to swerve now and in the future – there’s been lots of work done figuring out what a fair artist deal is which, in turn,  has given artists more leverage when negotiating with labels for their share of the revenue from music releases in the era we live in where everything can be streamed online.

At the same time, good record labels (and alternatives) are proving themselves by adding value beyond just distribution as well as generating great content that people want to hear while carrying on legacy traditions like physical media production and pressing vinyl alongside new ones such as producing collaborations between popular vocalists or pushing user-generated soundtracks.

Different tensions around streaming royalties are more difficult to handle. Publishers (and thus songwriters) get a much smaller share of streaming royalties than labels (and therefore performers) do, and it’s not the first time they’ve complained either – this is just coming to a head now in an argument where Spotify will undoubtedly want nothing at all to do with playing referee.

It won’t be happening in a vacuum either; what would happen if, for example, one label was getting both lower shares from overall revenue but also paying out larger portions?

6. Should fan funding play a bigger role in streaming?

Spotify’s new “Artist Fundraising Pick” feature is driving more than 50,000 artists to be able to raise money from fans for themselves or their teams.

More musicians are seeing this as a tacit admission by Spotify that royalties were paltry and an insulting device just so they can push responsibility onto the listeners.

Some people might see it differently though in which ending the historical separation of streaming music and fan-funding could actually benefit both parties involved instead of hurting them like some may think now with all these changes happening constantly on popular platforms such as Pandora, YouTube Music Key, iTunes Radio etc

Spotify’s new Artist Fundraising Pick drive up over 50K musicians who want not only help from support charities but also need funds for instruments, equipment, etc.

Streaming Services like Spotify and YouTube are starting to join the trend of revenue-share-waiving sales days. You can bet that this is not a coincidence, as many artists have taken advantage of these in order to create more intimate connections with their fans! This new development opens up incredible opportunities for streaming services by connecting them even closer with creators.

In recent news from Bandcamp’s revenue share waiver sale day, we see an abundance of wonderful examples between content creators and their fanbase coming forth such as bonds forged on platforms like Patreon or Twitch, who are increasingly sacrificing profits just so they may continue giving back what they love doing – creating quality music/content while making money off it too without being tied down by financial risk .

The question of whether Spotify or Apple Music should create their own version of Patreon and Twitch is something that needs to be addressed. For many artists, it could mean an easier way for them to get paid by the fans who want more from their favorite artist than just music.

However, not all creators may find success in this new type of model as some may struggle with content creation while others might have a hard time navigating the “asking-for-money” requirements for tips economy success. If we are going to make these models into engines powering our future music industry, there will undoubtedly be implications ranging anywhere from what those streaming services would play on radio stations versus making curated lists based on specific user’s tastes or even if they’ll offer packages like HBO.

7. What else can musicians do to survive and thrive?

Musicians are changing the way they work within a system that is broken. They’re not just complaining about it but are working for change in order to create opportunities and better thought-out compensation models where transparency exists as well.

Musicians see how difficult life has become under this streaming model we have now and want to do something about it so musicians can make sustainable careers from their art again without having to take on other jobs or second gigs with long hours outside of marketing themselves tirelessly while barely making minimum wage per gig because there’s no money being made off digital sales anymore like before when albums were available at stores around town (or even sold online).

The streaming era heralds a new day for artists. They’re taking control of their businesses and hustling to make the most of current systems and structures – mastering mailing lists, serving superfans, figuring out social media marketing, being smarter with merchandising.

Eager as they are to grow their audience through live streaming or other on-platform creative tools like those offered by Spotify Premium; making clever use of metadata services (like Gracenote) that will ensure accurate royalty payments from streams on all platforms where SoundCloud is present; turning up in each other’s videos across different channels only because there isn’t anything stopping them anymore– these content creators have embraced the power shift away from gatekeepers into an open playing field made possible by digital streaming.

To put it frankly, the music industry is a tough business to break into! You face stiff competition from other musicians out there who are releasing their own albums without you even knowing about them! It can be especially difficult when you don’t yet have any team members working with you so that they could take on some of these tasks for themselves while freeing up more time for you to create your next masterpiece – but hopefully, this article has given listeners insight as to how dedicated and hard-working an artist truly must be in order to make something great happen in such a competitive field like ours.

Artists are increasingly using technology and their creativity to build sustainable careers in the streaming era. Though, some of these ideas come from close friends who want to offer support or advice for artists on how they can make money with music online; other creative solutions stem directly from experiences as an artist trying out new technologies themselves.

This will impact activism against streaming services because it is important that people understand what has changed about making a living off art when companies like Spotify exist today – even if you have enough followers on social media platforms!

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About the Author

Des is the head content creator at The Music Marketing Academy


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