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Spotify’s Royalty Rate For Indie Artists Up Just $0.001 In 2011, Despite Big Subscriber Growth

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Spotify and other streaming services were the talk of the Midem conference which just wrapped up in Cannes. During the gathering, U2 manager Paul McGuiness labeled Spotify as nothing more than a “promotional medium”, while Sony’s Denis Kooker claimed that streaming services “do not cannibalize sales”. 2011 saw Spotify's reach widen and it subscriber base increase considerably, but how does this affect independent artists?

 THE REAL STATS

Tunecore’s new simplified dashboard makes comparing your different revenue streams an easy and revealing task. So I would like to share stats from a couple of releases for different bands for the year 2011. These are separate albums from separate acts. I have used releases that have been out for a couple of years so that they do not have new release peaks in them, as a result the streams were pretty consistent through the year.

ROYALTY RATES

  • ALBUM #1 – For Jan 2011 to Dec 2011
    6764 Spotify Streams: $34.48 ($0.005 per stream)
  • ALBUM #2 – For Jan 2011 to Dec 2011
    4833 Spotify Streams: $25.34 ($0.005 per stream)

Here are the difference in royalty rates from the first 6 months of 2011 and the second half.

  • Spotify Royalty for first half of 2011 $0.0046
  • Spotify Royalty for second half of 2011 $0.0056

If I compare the royalty from the first month of plays to the last month it looks like this:

  • Jan 2011 – $0.0036'
  • Dec 2011 – $0.0043

WHAT DOES THIS TELL US? 

Well firstly, for all of Spotify's growth in paid subscribers in 2011 and introduction into the USA, the revenue paid out to indie artist grew only $0.001. In the meantime the majors have been happily skimming a nice fat royalty check off the top, as a result they of course tell the world it is the way forward. 

The big question is, when did the major labels ever lead the charge when it came to brilliant new ideas. The majors are not led by visionaries anymore, they are not led by Zuckerberg or Jobs, they are led by people who have been very rich for far too long, and barely know how to use twitter, let alone integrate a whole new way of listening to music effectively.

They went for one thing, and one thing only, and that was money. Here was a quick fix to bring in quick cash and make them look like heroes again. Spotify needed them onboard for the content, and with every band under the sun ready to stream their music free on Myspace, they knew they would undoubtedly have a influx of indie acts eager to be on the service.

With around one million new subscribers leading to such a slight increase in payout rates, the assumption that it could have a devastating affect on indie artists becomes more realistic.

Rumors are that Spotify is looking for another big influx of cash, so one has to wonder where all that subscriber money is going. But from the evidence on hand, we can pretty much be certain it is not going to find its way to the Indie artists using the site.

I have said it before and I will reiterate this point – use Spotify as you do all other free streaming services like Reverb Nation, Myspace, Root Music and Soundcloud. Put two or three of your songs up and try and entice people to your own website to discover more.

It seems for once Paul McGuiness is right; at this stage Spotify is really just a promotional tool. 

Robin Davey is an Independent Musician, Writer and Award Winning Filmmaker. Follow him on Twitter @mr_robin_davey

 

admin on 02/01/2012 in Uncategorized | Permalink | Comments (37)
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37 Comments

  1. Robin, thanks fror sharing.
    Strange though. I’m in Europe and use Zimbalam in stead of Tunecore. Here are the 2011 data from my statements:
    Payments per stream
    jan $0.0028
    feb $0.0029
    mar $0.0028
    apr $0.0031
    may $0.0047
    jun $0.0052
    jul $0.0056
    aug $0.0058
    sep $0.0062
    I will receive The Q4 statement in March.
    Looks like it depends on what aggregator you are using. Maybe Zimbalam has a better deal with Spotify than TuneCore?

  2. Robin, wake up! The tech guys and the major label guys are one in the same – they exist to make money – to become part of the 1%. It is about time you stop drawing a distinction between the labels and the tech heads. Spotify gladly cut deals with the majors. Second, of course the majors are going to reap the harvest, they control the valuable catalogs. They made the capital investment to build their companies, so why do you all have so much animosity toward them. This is capitalism, this is how it works. Where would U2 be today, without the huge capital investment Island made to promoter their career? If they signed to a cool indie in the day like Stiff, would they be as huge as they are now? McGuiness is correct, subscription services don’t pay unless you have copyrights in bulk. If you are a struggling indie artist or label, Spotify is cannibalizing your iTunes and Amazon sales. Just ask any indie. The numbers from Spotify are weak and will continue to be inferior. Spotify ain’t a savior baby, it is one more tool the majors are using to kill independent competition.

  3. Robin:
    You can buy credits at Spotify, and use these to download tracks to your computer/mp3-player etc.
    Has anyone looked at the rate of purchaes of music through this via Spotify?
    Because Spotify is more than streaming…

  5. Yes for the over 10,000 streams on the releases listed above there were no purchases made of tracks through Spotify. In fact I have yet to make a sale through Spotify on any one of my releases. I would be very surprised if anyone did.

  6. Mark my words, Spotify is really going to be the beast that kills off this industry. I have seen a significant hit in iTunes and Amazon sales since the US launch (5 to 10% percent) despite my increased releases on both services. From my conversations with the average punter, Spotify (and to a lesser extent Grooveshark) are not converting streams to sales. You don’t need an MIT math degree to figure this out, Spotify can have 30 million users and your numbers will still be insignificant. Unfortunately it is only guess work on what are iTunes figures would be in a world without Spotify, Grooveshark etc., but I can sure qualify the negative net results.

  7. The wake of call is for your casting and Hypebot’s general mantra of the major labels are bad guys and the tech guys will save us minions – they’re all bad guys. “Meet the new boss, same as the old boss” holds true today as it did 40 years ago. Hybebot clearly supports the tech culture and endlessly criticizes the majors, and misses the obvious. The Internet like big government, the banks etc. doesn’t exist to free us little people, but to ultimately feast off our carcass. Either you buy into the culture as most do, or you fight it. But lets give credit where credit is due; many successful musicians would probably be working at Starbucks or investment banking if it wasn’t for the courage of some A&R or promo guy who put his or her career on the line to sign and support the marketing of a group. Make no mistake labels made careers, as do banks loan money to buy houses, and big pharma makes meds to improve your help. It is a two way street and not all nefarious. Simply, the old culture wasn’t that bad. Labels are corporations with sincere, hardworking people making lives better; employees who actually care about the art. When I talk to people at Amazon or other music services, it is clear they don’t care about the music. For the tech world music is clearly a means to an end (big IPO and cash out most of the time), to think Spotify, Facebook, iTunes, etc. really care about people, freedom of speech, promoting the arts is naive at best. It is all corporate America.

  8. Two major things missing here:
    1) you get different streaming rates depending on which country the music was streamed from
    2) within this, you receive different rates for ad-supported and premium streams.
    So if your streams come predominantly from a country with a higher/lower rate than these rates, you are likely to see a much different picture.

  11. For each stream via Spotify, there is a second seperate royalty paid to the songwriter for the rights of Reproduction and Public Performance.
    Problem is, most don’t get it, don’t know that they earned it and if they are aware, have so many middlemen dipping into it before they get it they have no way to tell what it was (for example, ask ASCAP/BMI what the royalty rate is that they negotiated for you with Spotify and then how much they take as a “fee” for collecting and paying it back to you – they refuse to tell you)
    I suspect those roaylties should be included as well.
    Jeff
    TuneCore

  13. Pay out per stream is minuscule, I agree. But we should not focus on the pay out per stream only. The number of streams is maybe more important. I expect that to rise over the next years.

  16. I was agnostic about the financial wisdom of being on Spotify until Midem. Below is a piece I just wrote explaining what changed my mind. If Spotify could pay you 100,000 euros for one track in a tiny country like Sweden, imagine how much you’d earn for a no. 1 album in a huge country like the USA once Spotify has achieved good market penetration.
    from the Record of the Day magazine http://www.recordoftheday.com:
    “Catchy Tunes is Scandinavia’s leading hit-driven independent label and Sweden is the market where Spotify represents the largest share of digital revenue (70%, some say), so we always ask label head Michel Petré how his Spotify revenues are looking. Once the answer was “It’s OK but not as good as iTunes”; now it’s a different story.
    “Yolanda Be Cool’s We Speak No Americano is eight times platinum in Sweden (where streams contribute to their certifications). Tracks like this can get close to 100,000 streams per day at their peak, and could reach 50 million streams in total. It conceivable that one track could earn 100,000 euros in Spotify revenue just in Scandinavia – which is better than the iTunes era or even the peak of the CD single era.
    “Also, while the majority of tracks in the iTunes catalogue don’t sell, the majority of tracks on Spotify are streamed, so Catchy Tunes are earning good revenues from tracks that didn’t chart when initially released. Playlists help here – Catchy Tunes have a playlist called Dancefloor Hits in partnership with Sony Sweden which has nearly 140,000 subscribers. Every Friday and Saturday evening, plays peak as people get ready to go out.”

  19. I think you need to do more statistical analyses. There is a difference between Spotify Free and Spotify Premium. Spotify Free is just like You Tube. You can listen to it at your computer with an internet connection but not on the go. A MUCH more inferior experience then buying the CD or a download on iTunes. With Premium, the gap between the Spotify track and a bought MP3 narrows. You still can’t burn it to a CD or (gasp) make a copy for your friends, but you can save it offline and listen on a mobile device on the go. The latter could very well cannibalize sales, but the former is no substitute for owning the song/album. If a user listens in that limited way on Spotify Free, but doesn’t take it to the next step (buying), then I don’t think that person is all that dedicated a fan. Since they don’t care that much to hear it while in their car (the place where most people listen to audio), I don’t see how that is a lost sale.
    As to withholding from Spotify, hey do what you want. But an unknown indie artist isn’t going to get radio airplay or get the marketing push a major label artist or prominent indie artist will get. If by some miracle I hear you’re an artist worth checking out, I’m going to go to my streaming service of choice (in my case, I dropped Spotify and am using Rhapsody). When I am hit with only a few songs to hear, and no album, I’ll say, “Oh well”, and move on to something that is there. Sorry, I don’t buy unless I can hear the entire album first. Only the Coldplays of the world can get away with withholding or windowing (Mylo Xyloto, by the way, has been released to all streaming services as of today).

  20. As some has sad before its nonsense just to look at the imcome pr stream. Why oh why should the streaming rate be better when Spotify have more users? Of course if wont be better but your streams will be streamed 10 times as much and therefore in total give much more than now.
    Its actually basic math, but sometimes nobody think of this in these kind of discussions…

  21. Of course it would be better they have more cash so the pay out rate goes up. More users doesn’t equal more streams, being more well known as an artist means more streams. More users means more subscriptions, more ad revenue and a more tantalizing per stream rate for the artist.
    If what you say is true then there is absolutely no hope for Spotify in the future.

  22. On what royalty could they conceivably earn that amount?
    It is impossible to tell from those quotes you posted to know that this is backed up by any evidence? And your site is subscriber only so I cant see the article. Maybe you should adopt Spotifys free/subscription model and see how it works for you 😉

  23. Guys,
    Check out a new music marketplace…it’s called The Holding Pattern (setup by a couple of Aussie muso’s)
    http://music.holdingpattern.com/
    * It’s 100% free for artists to upload
    * For the first time globally, artists now have a platform where their work can be picked up for commercial use i.e. TV and Film, and artists still own 100% of all copyrights, and all royalties from their PRO’s…
    * The platform has been designed to be really simple in terms of uploading and buying music….
    The seem to fighting the good fight for ALL artists…..

  27. People need to understand that they dont have a specific payment per stream. Its all based on advertising revenues over the percentage of plays in your catalogue compared to the rest of plays on spotify.

  28. Those rates look wrong. My guess is that you are looking at an artist with a US fanbase. Spotify in the US is still pretty immature with consumers only now coming off free trials.
    In general, focusing on per stream rates and comparing to a la carte wholesale prices isn’t really very helpful. You have the ability to hit a much, much larger audience, who will, potentially, play your music repeatedly. If you look at Youtube, we have seen many tracks in our catalogue hit close to 1 million plays. This would earn thousands on Spotify/Mog etc… but have earned us almost nothing on Youtube. (This may now change since we are now monetising our Youtube content through the new Merlin agreement.) These same tracks have sold perhaps a few hundred in a la carte. Its all about reach. It isnt about one consumer playing your track 100+ times, its about hundreds of consumers playing your track, with some of them play-listing it and playing it again and again.
    There is lots if mis-information out there. Distributors are on the front line and are positioned to loose more than anyone if our a la carte income dwindles, yet MOST distributors are sticking with Spotify and the Freemium subscription models.
    The “beast that will kill our industry” is our industry itself if we continue to try and dictate to the consumer how they must consume music.
    We have been here before folks.
    Danny
    http://www.kudosdistribution.co.uk

  33. I have not seen any evidence to suggest that ad revenue is included to the “pool” for streamed tracks. Everything I have seen suggests that free streams are always at a per-track rate regardless of ad-revenue and paid-streams come from the pool.
    Rhapsody pays more per stream. I think spotify will too as they push more users away from the free service.

  34. Like I said those rates are spread across USA and UK/Europe. Youtube is not a subscription service it is free. I don’t understand why people are blind to the fact that the Majors did off the top deals with Spotify that no one is allowed to talk about. That is where all the money is going.
    I posted those rates because it is reality, everyone is speculating that things are going to be better but the truth is that is what an Indie Artists earns through Spotify and there is no promise that will be any different.

  35. Believe me ,we are not blind to anything. My business depends on successful business models. Spotify is our second largest revenue earner in most territories where it exists, and is our largest source of Scandanavian income, physical or digital.
    “Did the best deals” in what respect exactly?
    I have seen no evidence that this is the case. Merlin are pretty good at ensuring indies get their fair share in all respects of the agreement. The spread of sales (where the artist is popular is really important. Averages for Scandinavian and even UK sales are WAY above the values you quote. (At least, for us they are way above….. I don’t know if your aggregators are Merlin members or not).

  37. Robin Davey…..So far up his own Jacksie he can’t see a way out other than trying to persuade none musicians what a great success he is (or isn’t, as the case may be)…This joker with the alleged ‘Purchased’ awards can’t make his mind up which gender of ‘music’ (loosely used word) he wishes to play under, May-be if he made up his mind and stopped using bull-dust or mind-games he may then be able to shoulder criticism and stick to one form of expression that his limited talent allows!

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