Is Spotify Ripping off Artists?

Categories: The Riz Report

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Spotify made one hell of an entrance in July. Swedish-founded and U.K.-headquartered, Spotify arrived the States three months ago to adoring fans. Like a new bride, glowing in the light, flashing that pizza smile logo at us. Everyone wanted a piece of the sexy digital jukebox. Now that the veil has been peeled and the honeymoon has ended, it's clear that Spotify isn't exactly the messiah of legal music. One heartbroken groom in particular, Thes One of People Under the Stairs fame, isn't so into Spotify.

Thes came out blasting at the service for yielding low revenues but not before trying a little experiment. "[People Under The Stairs] had done a test run [with Spotify]," Thes shared with KevinNottingham.com. "We had re-released Stepfather. We put that up through all the different avenues -- we put it up on iTunes, we put it on Spotify, here and there. We obviously didn't want to release the new record and be flying blind and not know where the money was coming in and how."

What Thes found was that Spotify churned out peanuts in comparison to the meatier iTunes revenue. As you might imagine, Thes wasn't a happy camper. "I was absolutely shocked to see how little money comes in from Spotify. It was like a .0001% compared to iTunes."

So pissed was Thes that he couldn't wait to share the news with his peers. "I've told a lot of people I know, friends of mine like, say Ugly Duckling, who's getting ready to release their record, put it up on iTunes or do whatever you gotta do but absolutely do not put the whole record on Spotify. You're basically gonna be hemorrhaging money."

Therein lies the danger in promising heaven and delivering earth. You run the risk of bad publicity. Spotify is indeed useful for discovering new music or rediscovering old favorites, but it's not the one-shot cure for an ailing industry.

The funny thing is that Spotify has been facing these suspicions for a minute. While researching for this article, a certain search engine pointed me to complaints about Spotify dating back to 2009. A report published in a Swedish paper back then claimed that one Lady Gaga had received a mere $167 for over a million plays of the monster hit "Poker Face" on Spotify. How sacrilegious.

Paul Brown, Spotify's senior vice president of Strategic Partnerships, quickly shot down the claims and even offered a detailed response to the paper, which, apparently is legal in the U.K.

The numbers were outdated and factually inacurrate, Brown barked. "This figure is over 15 months out of date and relates to a short period of time, just after Spotify had launched back in late 2008 and is not an accurate or current reflection of the total royalties paid out to an artist and composer like Lady Gaga. It also only relates to royalties due from STIM (the Swedish collecting society) in respect of plays in Sweden ONLY and none of the other markets. This sum also excludes the royalties paid to Lady Gaga's record company across all of the launch markets over the last 12 months. To get a little technical here, "Poker Face" itself was classified as a 'split track' at this time (meaning the song was co-written by a Swedish and US composer), only a fragment of the money was paid to the Swedish composer who is a member of STIM.

Brown continued: "This figure would only represent one of several revenue streams for the Lady Gaga track in only one country (ie. Sweden), at a time when Spotify had literally just launched. We compensate collecting societies, who pay on to publishers, and the record companies (who in turn compensate the artist and songwriter) for use of a track."

The One, if you're reading this, we hope that Brown has answered your question of "Why are we getting screwed by Spotify?" Give Spotify a chance to find its footing and it just might surprise you. If it's still turning in $.000001 five years from now we'd anonymously send Brown a nasty email on your behalf.

Also: it's not really shocking that iTunes would yield a fatter payout than Spotify given the latter's newness. Apple's iTunes has been around for 10 years; Spotify has been around for three. That's the obvious.

Here's the not so obvious: Streaming sites generally operate under the performance rights license. Download services, on the flip side, must obtain mechanical rights, sound recording copyright, as well as performance rights. So they're dealing with multiple different royalty types. On-demand streaming typically is dealing with one royalty type. It follows then that iTunes payouts naturally exceed Spotify payouts.

Online streaming and downloads will always be a strong source of royalties. But like everything in life, services differ in strength and size. The business of strings and keys is a multi-billion dollar industry, and it's only right that those in the center be thoroughly compensated. And though it's always based on creativity, the music business is still just that--a business. Understanding the various revenue streams and key platforms is necessary to thrive.

Dumping Spotify for the girl next door isn't the solution. Try a little tenderness.


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3 comments
Trizzat
Trizzat

Interesting, but there's always other views of the same topic.  Spotify's model may be helping with other issues, such as offering the public what it perceives to be proper.  That is, many of us have grown up with "free" music on the radio.  Now we are all able to access information and communicate at the same time by a click of a button, whereas in the past communication was governed by a handful of larger companies.  As illegal as it may be, it's hard to fight the urge of certain individuals to grab music without paying.  The model companies like Spotify offer gives the public a sense of "free" music, while compensating those whose content it uses.  There's a good discussion throughout www.trizzat.com, and here particularly: http://trizzat.com/2011/10/fol...

OneGoodMinute
OneGoodMinute

Great article.  There are so many questions up in the air right now regarding Spotify's business model.  As a consumer it is a great service, but from the artist's perspective it is another story. There is a great series of articles at Indie Posit, including details from indie band Uniform Motion who has blogged some specific numbers about the return from different digital channels.

http://www.indieposit.com/?s=u...

Thanks for this.

Gary Packwood
Gary Packwood

Just how many singles and EP's can the market absorb before the supply side of music begins to look like a mass of piranhas trying to feed on customers who only spend cash on major venue concerts three times a year?

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