Music technology can move fast! Just in the past several decades we’ve gone from vinyl to cassette to CDs to MP3s, and nowadays there isn’t any physical media at all. The latest melancholic Posty or Billie Eilish release now streams across the internet at the speed of light from servers parked in a desolate location to your phone or computer and through your Spotify app — to you and its 286 million other users.
So if artists’ songs are just zooming around a bunch of fiber-optic cables, how are they getting paid for it? Especially now, as venues are closed and tours are canceled and recorded music is an artist’s only income, how’s it all work? How little does an artist make per stream? And how many times do you have to listen to your top artist’s songs in order for them to earn a goddamn slice of pizza? We got answers.
So, what’s the going rate per song on Spotify?
It’s not easy to calculate this because Spotify (and Apple Music) use a pro-rata system. That means that once a month, Spotify puts all its revenue from ads and subscriptions into a pot, then divvies it up based on the total share of streams that each artist got. Various outlets claim, going by an old company filing, that Spotify pays between $0.006 and $0.0084 per stream. Other analysts concluded last year that Spotify pays artists the princely sum of $0.00318 per stream.
A fraction of a penny?
Yes. Which is to say a user would have to listen to a song 1,573 times to earn the artist five bucks! (Although the musician doesn’t even get to keep it all — more on that in a bit.) Musicians better hope you never tire of their songs. But hey, at least it doesn’t involve piracy?
How many people and songs are we talking about?
Spotify says it has 286 million active users, and 130 million subscribers worldwide. It’s 36 percent of the streaming market. Those numbers sound big, though it’s actually extremely tiny when compared to Facebook’s 2.6 billion monthly active users and YouTube’s 2 billion. Nonetheless, Wall Street values Spotify highly — it’s got a market cap of $28 billion, yet it still lost 17 million Euros just in the last quarter in its latest earnings report, and it regularly fails to turn a profit. (Spotify, headquartered in Sweden, counts its money in Euros because it’s legally based in the musical hotbed of the Grand Duchy of Luxembourg — a well-known tax haven.)
Does Spotify care about the fact that it pays fractions of a penny?
First of all, it’s not the stingiest of streamers. Of the major services, YouTube probably takes that title at $0.00087. (If you were wondering who pays the most, it’s Amazon Music Unlimited, followed by Rhapsody.)
However, Spotify testified in 2016 that “lower royalty rates are critical to Spotify’s future.” And in 2019 it appealed against the U.S. Copyright Royalty Board’s decision to award songwriters and publishers a 44 percent rate increase by 2022.
Still, lots of artists, though they have a complicated relationship to Spotify, will say it provides value. This particularly goes for smaller artists, who value its reach in a music landscape that moved beyond the old promotional models of radio and MTV a long time ago. There are success stories out there of starving musicians landing a song on one of Spotify’s playlists, which then rack up the streams and allows them to drop all their side hustles and concentrate on music.
How do artists actually get paid?
Spotify pays an artist’s record label, which then doles out the contractually obligated cut of payments to the artist, the songwriter and the producer. Depending on the artist’s deal, generally they get to keep 15 to 50 percent of what their record company got.
According to The New York Times, Spotify began experimenting with direct deals with independent artists a couple years ago — either unknown artists, or legends who are currently unsigned and have legal ownership of their old songs. Spotify pays them an upfront fee, and act a little bit like the artist’s record label (similar to how Netflix has morphed into a studio and a producer as well as a theater). The upside for an artist is a bigger piece of the financial pie, and ownership of their own recordings (which are non-exclusive to Spotify, meaning they can stream and sell them elsewhere).
This is a touchy subject, though, as Spotify isn’t allowed to be a record company per its contract with the big three actual record companies (Sony, Universal and Warner), and angering them might, someday, persuade them to keep their artists off the platform. But for now, Spotify and the record labels appear to be a finely balanced symbiotic relationship.
Is Spotify changing music itself?
Sure is. Songs are 45 seconds shorter than they were a couple decades ago, for one thing. And since artists get paid if someone only listens to at least the first 30 seconds of a song, it incentivizes artists to make all their songs shorter so that you’re more likely to burn through an album. As an example, The Verge pointed out Drake’s Scorpion double album, which has 25 tracks, of which many clock in at 3:30 or less. Generally speaking, you’ve probably noticed that rappers increasingly have more songs coming in under three minutes now.
Also because of these economics, song intros are all but gone, and either the chorus or some section of the hook will appear almost immediately, to actually hook you. It still pays for a listener to listen to the whole song, though, as this signals to Spotify’s algorithm to place the track on ever more popular playlists. (This can be worth a lot to a smaller musician: Inclusion on the “Today’s Top Hits” playlists can earn an artist an extra $116,000 or more.)
So think about it like this: All the new songs you like, no matter in what format you’re listening to them and no matter what the content appears to be about, are specifically written and arranged for this streaming economy and its algorithms. Streaming’s consequences provide yet another great example of Marshall McLuhan’s timeless theory about how “the medium is the message.”
Is there a better way to support an artist and their work?
Yes, there are lots of ways — but the best is actually the old-fashioned way. Live performances are typically a huge piece of the pie for an artist, along with merch. There are, of course, benefactor sites like Patreon and other ways to directly financially support artists (Spotify recently unveiled a poorly received tip-jar-like button on artist pages). But the most equitable way to listen to an artist’s music is by you actually purchasing and owning their work. Bandcamp has a far more charitable business model (it takes 10 to 15 percent of an MP3 or merch sale, depending on volume — everything else goes to the artist or their label via PayPal).
But the best deal for an artist by far? Old-fashioned CDs — no joke. As Alex Ross recently pointed out in The New Yorker, an artist’s income from a single CD sale is equivalent to that of more than a thousand streams. (Plus, let’s be honest — you also get that immersive experience with the artist: the album art, the liner notes and everything else that’s been lost to our current, shallower, age of abundance.) Unfortunately, more streaming means less album sales. And here’s a big, significant stat: Streaming accounts for more than 80 percent of all music consumption in the U.S.
So while music technology moves fast, and though it’s still unprofitable, Spotify is here for now, and probably will be for as long as people prefer streaming their music to other kinds of media. And, like every other format that comes along, it’s leaving its own mark not only on the music industry, but on music itself.