Spotify Economics

“Because as Spotify subscription numbers increase, so do payments. So, what DJ Khaled gets for a stream today is more than what Ed Sheeran got in the past.”

Ah, the nitpickers are out in force. I hate to interact with them, but I’m wary of misinformation being spread.

What I wrote above is loose language, you can even say it is presently technically wrong. Because the truth is PER STREAM PAYMENTS have been going down, not that that is written in stone, BUT STREAMS HAVE GONE UP so the resulting payment for a hit is higher.

My point is very simple. The greater the number of Spotify subscribers, the larger the pool of money to be distributed.


First and foremost, Spotify does not have a per-stream rate. Never did, still doesn’t, and never will.

The per-stream rate is math done to interpret the modern world for those still living in the past. They’re used to percentage royalty rates on physical. For some reason, they can’t understand pool percentages.

FURTHERMORE, these same people complaining, and just like Daniel Ek said, it’s not the big artists who are complaining, who are rolling in dough from streaming payments, IT’S THE LITTLE ARTISTS! Which makes no sense, because if the per-stream payment is going down, that means more tracks/artists are getting paid, which is exactly what Daniel Ek said, once again:

“”Gone are the days of Top 40, it’s now the Top 43,000″ – referring to the fact that the streaming service’s ‘top tier’ of artists – those accounting for the top 10% of its streams – now number more than 43,000, compared to 30,000 a year ago.”

Spotify CEO talks Covid-19, artist incomes and podcasting (interview)

Funny how those who lean left, the majority of the artists, those who believe the little musician should make more money from streaming services, nitpick just like those on the other side of the political spectrum do. They cannot handle the spirit of the statement, they have to cherry-pick and twist to make their point.

And to beat a dead horse, as Spotify increases in subscribers, more artists are sharing the wealth. Somehow that’s a problem? Because each and every stream might be worth less?

This is the basic rule of scale. Which, ironically, Spotify doesn’t have (scale, that is).

Let me explain…

These internet companies become more valuable because more people use them. And the cost of acquisition per customer drops, because users tell other users, people want to get in on the game. And costs can be spread over more people, therefore lowering them per user.

Spotify becomes more valuable as more people use it. That’s why its stock is high (along with the venture into podcasts).

However, Spotify still has to cough up approximately 70% to music rights holders no matter how big it gets.

Going back to the past to explain this to the brain dead…the reason record companies were so profitable in the past is because recording costs were a set figure. And, as a record caught fire, fewer marketing efforts were needed to sell each subsequent album. So, doing little more than pressing and shipping the product, at a certain point almost everything was profit. Sure, you can amortize the costs over each and every album shipped, but most records’ costs are never recouped anyway.

Once again, it’s sad to have to describe the music business to those agitating for results that are impossible. Spotify can’t lay out more cash to artists, who are paid by their label anyway, if they’ve got one, because then it would GO BROKE!

I remember a conversation with Lucian Grainge. He lamented the artist blowback on Spotify because THEY’RE HIS BIGGEST CUSTOMER! The healthier Spotify is, the healthier the labels are. And there’s no point in putting Spotify out of business, because it would hurt the labels.

If you know anything about retailing, about concert promotion prior to the Sillerman roll-up, you know that the first rule of these businesses is TO KEEP THEIR BUYERS SOLVENT! Which is why manufacturers extend terms to retailers, why acts give back money to concert promoters, which they still might do with indies.

But the problem with the internet is it’s flat. Everybody gets a voice and everybody’s can be amplified. And then this misinformation, or twist of information, gets picked up by the ignorant with an agenda and you end up with a paper tiger. What next, Lucian and Rob Stringer running a child sex ring out of the dressing rooms in Madison Square Garden?

So, you hate the big boys. I get it. They’re up here and you’re down there. You want more. And I believe in a safety net for everybody, a roof over their head and food on the table, BUT I DON’T BELIEVE EVERY ARTIST IS ENTITLED TO THE SAME THING! And just so the nitpickers won’t bite back, there should be a government safety net for these people, but as far as their artistic work…NO WAY!

What next? Do we get rid of all pool percentage deals?

Once again, I don’t want to go too deep here, giving those on the other side cracks they can burrow down into…

However, do you know if you buy more you pay less? Which is why if you buy from a one stop you pay more than you do buying direct? Ever try to sell to Wal-Mart? It’s only interested in products that can scale, that can sell zillions. They don’t want to stock any product that won’t, because it’s going to eat up shelf space that could go to a more valuable product. Then again, in the virtual world, like SPOTIFY, there’s unlimited shelf space, so there is more room to play!

Creating music is a social experience. Not one of hard facts. Whereas the business side is. Which is why you see a clear division between the two. The artists need the business people and vice versa. Hell, most musicians couldn’t even work at the 7-11, they couldn’t show up on time. And you can’t sell the music of the execs, believe me, many tried, they gave up.

But your response to my screed has the chance to not only reach as many people, but more.

And I get it, you’re mad that I have a bigger audience than you do. But you truly aren’t aware of what it cost to garner that audience in blood, sweat and tears, sheer work. Without ads or promo, without buying followers. Furthermore, I’m not getting paid for my writing. I choose to do this. Because the wider my reach, the richer the opportunities to make bank. JUST LIKE SPOTIFY!

Which is why if you’re a nobody and you’ve got a paywall, good luck, your odds of making it are low. Like all those people on Patreon. If you’re making a living, more power to you. But spreading the word, growing, gaining significant mindshare…NEARLY IMPOSSIBLE!

There’s plenty of money out there, tons. And if you’re interested in cash, figure out a way to make it.

The biggest artists make most of their money from brand-associated income, perfumes, makeup, clothing, tchotchkes. And it’s not that streaming pays so bad, but you just can’t make as much as Jeff Bezos from it. And you can try, but it’s literally impossible to do, no one makes triple digit billions in music. But music gives you the right to speak truth to power, to have an impact…THAT’S ITS ESSENCE!

Believe me, if you’re great, people will find you. But the process is slower than ever before, because the channel is overwhelmed with junk. So, you’ve got to work longer and harder to make it, and you still may never make it. How many people have that gumption? Maybe you had an interest in medicine, but you didn’t want to study and get good grades and therefore get a good MCAT score, never mind spend all those years in school and as an intern and resident, so you’re closed out. What next, should everybody be allowed to be an MD? Should the amateur MDs be paid more proportionally for each visit/operation, because they see fewer people? And what about the CUSTOMER! The customer won’t want to go to the amateur MD, no way, they want to see the big, licensed MD, so the amateur MDs get online and tell everybody how this is unfair.

This is the way it is. Who knows, I’m completely fried, I might have left a hole for a nitpicker to enter, to blow back. But the spirit, the essence of the above, is true, definitively.

Oh, one more example. There are always people lamenting their act won’t get signed to the major label, or the company released the music and have stopped marketing it with tons of bucks. EVER HEARD OF OPPORTUNITY COST? Record labels want to give themselves the biggest chance to make more money. They don’t want an album that can sell 10,000 copies, even if you give it to them for free. Because it’s gonna take up too much time and effort marketing said product and supporting it in other ways.

So you can decide right now which side you want to be on. Do you want to amplify the words of the losers, who don’t understand the business, or do you want to align yourself with those who are successful and learn from them? Believe me, in a business like music, it’s almost impossible to get a job and keep it. Not only can you not skip a day, YOU’VE GOT TO WORK ON SATURDAY AND SUNDAY AND MAY NOT GET PAID EXTRA! It’s a life commitment, and most people are not willing to suffer that much, and most people are not that great either. Do you think people want to pay to see castoffs from Little League as opposed to the Yankees?

I’m done.

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