Bob,
These are good points…let’s also remind everyone that Spotify created a previously non-existent middle class. In the last 60 years, around 2,900 major label artists (give or take 1,000) have amassed an audience and brand large enough, that to this day, they drive enough traffic to generate at least $50,000/year in Spotify streaming revenue. In 2021, Spotify paid 13,400 artists at least $50,000 in streaming revenue. If you back out these major label artists over the last 60 years, 1,000 artists currently signed to a major label or significant indie label (that’s a generous number don’t you think?), and pad that number with an additional 1,000 artists for error and/or pre-1965 brand names still driving this kind of traffic (like Elvis), that leaves a super conservative number of 8,500 unknown artists that generated at least $50,000, just in streaming revenue, just from Spotify. This number doesn’t include streaming revenue from all the other platforms, ticket, merch, or social media revenue. These are 8,500 indie artists who NEVER would’ve signed a label deal and who NEVER would have been on the radio prior to Spotify. These are 8,500 artists who can’t exist or at least prosper prior to 2009.
In 2022, one short year later, 16,500 artists were paid a minimum of $50,000 in streaming revenue from Spotify. That’s a YOY gain of 3,100 artists or a whopping 23% increase!
The label system DID NOT sign, develop, and/or bring-on-line 3,100 new artists in one year.
These are indie artists.
DMN published a whiny piece about the 2021 Spotify payout report spinning it to say that these 13,400 artists represent a paltry 0.0017% of the 8 million artists on the streaming service. I can only think the implication was that somehow in the art and music world, every “artist” deserves to be paid, and Spotify is the bad guy because less than 1% of the “artists” are getting any kind of real revenue. Of course, in the art and music world, 99.9% of the content is objectively SHITE! I have a Hollywood network executive buddy, he told me they teach that if you say “NO” 80% of the time, you’ll almost always be right.
Spotify clapped back at DMN when they released their 2022 report by including a very simple criteria to identify the “professional” and “professionally aspiring” artists from everyone else on the app that wants to put their little finger painting on Spotify’s worldwide refrigerator…
Artist must have released at least 10 songs (enough to make one album)
Artist must have at least 10,000 monthly listeners (this number won’t pay anyone’s bills; this is a low bar)
Artist must have generated at least $1 in online ticket sales (to be fair, Spotify used pre-pandemic 2019 sales for this data)
The results?
2.6 million had released a minimum of 10 songs (2/3 of Spotify “artists” haven’t even released a full album!)
140,000 had a minimum of 10,000 monthly listeners
200,000 had generated at least $1 dollar of pre-pandemic digital ticket sales.
Out of 200,000 professional or professionally aspiring Spotify artists in 2022, 16,500 or 8.2% were paid at least $50,000 in streaming revenues.
Johnny Dwinell
Daredevil Production, LLC
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How is Spotify affecting anyone who owns their music from making money off their music?
The problem isn’t Spotify’s egalitarian payment system (everyone is paid if someone consumes your music and if you get as many streams as Elton, you get Elton sized payments) or its non-curated addition of 100,000 songs a day. It’s that payments follow consumer choices. Eg, The choice to stream your music.
Creating that demand is not Spotify’s job.
Whereas, filling the demand that exists? Making it easy to for fans to stream your music? Spotify is class best.
Dennis Pelowski
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Stating perhaps the obvious – but isn’t this discussion a microcosm of the moment? An inability to acknowledge/agree on a set of facts, much less being able to have a legitimate discussion on that information?
FWIW – keep up the great work, Bob.
Bob Flint
Springfield, VT
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I suspect we may share something in common that I’m very proud of: I can accept an inconvenient truth.
It makes life much easier to live and makes me more patient with people that can’t—hopefully they have other qualities that make interactions tolerable.
Michael Aiken
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R: Mike Froedge
I am a ‘creator’ – not a ‘corp.’
And yet – I don’t see a company like Spotify as the enemy – or as ‘exploitative,’ even though it commits the cardinal sin of making money.
There seems to exist some misunderstanding on a fundamental level with the role of a service provide. But I’ve seen it before – strong dislike for a firm like Spotify that doesn’t produce widgets, but rather provides a key service to creators.
Spotify is a key provider of exposure for the fruits of creators’ labors. Theirs is a valid and important service, and I as a creator, thank them for providing it.
And no – I don’t hate them for making money in providing their service. Isn’t that ‘the American Way?!’
Manny Freiser
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There are three certainties in life: Death, taxes, and people convinced that Spotify is the enemy.
“There are some people that if they don’t know, you can’t tell them.” – Louis Armstrong
David Dietrich
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I’m constantly baffled by people (like this first poster Mike Froedge) who seem to be very confused about the source of “wealth”. Ek is a billionaire because people are willing to purchase Spotify stock at a certain share price. That may or may not have anything to do with the business itself.
Sheesh…
Roy Liu
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The only cogent point he made was the discussion as to whether Spotify’s subscription price could/should be raised. I’m sure they have data through on lost subscriptions vs revenue from retained subscribers at the higher rate. Hell, I was president of a bar association and we had those same discussions related to raising our dues: will the increased annual dues exceed the lost revenue from non-renewals who don’t want to pay the higher price?
But side by side to yours, his argument fails misapply because it’s based on emotion and bogey men and not logic and math. A 4.77% net profit margin and he wants higher payments? Absurd!
Craig Davis
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I’ve done some math on this over the years. If Spotify paid what “older” folks think artists should be paid, the consumer would be spending between 4-600 dollars a month on Spotify. Young artists love Spotify because more people show up at their shows, play and simple!
Kevin King
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I believe I see where Mike Froedge is coming from with his insistence that Daniel Ek is the enemy and that you, Bob, are pretending Mr. Ek is not the enemy. My best guess is that Mike wants Spotify’s subscribers to pay a lot more for access to music so that Spotify can turn around and pay the artists and other rights holders more. This argument ignores the free, if limited, tier of Spotify and also neglects the basic principle of charging what the market will bear. If Spotify charged people $50 or $100 per month for access to the music, millions would cancel their subscriptions and go elsewhere.
I believe Mike is saying music’s inherent value greatly exceeds its potential revenue from Spotify payments. And then, as Spotify gets more and more music, each stream or thousand streams or 10 million streams, is worth less and less in payments to rights holders (including artists). Fair point. But we live in a market economy, for better and worse. Spotify can charge more if it can still make money.
Capitalism has its pitfalls, but communism, for example, works well only in ivory tower minds and maybe some kibbutzim.
If Mike wants more in payments, he can set up his own distribution system and somehow get loads and loads of subscribers.
As Mike himself says, “It is what it is.” But Ek is not the enemy. He’s just the guy with the market-leading solution. Build a better mousetrap, and Ek gets knocked off the top of the hill.
All the best,
David Arnold
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Well, you’re certainly a master of publicly cherry-picking responses which agree with your position.
LOL. Bravo!
Hell, at least Steve Jobs devised a comparatively fair business model.
With iTunes, if you consumed more music from more artists, then you paid more… As one should… And so all of those artists at least got paid accordingly.
With Spotify, etc… it doesn’t matter if you consume music from 10 artists or 10,000 artists, you still just pay the same lousy ten dollar subscription. And those 10 or 10,000 artists make essentially nothing.
If 1,000 people bought your single on iTunes (even if they never actually listened to it)… you would have grossed approx $700, after Apple took their piece of pie.
This is not a fortune, of course… But to pretty much any independent artist, 700 bucks is a pretty decent chunk of change, and will pay some bills.
If 999 people listen to your single on Spotify… you get precisely nothing. ZERO dollars, and zero cents… because since 2023, Spotify quietly changed their policy to eliminate paying ANY royalties whatsoever for a song with less than 1000 streams!
I won’t argue that streaming isn’t the future of music consumption. It absolutely is. But if the business model continues as-is, that future is going to sound increasingly bleak. Sure…
technology has democratized and cheapened (literally and metaphorically) the process of recording, mixing, and releasing music. Any half-assed hack can take a $200 laptop into their bedroom and churn out some “songs” and throw them up on Spotify. Tens of thousands do so literally every day. And the overwhelming majority of it sounds like that’s precisely what happened. It’s disposable, amateurish tripe. Hell, now you can even get AI to do it for you, and it will probably sound better!
And you’re right… Music is only worth what people are willing to pay for it. And increasingly… they’re going to be getting their fraction of a fraction of a penny’s worth. More and more truly creative and talented people will continue to abandon music for other pursuits… tech, etc… because they can’t feed and house themselves on f*cking thin air.
I’m not a stuck-in-the-past dinosaur who longs for the days of horrible record deals, the expensive and tedious logistics of physical distribution, or any of the other BS from that era.
But something about the current status quo has to change.
We are letting “cheap and convenient” suffocate creativity and creators.
And that’s sad.
Mike Froedge
Step Up to the Mike Productions, LLC
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Mike Froedge really doesn’t get it, does he? Bravo to him for trying to score points with “creatives” and his clients, but thank god more people are becoming clued-in. It’s been said before: Keep up or get out of the way.
-Hugo Burnham
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Bob:
Let’s do the math and follow the money
– The following approximations are for purposes of this illustration:
– The minimum basic artist royalty is calculated on retail not wholesale sales;
– From 1958-1968, the average artist royalty fluctuated from a low of 3% to a high of 8%;
– Most if not all major label recordings were produced by in-house producers (until 1969 when independent producers producing recordings for majors started to emerge);
– Most, if not all of these in-house producers did not receive a royalty from the artist’s gross royalty;
– In 1972 the average independent producer royalty was approx 3%;
– Discounted retail sales prices are not taken into consideration;
– In 1985, with the advent of the CD, the average artist royalty rates starting increasing deom 12% to 15% net 12% after deduction of the 3% producer royalty;
– The most significant standard deductions are used for this illustration;
-In 1968, the growing audience for stereo FM rock radio stations combined with the additional $1.00 price for Stereo helped accelerate the phase out of selling mono record pressings;
The retail list price for an album and the artist’s net:
1958-1968: The average List Price of a record (vinyl) went from $2.98 to $3.98 (mono) and $3.98 to $4.98 (stereo) for 10-12 tracks;
From 1958-1968, the average artist royalty fluctuated from a low of 3% to a high of 8%.
$4.98 x 90% (10% breakage deduction) = $4.48 x 75% (25% packaging deduction) = $3.735 x 7% (average artist royalty of 10% minus additional deductions) = $.26145 per album = $.0217875 per track
In 1972, the retail list price of LPs increased to $5.98
$5.98 x 90% = $5.382 x 75% = $4.065 x 9% (average artist minus 3% producer royalty) = $.363285 per album = $.03027375 per track
In 1973, the retail list price of LPs increased to $6.98
$6.98 x 90% = $6.282 x 75% = $4.7115 x 9% = $.424035 per album = $.03533625 per track
In 1976, the retail list price of LPs increased to $7.98
$7.98 x .90% = $7.182 x 75% = $5.3865 x 9% = $.484785 = $.04039875 per track
In 1978, the retail list price of LPs increased to $8.98
$8.98 x 90% = $8.08 x 75% = $6.06 x 9% = $.5454 = $.04545 per track
In 1984, the retail list price of LPs increased to $9.98
$9.98 x .90% = $8.982 x 75% = $5.7365 x 9% = $606285 = .05052375 per track
Compact Discs:
In 1985 the CD was introduced and the initial CD prices were as high as $20+, before settling into a range of:
1985-2000: $13.98 (average list price)
$13.98 x 75% – $10.485 x 12% = $1.2582 = .10485 per track
CD’s 2000 – 2010: $11.98
$11.98 x 75% = $8.985 x 12% = $1.0782 = $.08985 per track
CD’s 2006-2020: $10.98
$10.98 x 75% = $8.235 x 12% = $.9882 = $.08235 per track
ITunes:
$9.99 x 75% (net of iTunes Distribution Fee) = $7.4925 x 12% = $.8991 = $.074925 per track
.99 cents per track x 75% = $.7425 x 12% = $.0891 per track
Royalty success in the record business has always been a function of small numbers (the royalty rate reduced to cents) times a large number (millions of sales)
Mechanical Royalties:
Starting in 2010, the statutory mechanical royalty rate payable to songwriters for for each composition embodied on each physical product sales and digital downloads was $0.091 per song or $1.092 for each album sold in the US
1/1/23: 12 cents per song for physical product and downloads.
1/1/24: 12.4 cents
1/1/25: 12.7 cents
Streaming:
Songwriters:
Songwriters typically earn fractions of a cent per stream, with the exact amount varying based on the streaming platform, listener location, and subscription type.
Generally, this falls within the range of $0.003 to $0.008 per stream while the current statutory mechanical royalty rate in the U.S. for each composition embodied on each physical product sald and each digital download is 12.4 cents per each download or physical copy sold per composition.
The MMA (Music Modernization Act) was supposed to help correct the songwriter streaming rate imbalance but it was all smoke and mirrors and the NMPA and the administrators of the Mechanical Licensing Collective (MLC) have enriched themselves at the expense of the songwriters who don’t have a union or guild to represent them and lobby on their behalf to adjust the inequitable streaming rate they are being paid.
Successful writers who fell out of vogue were able to live off their catalog based on statutory rate payments but the low streaming rate payments forced many of those writers to sell their catalogs
Artists:
Over the past 20 years from physical and downloads sales artists earned approx 10 cents per track vs the average artist payment per track from streaming is now between $0.003 and $0.005 per stream on Spotify or $.036 to $.06 per 12 tracks
Over the past 20 years from physical and downloads sales artists earned approx 10 cents This begs the question of whether people were willing to pay more to hold the artist’s work in their hands or have it on their hard drive or is that Spotify leveraged the success of their EU and Scandanavian beta test and in exchange for equity, the US major label sold the artists out, (the artists who didn’t have the leverage of worldwide success or a union or guild lobby and negotiate on their behalf) when the steaming rate concrete was being poured.
If AFM took up the mantle negotiated for artists as a block against the DSP’s for better artist streaming rates got the artist organized like the SAG-AFTRA members did then perhaps they would have had a chance of improving the per stream rate. Unfortunately artists are independent by nature and while they will come together for a cause – to raise money for famine relief in Ethiopia and other parts of Africa, Live Aid, 9-11, Hurricane relief, and the LA Wildfires, they will not combine their leverage and lobby for themselves as a block. The 1% – the highest streaming artists get better rates for themselves but will not use their capital to help get better streaming rates for other artists. THIS rising tide is only limited to a few boats!
The current rates make streaming a loss leader which at best might hopefully help drive people to see the artist live where only little money can be made, until the artist either develops into a great live performer and/or has a breakthrough streaming track.
The low royalty per stream issue may also be more emphasized by the massive number of artists on the low/no royalty end of the spectrum while the percentage of artists on the royalty earning side may be not that different from what it’s always been,
Inevitably, the classic artist complaint of not getting any royalties from their record company had a ring of truth to it since many albums never recouped and for those that did, the smart artists pulled advances against royalties that wouldn’t be paid for months putting their royalty account back into an unrecouped state.
The few artists that had multiple albums with sustaining sales over many years overcame the cross collateralization hump and were likely the ones that had continual positive royalty statements.
Once again the lesson may be the more things change the more they stay the same
George Gilbert
