How does it work Spotify?

money music

Hello, The Artist here.

There has been quiet a bit of discussions around the Spotify business module and the streaming of music on the other side of the pond since the company launched its service in the US. I have touched in it before in this post where I showed what kind of money independent artists are making (or rather a good guess at what they are making) from Spotify.

Today I captured a link from @musicthinktank twitter feed,  called “How do we benefit from streaming? Can we?”, that again got me a bit upset with Spotify’s business module.

The quote from Spotify that got me most upset was this one:

Spotify does not sell streams, but access to music. Users pay for this access either via a subscription fee or with their ear time via the ad-supported service [just like commercial radio] – they do not pay per stream. In other words, Spotify is not a unit based business and it does not make sense to look at revenues from Spotify from a per stream or other music unit-based point of view. Instead, one must look at the overall revenues that Spotify is generating, and how these revenues grow over time.

Spotify is generating serious revenues for rights holders, labels, publishers and the artists that they represent.  We have paid over $100m to rights holders since our launch, and the overwhelming majority of our label partners are thrilled with the revenues we’re returning to them. Spotify is now the second single largest source of digital music revenue for labels in Europe, according to IFPI.

So what they are saying is that they don’t pay per stream. Does that mean that some artists, depending on what deal their label have with Spotify, get paid even if their songs are not played at all?  It is of course BS.

Spotify counts the number of streams per song, we all know that. There is no other way to know what songs are popular and what song should make their charts. Tunecore has written this in their FAQ about Spotify:

“For songs streamed, Spotify has deals with necessary rightsholders in all of its launch countries. Together with them, Spotify has agreed upon a royalty based on how frequently your music is played. Each stream earns you a share of Spotify’s advertising revenue. The actual amount varies and depends on the ratio of advertising revenue and your percentage of the total number of streams at Spotify in a given month.”

Clearly the number of streams count.

The fact that they have some strange agreements with the big labels is something different. I love the service Spotify is offering but I hate how they have jumped up in the lap of the old thinking record industry. Why are they so secretive about the business module? Why not simply disclose how it works? There is only one reason for hiding it and that is because it is not a fair deal to the artists and it would hurt the Spotify brand (and their share holders = the big labels that owns 18% of Spotify) if it came out how it really works. However it does not look too good now either.

We live in a data world. The easiest and most fair deal would be to simply pay per stream. If you are popular you will make more money. If you advertise and promote the artist well they get more streams. Easy to count, easy to understand and straight forward.

Some might say it is not that easy with a subscription module since some people only play 50 songs per month and others 500 or more so the pay per stream would be different for these two types of users. However if you put it all into one big pot each month and then divide it by the number to total streams you would still get it right even if the pay per stream would be a little different each month depending on how active the users would be. This is what Tunecore statement says but not what Spotify themselves say. Confusing!

I´m pretty sure my perspective is too simple and that there are a number of other parameters and legal issues behind all of this but I´m also sure there is a better business module to be found that does not have to hide in the dark and that is much more fair to the artists who actually make the music.