
How we pay royalties: an overview - Sniperfish
http://www.spotifyartists.com/spotify-explained/#how-we-pay-royalties-overview
======
dmbass

      2. Artist’s Spotify streams divided by total Spotify streams
    
      This calculates an artist’s popularity on the service, their
      “market share.” Dividing an artist’s streams by the total
      streams on Spotify determines the percentage of our total
      pay-outs that should be paid for that artist’s rights.
    

This sucks bigtime. Why should artists that I never listen to receive any of
my monthly subscription? This portion of the calculation should be done on a
per subscription basis.

~~~
TylerE
I don't see why you're upset. Think globally. Millions of users are paying for
the bands you like that _they 'll_ never listen to.

~~~
dmbass
Let me give an example:

Say I pay $10/month and only listen to 2 artists, each with .001% market
share. IMO, each one should get $3.50 from my pool of subscription money.
Using their current scheme, each would get $0.00007 while Lady GaGa would get
$0.30 when I didn't even listen to Poker Face.

~~~
ZoF
I see your point, but I think your reasoning is flawed. If each one got 3.50$
from you then they would get nothing from the other subscribers, whereas, as
it currently is they receive .00007 from everyone... Even if Spotify followed
your subscription model the end result would be the same small amount of
money.

Your method would only increase complexity for Spotify and serve no real
purpose in terms of getting your favorite artists more money.

~~~
d2vid
If tweens listen to 10 hrs/day of Justin Bieber on repeat using free accounts,
Bieber shouldn't get money from adults who listen a few hours a day to
anything but him using premium accounts.

I think it's quite reasonable to assume that differences in listening and
paying habits between users would NOT average out, and a per user split would
be fairer.

~~~
e12e
I agree that a per person split would be might be better (for how I think
royalties _should_ be distributed) -- but one would also take into account the
ad revenue those tweens (and other "free" users) generate.

I don't know how Spotify is doing financially, but hopefully they make money
off free users as well as paid users (but I'd not be surprised if they end up
a bit like Opera did -- making money from paid users and licensing/bundling
deals -- and just using the commercial breaks/ads as stick to guide users
towards the paid service).

Either way I'd much prefer being able to pay for lossless records that I get
to keep -- I gave up on Spotify quite early as it ended up a little like
youtube -- come back to a playlist after a few months and half the songs were
gone. I know they're better now, but that experience just underlined the idea
that paying for licensing content in a way that leaves you vulnerable to that
content disappearing is a very bad deal for me as a listener/consumer.

~~~
maccard
Its interesting that you mention their ad breaks. For 6 months, I had no idea
that spotify operated a premium service whatsoever, until they imposed the
2.5hr limit per week on my account and hit me with more ads. I subscribed
immediately.

------
tunesmith
From an artist's perspective, the decision to sign up for Spotify basically
comes down to one question:

Does the benefit in music discovery make up for the cost of losing
album/download sales?

I did the calculations once and I forget the details, but the gist is that
without factoring in music discovery benefit, an indie artist probably only
hopes someone chooses to stream instead of download if the listener is going
to stream the song around 1,000 times or more. Otherwise, you get more
financial upside if they buy the download.

So the question is if any discovery benefit will shrink that number enough.
This would include the people who stream and don't buy but would never have
bought in the first place, as well as the people who stream and then buy.

The answer is difficult to prove because you get into weird counterfactual
questions, and there really aren't any good studies out there from unbiased
experimenters. But it's pretty reasonable for a rational musician to decide
that any discovery benefit will not make up for the cost in losing album or
download sales.

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jhgg
I think that the real value to artists with spotify is that they show upcoming
touring dates for the artist inline with the artist profile[0]. I think that
spotify has a lot more that they can do to facilitate direct artist
interaction with the fans though.

[0]: [http://i.imgur.com/MyMlCvB.png](http://i.imgur.com/MyMlCvB.png)

~~~
kevincrane
I love that feature _but_ just listing concerts in my country isn't very
useful in the US. I regularly get shown that someone is playing in Portland or
Austin and I live nowhere near either of those places. Given it hooks into
Songkick (awesome site btw) which knows locations of all these events, maybe
they could find a way to track where you are and give more relevant
suggestions.

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andrethegiant
I'd like to see a comparison of royalty models between streaming services
(Spotify, Pandora, Rdio, iTunes Match/Radio) as well as how it compares to
buying a physical CD.

~~~
tunesmith
There are a ton of comparison charts out there... one thing to keep in mind is
that a service like Pandora is completely different than a service like
Spotify. Different royalty rates, different implications. It comes down to the
fact that on Pandora, you can't request particular songs.

For that reason, artists don't tend to mind Pandora too much, since any
royalty income they get from Pandora is basically gravy. It doesn't really rob
album sales. You _could_ argue that it robs radio play (since radio is less
popular now), leading to lower royalties that way, but it's a different beast
than Spotify. For Spotify, a person can request a certain artist/song and
listen to the stream, without buying the track/album. It robs album/download
sales, and it's debatable (to put it charitably) whether the "music discovery"
benefit makes up for that loss.

------
kosei
One of my favorite things about the Spotify service is music discovery. In my
experience I've found that they do a pretty decent job of helping to show me
new bands based on my current preferences and listening habits, as well as
those of my friends. If that continues to improve, I think they will also be
able to do a much better job of helping smaller bands get additional exposure
and therefore royalties.

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ucha
Looks like the system can be gamed by an artist than listens to his 4 min
track 24/7\. If it pays about $0.007 per stream, listening to a 4 min song
would pay out $75 - $10 of the subscription fee = $65/month/subscription. That
wouldn't happen if the royalties redistribution was done on a per subscription
basis.

~~~
erikpukinskis
Minus the cost of a dedicated server. Minus the risk of getting caught. Minus
the probability spotify has a trivial cap in their software to prevent it.
Gets you pretty close to $0.

~~~
billmalarky
Youtube was gamed for years. It might still be possible on spotify. Not just
for the money, but also to get higher in their rankings and get more exposure.

------
Sniperfish
I don't have much personal investment in the story, I'm a significant consumer
of music but haven't user Spotify (despite being in Canada I was only vaguely
aware the service isn't available here).

They've taken some flak in the past for their payments to artists and while
I'm not following the discussions closely enough to suggest those criticisms
are unjustified it does seem that they're not the chief culprit. 30% retained
doesn't on the face of it seem unreasonably high, does anyone know how this
compares to equivalent services?

Ultimately I don't think disclosure is ever a bad thing and hope maybe this is
one more small step advancing the general 'royalty model' conversation.

~~~
soci
70% royalty share was imposed by the majors to Spotify. Just because this was
the model used by physical stores and it's how the industry works. They didn't
change the revenue split model.

One of the problems here is that there are many middlemen involved between the
artist and Spotify. The label, the manager, the aggregator. Everyone gets his
piece.

Also, there is problem regarding how much it takes for an artist to get the
same from Spotify than they used to get from a song sold from a service like
iTunes. Some artists claim that a song has to be listened up to 60 times in a
streaming service in order to the same as a song sold in a digital music
store. And here there comes the big issue. Have you ever listened 60 times to
a song you buy in iTunes.

------
beachstartup
> 2\. Artist’s Spotify streams divided by total Spotify streams

this is quite surprising. does this mean that hypothetically, if there is only
1 band in the spotify universe, it will receive half the revenues it once did
if another band joins the service?

~~~
gphil
Only if the listeners started listening to the new band as often as the
existing band. Number of "streams" == number of plays.

~~~
Sniperfish
Confirmed in their section 'Wait, I thought Spotify paid per stream?' as
"Every time somebody listens to a song on Spotify it generates payments".

------
jheriko
"if we could build a service which was better than piracy, then we could
convince people to stop illegal file-sharing, and start consuming music
legally again"

this is exactly the right attitude. i've been 'selling' this for years as my
reason for piracy - its just easier. spotify absolutely killed that for me. it
really is more convenient...

i do wish existing businesses in that area would look and learn instead of
lobbying and abusing legislation to try and keep hold of a business model that
died years ago... (or publishers trying to convince their artists that Spotify
is ripping them off rather than /them/)

~~~
wwweston
I'm not sure it is better than piracy.

In both cases, there's no further incentive for a consumer to pay out to get
better access to the music. AFAICT at current royalty rates, artists get about
the same amount of money they get from piracy.

Except with piracy, people _know_ the way they obtained the music is
questionable/unsustainable, so in some people it probably creates a drive
towards future patronage of some kind.

Meanwhile, Spotify gives the illusion that you're involved in a legitimate
transaction and have more or less done your duty, while what's basically
happening behind the scenes is we have a "disruptor" whose main innovation so
far appears to be replacing recording revenues with the fractional broadcast
revenue.

Better experience for the consumer, though!

------
crisnoble
If you read all the way to the bottom you can find the main reason why I
support Spotify, "Spotify’s impact on piracy"

>Spotify has been successful in convincing this younger generation to abandon
piracy and begin using and paying for a legal service. In fact, over 50% of
Spotify’s paying subscribers are under the age of 29.

This is the reason that I love Spotify and its ilk.

------
doki_pen
Can this system be gamed for profit?

1\. Setup a short track on one of the linked providers. 2\. Setup a bot to
play the track over and over.

Do they pay out equally for tracks from paid vs. unpaid spotify accounts? If
so, you could setup a bunch of anonymous accounts to increase stream plays.

~~~
chrismsnz
Sure,

I missed this talk at Ruxcon this year
[http://ruxcon.org.au/speakers/#Peter](http://ruxcon.org.au/speakers/#Peter)
Fillmore

But if you can find a write up of it or a video he goes in to how he actually
went about gaming the charts etc... of online music services.

------
jcampbell1
> Spotify relative to other services

This section is highly misleading. US terrestrial radio mainly pays song
writers not "artists", and it pays them decently well. This section should be
regarded as a solid lie.

------
oscarlsson
Does ayone know if any of the other music services focusing on concerts and/or
merch or similar?

~~~
soci
At KiteBit we recently pivoted to the music market. Selling music, concert
tickets & merch.

Music artists obviously have the pain of not getting enough from streaming
service. Also physical and regular digital downloads are falling... So there
is a cash flow problem in the bands not being in relations with the very
opaque majors.

So now KiteBit offers a service for artists/bands who already have a loyal fan
base who is willing to pay for the contents they produce. Not just for the
sake of the contents put on sale but appealing to the emotional relationship
they have with the artists, and using pricing models like the "pay what you
want" that improves revenues by 12% goo.gl/N0oOeD

All in all, KiteBit it's like a bandcamp for Pros that can be used to sell
music, concert tickets, or link their merch to digital downloads to retain
customer loyalty. The trick is that the service wants to be transparent to the
audience so that there's no feeling of any middlemen in the buying experience.
that's why you won't see any marketplace in the KiteBit's site.

Disclaimer: I'm the founder of this company.

------
cupcarpet
spotifyforartists.com

------
rfnslyr
I love Spotify. It actually revived my joy in doing anything really. I've kind
of grown bored of life, of coding, of anything. Music is the one thing that I
am and will always remain passionate about.

I'm Canadian, so getting Spotify running on all my mobile devices and my mac
was tricky, especially with Premium, but I got it done.

The ability to support artists, while discovering new ones, and not acquiring
the material illegally is crazy awesome. I am discovering new artists day in
and day out and it keeps life very exciting for me personally. I even got back
into coding.

~~~
qq66
It's great to listen legally, but keep in mind that the support artists
receive is very small (all but the most popular musicians receive less than 40
hours of minimum wage from Spotify). If you like a few groups consider buying
merchandise or making a donation.

~~~
pionar
Wait, are you saying that artists rely just on Spotify for income? That would
be foolhardy. I would think that Spotify would be just one small chunk in a
wide portfolio of distribution channels.

Also, artists have generally never been very richly paid on music sales.
Touring and merch are where the money's always been.

~~~
wwweston
> Wait, are you saying that artists rely just on Spotify for income? That
> would be foolhardy.

Well, yes. Since the entire premise of Spotify seems to be that we should pay
broadcast royalty rates for a service that replaces recordings entirely, it
would indeed be pretty foolish to rely on that.

And in fact, some artists think it's so foolish they've realized its to their
advantage not to participate.

> I would think that Spotify would be just one small chunk in a wide portfolio
> of distribution channels.

The problem being that once something's available on Spotify (or something
like it), the structure of the service eliminates any access-incentive to look
for it anywhere else.

> Also, artists have generally never been very richly paid on music sales.
> Touring and merch are where the money's always been.

This is pretty different from the history I'm familiar with -- touring
supported/drove album sales for a long time, except for certain acts (huge
like the Stones, jam-oriented like the Dead or Phish, or nostalgia focused).
And people made a _ton_ of money from recordings (though it wasn't always the
artists because of gatekeepers).

The reverse is often true now mostly because we entered a transition to a new
format with the uptake getting waaay out ahead of the vendors and legit
recording sales collapsed (and then, right as we started to see vendors come
on board, we had the biggest economic contraction since the great depression).

This isn't an inevitable trend, and revenue from recording sales this year is
increasing again this year based largely digital sales increasing faster than
physical sales are falling. And _total revenue_ from recordings sales, while
much smaller than what it was at its peak around 2000, is actually 50% more
than it was at the beginning of the 1990s.

We could yet see another golden age of recorded music. This time better in
that digital albums are cheaper _and_ , with a shorter distribution chain,
people who make the music are often keeping more.

At least, that's the potential. Unless we decide to go with buffet-streaming
services that remove incentives to buy it.

But maybe that's the next step for our culture: if art can't be supported by
t-shirts and tchotchkes, it's not art that we should be economically
encouraging, right?

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antocv
Twist. Rights holders are actually the owners of spotify in 90% of the cases.

~~~
malbiniak
Can you expand on that?

~~~
wmf
[http://techcrunch.com/2009/08/07/this-is-quite-possibly-
the-...](http://techcrunch.com/2009/08/07/this-is-quite-possibly-the-spotify-
cap-table/) (2009)

If Spotify is worth $4B, that means the labels have made an "extra" ~$600M in
addition to the 70% royalty. Over its lifetime so far Spotify has paid out
around $1B in royalties, so an extra $600M is pretty significant.

