Spotify states its defence

The founder of the streaming service, Daniel Ek, has come out fighting against claims that his service undervalues music, following withdrawals by Taylor Swift and others.

He said Spotify was defending music against theft: ‘Piracy doesn’t pay artists a penny – nothing, zilch, zero… Spotify has paid more than two billion dollars to labels, publishers and collecting societies for distribution to songwriters and recording artists.’

Told that 500,000 listens to a song ill yield a payout of up to $US4,000, he said that is far more than radio stations pay in royalties for the same number of plays.

He has a point.

daniel ek

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  • The comparison to radio is disingenuous — one radio-listener is not equivalent to one Spotify-listener, since the latter will have explicitly *chosen* to listen to the *specific* piece in question, whereas the former will have chosen the station, but not necessarily the piece. Both experiences have their virtues (in fact, I wish BBC Radio 3 would be more adventurous, and have a higher proportion of obscure works, both by living and by dead composers, instead of regurgitating the classical charts and repeating pieces I have heard hundreds of times), but the point is that the financial value of the listener who explicitly chooses a piece ought to be higher than a listener hearing something through the mass media. For a similar reason, it is right that GEMA distinguishes between ‘serious’ music (to which you are more likely to pay attention) and ‘background’ music — as PRS used to do, before it decided that distinguishing on the basis of how people listen to music would be ‘subsidising’ classical music.

    We must also keep in mind that, without radio airtime, the overwhelming majority of recordings will never receive 500000 plays (where a play is defined as one person hearing the piece once). Economies of scale dictate that you would not sell 500000 apples to a wholesaler for the same price as you would sell 500000 apples individually in 5000000 separate purchase-events. In the same way, whilst the audience-size of a radio station has a bearing on the licensing fee (at least in the PRS tariffs), the licence is cheaper *per capita* than it would be if each audience-member were to have taken out his/her own individual licence.

    • It is true that it’s a bit unfair to compare a listen on Spotify to a listen on radio, but only a bit unfair, mind you – plenty of people listen mainly to other peoples’ playlists, and they don’t go out of their way to choose specific tracks all the time. I say this as someone who’s had to listen to Spotify functioning as an office radio, and a painful experience it was I can assure you!

      (… which forced me to don headphones and listen to my own selection, er, also on Spotify)

      Anyway, $4000 for 500,000 plays of one track? Let’s compare it to CD sales.

      Assume (generously) that the artist gets $5 for a CD sale, and that there are 10 tracks on the CD. $4000 / $5 = 800, and 500k / 800 = 62.5.

      I’ve only got a few CDs that I think I’ve listened to more than 62 times, but I’ve certainly got some. That $4k for 500k plays isn’t looking completely unreasonable.

      The elephant in the room is that the record label often takes a huge cut, even 100%, of streaming royalties – often streaming royalties don’t count as recoupment, or the “mechanical” share might be unreasonably high, or there might be other contractual shenanignas going on. That, I reckon, is why Spotify is so unpopular with established, contracted artists – their cut of the royalties is much lower than for physical sales. However that’s why it’s also popular with record labels (especially the ones that are Spotify shareholders!!) The simple reason it’s unpopular with unsigned artists is that they need a lot of plays to get a lot of money, but while unpopular, it’s not completely unreasonable.

      Tim

  • Sorry but Ek has a distorted point if any.

    As a recording musician and composer I’d take piracy coupled with fair payment from legitimate sources over no piracy and miniscule payments coupled with boastful self serving claims that Spotify actually pays musicians any day. Yes they do pay but what they pay is an insult to all who are creative. They pay around $US 40- US$ 80-for a couple of hundred thousand or more plays.

    More power to Taylor Swift.We need 200+ more like her with the same selling power to do the same and to put a stop to the gangsters like Ek and his ilk. This is especially so if you value having the ability to stream new classical music and other fringe genres. If so you would act to stop Ek and his ilk in their tracks now.Sorry but Ek and his ilk are indeed the enemy of musicians world wide.

  • My jaw dropped when one poster reckoned that an artist got $5 for each album sold. Another poster reckoned that artists got no income through streaming or airplay. This shows you how far people’s perceptions are from reality. Most artists get a royalty of around 8% on the residual, that is the profit from the recording once all recoupable expenses are extracted – this includes not only the production of the CD, transport and storage, but the advance paid to the artist, marketing and videos and clothing and accommodation and dozens of further things. Most CDs are sold by record companies to retailers at around 40-50% of their final retail price. So if you buy a CD for $10 at Walmart, $5 dollars goes to Walmart. Of the remaining value, around $1 might be clear profit for the record company – and the artist gets 8c of that. That CD can be leant, resold, played at parties – and that one single royalty payment applies. Depending on their contract, artists do get paid for streaming and are recompensed for radio play through organisations like PAMRA; but they must clear their advance figure before they get anything further.

    It is very easy to blame Spotify for what is happening. The point is, people feel they don’t have to pay for music, so the majority of those who use Spotify, use the free service with the occasional advert. Once people are used to paying $20 a month for unlimited music, then the income streams will get bigger.

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