Spotify, Statistics and…, well, you know…

A confession. I now have a Spotify account… and not a paid one. I have the free one. Mind you, I’m not exactly happy that I have a Spotify account at all, because the technical standard of its streams (320kbps… and less on the free version!) is not up at the quality level I want, but I wanted to hear some music from a band I’d been told I would like and it turned out that I had to have to have a Spotify account to hear their stuff because that’s the only place I could get to hear it. And it’s that which intrigued me. I had been under the impression that the only people who made money out of Spotify were Spotify’s owners and the record labels. It turns out that I was wrong. And in the process of finding that out, I also discovered that for musicians, Spotify is probably the best chance of making money they’ve ever had in their lives… which has to be a good thing. There is only one trick musicians need to keep in mind when loading their music onto Spotify: they need to arrange their business affairs so that 100 per cent of their Spotify royalties goes directly to them, which means they must own master recording and publishing rights—both mechanical reproduction and performance—and they can’t have any labels, distributors or other agents in the way. Otherwise, Spotify’s payouts will be hugely reduced.

While investigating Spotify’s business model, I learned several depressing facts. The first was that only 45 per cent of Americans buy music at all. The rest don’t buy music, listen for free or steal it. The second was that those who do purchase music spend only $55.45 per year. The third depressing fact I learned was that Spotify pays artists only around half-a-cent ‘per play’. (The company says that on average, it pays between $0.006 and $0.0084 ‘per stream’.) Which means that most musicians will still be found working behind bars, waiting tables and driving taxis.

The fourth depressing statistic I discovered was that Spotify does not actually pay a fixed royalty, so you may not even make 0.6 cents when someone listens to one of your tracks. Spotify instead first applies a formula that works out the country to which the music was streamed, whether the person to whom the music was streamed had a free or a paid subscription, and a further metric Spotify identifies as ‘the relative premium pricing and currency value in that country.’ I have no idea what that last phrase means, but I’d take a stab that it means that even if every single inhabitant of Bolivia streams your music 24/7, you’ll still only be making a dollar a day in Spotify royalties.

Which is not to say that some artists don’t make money. According to Spotify, its current top-streaming song (FourFiveSeconds) is earning Rihanna the grand sum of $16,000 per day. (I emailed her to ask if this was true, but she hasn’t yet replied, so until she does, we only have Spotify’s word for it.) The 200th-most streamed track is Bruno Mars’ Treasure, currently earning $1,470 per day. But the most-streamed song in Spotify’s entire history is Avicii’s Wake Me Up, which passed the 200 million streams mark (total) earlier this year, which translates to royalty payments from Spotify to Avicii (pictured below) of around $1,680,000… so long, that is, as they weren’t all streamed to Bolivia. # greg borrowman [gborrowman@nextmedia.com.au]

(This article first appeared in Australian Hi-Fi Magazine, Volume 46 No 4, published in July 2015)