Spotify take 70% of their revenue and distribute it split by stream count. I honestly fail to see what's "unfair" about that
When you spend $10 or whatever on streaming, you'd expect $7 to be split between the artists you listen to, but it's not. Instead almost all of it goes to the big artists anyway because in the big streams pool the small artists you listen to have a tiny proportion of listens, even if you exclusively listened to them.
This gets worse when you consider all those shops/cafes/etc with Spotify's top charts playing on repeat. They may be a small percentage of users, but they're an outsized proportion of streams, and almost exclusively big artists.
This is the way it is because big artists have big name labels, and those labels are the only ones who can negotiate, so the deal ends up favoring the big artists/labels.
This is definitely not how most consumers would expect it to all work, and therefore "unfair" seems like a reasonable term to use.
For example, consider a bimodal population of 1000 people that listen 10 times to a popular artist (for a total of 10,000 streams) and 10 people that listen 1000 times to a small artist (for an identical total of 10,000 streams). In the "pool all streams" model, both artists get paid the same, while in a "split per user" model, the popular artist gets 100x the payout of the small artist.
An interesting question then is whether big or small artists are disproportionaly listened to by people that stream a lot. I haven't seen any data on it, but intuitively it wouldn't surprise me if it's the latter case.
Small artists tend to get a lot of streams from very few users, and lose out, so this suggests that earnings are more correlated to unique listeners than to average listens per user.
If with lose out you mean that Spotify pays out less per stream to small artists as opposed to big artists, then that's not the claim made in the parent comment nor one I've been able to find any evidence for.
I'm fairly sure this is not about Spotify being too cheap, it's that the revenue distribution skewed in the transition from CDs to streaming in favour of popular artists.
Like they should, mostly because they drive Spotify subscriptions. It's fair because there is a strong correlation between popularity and work, coupled with talent.
> When you spend $10 or whatever on streaming, you'd expect $7 to be split between the artists you listen to, but it's not.
Even if they'd distribute your subscription to your favorite artists, the total revenue for those artists and their share would still be mostly the same. Only in some degenerate scenarios, where you listen to only one obscure artist that nobody listens to, would those numbers be any different, and not by much.
> This is the way it is because big artists have big name labels.
Economies of scale probably apply. Like they should. ;-)
Talented artists can often sign with big labels. And isn't it wonderful that in 2023 you can publish your work, on Spotify and elsewhere, without having to sign with a big label?
There is no reason to believe this is true - I can download all the main artists in 30 minutes. Its the niche ones that I enjoy discpvering and wouldnt bother to download
> there is a strong correlation between popularity and work, coupled with talent.
Even stronger correlation between marketing spending and popularity
> Only in some degenerate scenarios, where you listen to only one obscure artist that nobody listens to,
This is waay too disrespectfull
Just saying this because it is so weird. Like, hell yeah I sure hope my money goes to the people that I listen to why is this a thing??
This seems like a way to sound popular without actually solving the problem. IT sounds like it would help "yay my favourite artist gets lots of money!" but when you model it out I'd expect quite similar outcomes – most of your money is still distributed in the way Spotify do, and often your top artist might still be one of the popular ones, and small artists aren't going to be the top of many people's listening.
... but that's because popular artists account for almost all the streams, right? I don't think a per-user split is any fairer, it's just different, and there's no clear evidence on whether there'd be less of a gap between big and small artists with a user-centric split.
You'd think it should still be fair because money is supposed to be fungible.
So if Artist 1 gets 99% plays, and artist 2 gets 1% plays, then if you split the 70% of revenue at end of month by 99/1 , that should be fair, right?
I'm probably missing something important. Is there a source for the actual formula or so?
User U1 listens to tracks from artist A1 ten times.
User U2 listens to tracks from artist A2 190 times.
The $20 that U1 and U2 have paid are distributed to artists according to number of songs streamed. Artist A1 gets $1, and artist A2 gets $19.
It's counter intuitive that U1 effectively pays $9 to A2, without having listened to their songs even once.
EDIT
I'll also add that the big name artists have value beyond the number of streams. A platform without Taylor Swift will have less overall users, less money for the royalty pool, less money for platform development, etc...
An interesting thought idea would be to create a streaming platform which only has artists outside the top..50? and see how it does.
The imbalance remains even if you scale it up. Artists that are listened to by users that listen to less than the average number of streams are underpaid in relation to the revenue they generate for Spotify.
Basically do you put all the money in a pot and then split it, or do you treat each subscriber as a unit and split their subscription fee just among the music they listen to.
That's how it worked with CDs: I buy the band I like and they get whatever pennies the mafia leaves them. But the pennies go from me to the band I like and to them only, not some $BIGPOPSTAR instead that I never listened to.
Spotify takes $14 (70%) of our money and divides it by 250, this means that Simply Red gets 80% of $20 or $11,20 and A-ha gets $2,80.
The unfair part is that my money got to pay for an artist I never listened to. Why not my share moved to A-ha?
Should of course be 80% of $14, $11,20 is still correct though.
I don't. I expect that when I pay for a streaming service, as soon as the money is in their account all bets are off and no insight is given.
So such a generalisation of what people expect doesn't hold up for consumer products I'd say. I wouldn't be surprised if most customers don't even think about it at all.
- 2 users, A and B, each pay $10/month
- User A listens to 20 Taylor Swift songs
- User B listens to 5 Radiohead songs
- Spotify gets a 30% cut
Currently:
- Spotify gets $6
- Taylor Swift gets $11.20
- Radiohead gets $2.80
If each subscriber's bill was split separately:
- Spotify gets $6
- Taylor Swift gets $7
- Radiohead gets $7
So this change would benefit artists that less active Spotify users listen to.
Right now the less active users are paying to support the listening of the most active users.
Personally this would make me feel like my money is more directly supporting the artists I care about.
This is where you're wrong..
2. It’s a simplified example for explanatory purposes
There's a reason Spotify is ending their service in Uruguay, and it's not because they're enough.
Right now someone who only streams a few songs gets a very small “vote” (assuming pay is per stream). That would make it so that everyone had the same “voting” power. But I doubt there’s much correlation between people who use Spotify less and small artists. In fact that’s probably a negative correlation if anything, and this could end up hurting local artists.
But what I usually see is lots of movies made for teens who are binge watching Netflix even though they are paying the same. Netflix has some public presentations on their algorithm and from the presentations it looks like they are optimizing for watches without weighting by subscription revenue per watch.
Fwiw, the actual Spotify math is a bit more complicated than just splitting by streams - I.e., https://www.theverge.com/2023/11/21/23971616/spotify-royalti...
Essentially A's money is going towards Y, even though she never listed to Y.
(I'm not expressing an opinion on which of these I prefer)
Now if my 7$ are distributed to all artists I've listened to this artist will now receive 7$. If my 7$ is thrown in a global pool and split by global stream counts this artist gets almost nothing.
Of course this is a extreme example but it should illustrate why this can matter.
Not by definition. If you generate more streams this month than the average user, your streams are a larger fraction of the stream counts than your 7$ is of the revenue pool, and this artist will get paid more than if he only got your 7$.
Splitting the revenue per-user instead of per-stream can certainly make a huge difference, but switching to per-user instead of per-stream benefits artists with listeners that generate a below-average amount of streams per month, regardless of their absolute stream numbers.
And there's the fact that the payment per stream is low on Spotify compared to Qobuz or Tidal.
Instead, your listening is not weighted in any special way so it goes into the global pot of money and hours listened and gets diluted by the people listening more.
Currently Madonna will get 1000/1100 of artist's share => 10/11 x 70% x 20 = 12,73$ While Queen will get 100/1100 => 1/11 x 70% x 20 = 1.27$
With a per subscriber split => Queen and Madonna will get 7$
Right now there is an incentive for artists to create shorter songs so they get more stream = more revenue
Is there any reason to believe big artist listeners on average stream more songs per month?
In other words: A small artist can _bring_ users to the platform, fair enough, but the platform that gives access to other artists and enables that needs to take the bigger share.
No, they all are. I wouldn't be a subscriber and I doubt many others would be if they only had the "top" artists that "are responsible for funding the entire platform".
Go through your playlist for a minute and find how many artists aren't "the big ones" and ask yourself if you'd use the platform if the small artists weren't included. The whole point of spotify is ALL music, so ALL music is important, surely?
What sustain the economics on the Spotify is its catalog that is a composition of the labels catalog + long tail artists and their podcasts also.
When users goes to the Spotify, they are paying not to support their favourite artist but to be able to access the platform, that occasionally will have their long tail artists.
> The whole point of spotify is ALL music, so ALL music is important, surely?
Not necessarily. Catalog + Network effects + Marketplace is important.
What you’re describing in your argument is that “since you’re in the platform due to the artist, it’s fair that this artist receives the 70% of your money”. The flaw here is that this artist is benefiting of a marketplace and all its infrastructure and distribution without paying and the whole point of the platform is to give access to its catalog.
Think on the Spotify price as some kind of “optionality fee”.
Spotify however wants to maximize its cut and so has incentives to shift money from less popular artists if it can entice major labels to its platform. This has absolutely nothing to do with what’s fair, it’s simply about profit maximization and reducing the risks of competing platforms.
Well I do not have the numbers here, but I would argue that this is definitely not the case in reality.
> Spotify however wants to maximize its cut and so has incentives to shift money from less popular artists if it can entice major labels to its platform
It’s the other way around, because the platform has competing interests: Spotify wants to have the labels to sell an “optionality” to the users (I.e. get the money from subs) but in terms of reproduction/execution Spotify wants to reproduce the maximum of podcasts and/or long tail artists because in those 2 cases Spotify does not spend a single penny.
The labels has a very high bargaining power over Spotify due to its catalog, so as expected this is the biggest expenditure.
That’s one of the reasons why Spotify is desperately pushing podcasts like crazy.
Agreed.
Major labels have leverage which they use to get a larger slice of that 70% than they would otherwise make in a ‘fair’ split.
It sounds better if they artist got your entire monthly payment (after payment processors and Spotify’s fee), but probably a nightmare for accountants.
The Uruguay parliament should regulate the contracts between their local artists and the labels. Some of them will ban Uruguay artists but some of them, maybe local ones, will intercept the money no matter what.
Or Spotify makes deals with individual artists, but there is a long and thin tail of them.
They won't. They will have contracts with distributors: https://artists.spotify.com/providers
As per their latest financial statement ( https://s29.q4cdn.com/175625835/files/doc_financials/2023/q3... ):
Revenue: 3357
Cost of revenue: 2472
> Cost of revenue also includes the cost of podcast content assets (both produced and licensed)
> Cost of revenue also includes credit card and payment processing fees for subscription revenue, customer service, certain employee compensation and benefits, cloud computing, streaming, facility, and equipment costs.
So all operational costs is included in that "70%", including: infrastructure, payment fees, etc. etc.
A breakdown:
217 committed Google Cloud Platform per quarter (based on 4344 in 5 years)
105 for amortization of content assets (podcasts they bought)
30 for some content write-off
102 "minimum royalty" for licensed content (not the regular artists), (based on (2124-83) in 5 years)
100 my estimate for app store fees, assuming 15% fees for 20% of the users
67 my estimate for ca. 2% creditcard fees
? streaming
? facility
? support software + employees
? equipment, software, etc
? refunds etc
? free spotify for employees
They're paying less than 52%. My estimate would be between 35% and 40%
However, podcasts work differently, both on the revenue and cost side, and appears to be mixed in. Additionally, Spotify sells optional marketing programs (ads within Spotify, for example) which I assume are included in revenue. So it's hard to draw the right conclusion just from the summary numbers.