Spotify pays out 70% of its revenue to record labels | Hacker News Reader

Spotify pays out 70% of its revenue to record labels

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33 pointsdoener17 comments

I think this is the right way to look at it, but people insist on only talking about per-stream royalties. I have gotten into several arguments about that on this very website.

Many artists use self-service labels like CDBaby which take just 9%.

So it is completely legitimate for artists to be focusing on per-stream royalties.

The label deal is irrelevant. The point is different streaming services offer different price points and revenue models (ad tiers, etc). It seems like all the streaming services take around the same percentage cut. This indicates that there is no obvious way for Spotify to get its customers to pay more, and it's likely they're serving the more price-sensitive part of the market.

I believe this is missing context. From what I understand, Spotify pays big record label companies a lot of money as part of their negotiation for permission to host/stream their music. If they didn't pay these record labels they wouldn't have the music most people want to stream, and so they wouldn't have any power to get customers. They are basically held hostage by the big record label companies if they want to run their business because Spotify doesn't actually own any of the music they stream.

So now let's look at the artists under these record labels. Do they get a cut of the deal that Spotify has with the company? As far as I can tell, they do not. Artists only get paid royalties based on how much their songs are streamed, which is extremely low. They do not get any money from the backdoor deal that Spotify has with their label.

Personally I think artists have the right to be mad at both Spotify and their label.

Kinda seems like it’s the record labels fault though, like they should be aligned with the interests of the artists instead of just for themselves.

What do labels even do these days?

I’m not following. The label is the entity that the artist chose to represent them. The labels do not pass on the money that they make during that representation. Who else should the artists blame, other than themselves for choosing poor representation (from only poor options)?

If you don't sign with a larger record label, it's harder to get good marketing, gigs and distribution (although some people make a decent go at it by grassrooting via social media). All the big labels operate in the same way, more or less like a cartel.

Spotify is a middle man.

Of course they are paying out the majority of their revenue to the people who are actually responsible for making the music i.e. the artists and the labels who represent them.

And it's legitimate for artists to criticise the lower per-stream royalty when they see Spotify paying people like Joe Rogan pretty exorbitant amounts of money. And when many of them aren't signed with large labels but are instead going through self-service labels where the artist collects most of the royalties.

Yes, and middle men get squeezed. Their customers want to pay less over time, and their suppliers want them to pay more.

It's one thing if you're taking raw materials and building something of value and reselling it. But I see this turning into record labels creating their own streaming services, much like Peacock+/Apple+/Universal+/etc.

It's not hard to imagine a world where you have to pay $100/year to stream Pink Floyd from the Warner Music catalog.

And Spotify just paid $250m to Joe Rogan for a questionable podcast deal.

So squeezed is not how I would categorise the company.

Pretty sure he's the only podcaster making them significant profit

This shouldn’t be a surprise. The casino always wins. In this case it’s the record labels and powerful executives that negotiate record deals. Check out the last 30 seconds of Black Pinot by Mayhem Lauren and Action Bronson. It’s not a secret there are so many references to how messed up record labels are within songs.

Perhaps I have my own bias, but I never quite get why record labels are always considered bad for musicians.

From my understanding record labels put up a lot of money upfront and profit, sometimes very much, if the artist blows up. I understand this creates a scenario where of many of the artists that become famous are unhappy, because the option contract seems unnecessary after they've made it, but this seems like survivorship bias.

If the record labels weren't good at promotion and production then I think we'd see more self-made artists, which is something Spotify allows.

One way to look at record labels is like an investor, but I think that brings the connotation that if the business fails the investor is simply loses money.

In reality, record labels basically loan a lump sum to the artist to pay for producing the product. This loan also comes with a contract to own some/all of the final product. The artist then has to earn that money back in order to pay off the loan before they ever get a share of the profits.

It's easy to say that musicians should be more careful with the contracts they sign, but the system is kind of stacked against them if they want to pursue this career. Nowadays, you can make it fairly big (possibly) by doing most things yourself but record labels are still out their signing artists.

EDIT: I was incorrect. You don't have to pay back the record label if your music makes no money. I have removed the statement that implied that.

This is correct. It’s as if your startup investor took 70% of your revenue and then wouldn’t even give you the 30% until they’d used it to repay themselves the cost of their investment in you.

I don't see how this is different from how any distributor of goods does business.

Nobody bats an eye when the local grocery store (a distributor) is spending more than 70% of its revenue to buy the goods from their suppliers. It's also expected that suppliers/factories don't pass on those payments back to the farmers.

Spotify claims it pays out 70% of its revenue to record labels.

Fixed.

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