You may be a die-hard Spotify customer and curse the name of anyone who dares to utter the words ‘Apple’ and or ‘Music’, but the rivalry isn’t what this article is about. In an industry that is already incredibly hard to break into, the way the Swedish streaming giants have throttled any opportunity of making a living from a user uploading to their platform is embarrassing. It may give them the biggest profit margins, but is that what is going to drive people to keep uploading to their platform?
Spotify has copped a lot of flack recently, mainly down to how little they pay their only asset, the artists, despite earning millions (if not billions) from advertising. I just want to reiterate that, Spotify’s only asset is the artists, so it is baffling how little they give in return. There needs to be some sort of reform.
HOW SPOTIFY PAY ARTISTS
So essentially what you need to know is, Spotify pays the artist based on their ‘market share’. What this means is the number of streams for their songs as a proportion of total songs streamed on the service. They pay the artists with 70% of their revenue, and therefore are taking the other 30% for themselves. But back to that 70%, smaller creators are likely to suffer more from this model due to the fact their market share will be significantly less than that of someone like Drake for example. If he was to have 5 songs that amounted to 2% of all streams across the platform he would take home 2% of the 70% of revenue mentioned earlier.
So assuming the pay-out was made annually, Drake would be taking home $103,000,000 every year from just those 5 songs on the streaming platform. And that is just Spotify alone, with 70% of their revenue in 2019 amounting to over $5 Billion.
Now this is in theory is no different to how other streaming platforms pay their artists, for example Apple Music has a similar ‘pro rata’ system in which the same concept of revenue being split via market share etc. There is similar disgruntlement towards Apple Music on this topic as well, but where Apple have saved face is in their proposition for reform in the streaming industry.
WHY WE DON’T HATE APPLE AS MUCH AS WE DO SPOTIFY:
Alongside the likes of Amazon, Google and Sirius XM, Spotify decided to vote against a statutory pay rise for composers and publishers in late 2019. I’d argue it’s fair to say this is because they want to keep their profit margins as large as possible, at the end of the day they are a business. But I’d also claim the issue lies more with them having to pay publishers more, rather than paying the composers. The CRB (Copyrights Royalty Board), had proposed two formulas of how the composers and publishers should be payed and what ever was highest at the end of the year is what they would ultimately be paid.
What you may have already gathered is that Apple were not opposed to this. Actually they proposed a new way of paying the composers and publishers, with a fixed rate per stream (over 30 seconds). $0.00091, was the figure. Now it may not seem like much, but in terms of streaming it’s a good rate and more importantly it is a transparent formula in which the artist can estimate how much they will make much easier.
The representative arguing on behalf of Apple at the CRB, Dale Cendali said: “The current rate structure is overly complicated and lacks transparency because royalties depend on the amount of revenue a service generates, this means you can have one company pay one rate for a stream, and another company pays a different rate”.
She also mentioned “Apple doesn’t think it makes sense for [composers] to be dependent on the business success of the services that use their music. They should get a consistent, predictable, and transparent per-play rate”. She also then went on to add that it was then up to the business in question to innovate and evolve into the most efficient business possible. Unfortunately for Apple and music creators, this notion was dismissed by the CRB.
ARTISTS AGAINST STREAMING
It is fair to say that the way Spotify conducts its business isn’t popular amongst those in the industry, especially the artists. Most recently, Grime-artist JME took to Twitter to launch a sarcastic yet engaging argument over the way artists are compensated for their work.
Using the hashtag #BrokenRecord, JME highlights the unfair nature of the business model they are subject to. He is also calling for an increased rate that the music artists are paid, he believes that the amount that they receive in comparison to how much the companies make from advertising is heavily out of sync.
So until something changes in the music industry and more specifically the way the artists are compensated by streaming services for their work, they shall continue to cop the flack they already get. Spotify isn’t all bad, their work with growing the medium of podcasting is excellent, they have just fallen so out of touch with the music artists and with where the times are moving. Reform is needed, but I wonder when will the art overtake the profit margins in importance. Unlikely.
If this has peaked your interest, read up on streaming tactics here.
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