The Great Rock & Roll Swindle: Or How much does Spotify earn per spin?
I keep seeing this image getting shared around, and it’s a really incomplete picture of a complicated system.
First of all Spotify had $1.3 billion in revenue in the first quarter of 2018, not the full year (maybe $1.3 is just for the US?). In 2017 it had over 4 billion Euros in revenue, and 2018 will probably be around the same. Which makes things look even worse.
The trouble is, that’s gross revenue, before costs. It’s hard to say exactly how much Spotify has paid artists, but the accounting category that they describe as “predominantly royalty and distribution costs” was 3.2 billion Euros, or 80% of their revenue. In 2015, 84% of Spotify’s total revenue went to the music industry. And Spotify has posted an operating loss of hundreds of millions of dollars each year, which has only grown as they’ve brought in more revenue.
Meanwhile, Universal, Sony and WMG earn about $12 million per day from streaming services. According to the RIAA, streaming generated about $5.6 billion in revenue for the US music industry in 2017, or about 65% of the total revenue from recorded music. That includes more than just Spotify, but it gives an idea of how much revenue streaming is creating.
So, Spotify is making a bunch of revenue, but they’re paying most of it out to rightsholders, and still haven’t managed to turn a profit, ever (although yes, their execs are making millions, which is an issue). Individual artists get next to nothing from Spotify, but the industry is making billions, and streaming revenue is the reason the US music industry has had double-digit growth two years in a row — its fastest growth since the mid-1990s. The system clearly isn’t working for most artists, and there’s a solid argument that it’s doing more harm than good to a lot of mid-tier musicians.But there doesn’t seem to be an obvious solution, especially one as simple as just “Spotify should pay artists more.”
Revenue per spin
One common criticism in all of this is that artists make next to nothing per spin. Which is true, but many industries get by on tiny marginal revenues. The question isn’t just how much the artists get, it’s how much Spotify is making .
So far, I haven’t been able to find a real number anywhere — if it’s out there, let me know, because I just wasted a reasonable amount of time coming up with my best approximation. In 2016, the average listener played 148 minutes of music per day (https://expandedramblings.com/index.php/spotify-statistics/). Assuming the average song is about 3.75 minutes (https://www.statcrunch.com/5.0/viewreport.php?groupid=948&reportid=28647), that’s about 40 songs per day, or 1,200 songs per month. That has likely gone up since 2016, but let’s be generous, since fewer songs means more revenue per song.
Spotify charges most people $9.99/month for paid plans. At 1,200 songs, that’s $0.008 per spin for Spotify. If I had to guess, I’d say paid listeners are probably the kinds of folks who listen to more music than average, so the actual earnings per spin are likely less. Also, students only pay half that per month, and family plans are only $15/month for multiple users, so $0.008 is definitely a high estimate. But let’s keep that as the number for approximate revenue per paid spin.
Figuring out how much they make from free subscribers is harder. We know only about 45% of Spotify subscribers are premium subscribers (https://www.statista.com/chart/13098/spotify-subscribers-and-active-users/), but they account for about 90% of revenue (https://www.recode.net/2018/2/28/17064460/spotify-ipo-charts-music-streaming-daniel-ek). That means that if we’re averaging out paid and unpaid spins and revenue, we have to add another 55% to the number of songs, but only another 10% to the revenue earned. That’d give us 2,666 spins per month, but only $11.10 in revenue, or $0.0042 per spin.
If that number is halfway plausable, it gives a different context to the stat that Spotify only pays artists $0.0037 per spin, since that’s about 88% of their total revenue. That doesn’t sound like them taking grotesque advantage of artists.
There’s no doubt that most artists aren’t able to make a living from Spotify. But the issue doesn’t seem to be that Spotify is pocketing too much, it’s that people aren’t paying enough. If that 45/55 ratio of paid to free listeners started shifting the other way, there’s a whole lot more room to pay artists. If the people who paid were willing to throw in more than $10/month, which is less than the cost of one CD per month, there’d be more room, too. The issue isn’t the platform, it’s in how we’re valuing music.