If You Use Spotify, The Major Labels Are Stealing Your Money Away From Bands You Actually Listen To

The real story behind that fraction of a cent per stream.

The music business at major levels is notoriously opaque: blacker than the bottom of your shoe after walking through the Canadian tar sands. NDAs abound like butterflies in a Costa Rican zoo. One thing is clear: no one wants you, the listener, to know what’s going on. We’ve all heard about how sausages get made. The music business is even uglier.

Here’s how it works: record labels are like investment banks. They give musicians advances, which lets them quit their day jobs, shave a mohawk, and begin being musicians full time. In return, the label owns their music. Almost every artist would love for this to happen to them. Champagne, anyone?

Major labels then provide those artists with access to the best producers, songwriters, collaborators, and studio musicians around. It’s the transition to the big time and big sound.

The major labels have collected the biggest money-making artists, put them under contract and NDA to never discuss those contracts, and then pumps out money in marketing to boost their returns on investment. You know, the business of music.

All of that makes a lot of sense. Even if distribution costs have evaporated, major labels still bring a ton of benefits for artists, which is why you will almost never find a popular artist who is not signed to a label.

But the major labels know they have something that most people want. And they will go to great lengths to protect their investments, including gaming the system so that artists who are not part of their machine can never make money from their music.

Here’s what happens on Spotify: when you listen to a song once, there is the tiny fraction of a cent that goes to an artist that actually made that song. Cut that up between all the people involved in the creation of that song, and the pay checks to artists have been notoriously — read: offensively — low.

I pay $10/month for my Spotify. Where does the rest of my money go? About 30% goes to Spotify for fees and taxes. OK, I’ll accept that. It’s a good service. But then the major labels require that Spotify pays them the rest of my money from my subscription as a proportion of which of artists get played the most on the platform globally, with no regard to what I listened to. This is heavily, heavily skewed towards a few major international acts.

That means that nearly all of my money, which I paid to listen to the bands I like, actually goes to Calvin Harris. Sad face.

The major labels are taking and keeping more than 50% of the payout from Spotify. Almost none of my money actually goes to the artists that I listen to and want to support. The major labels are using their advantageous position to suffocate artists that are not signed to them. Monopoly, anyone?

Why is this? Because Spotify knew that having access to their mainstream catalogues was necessary to their global appeal. They couldn’t launch a service without stars like Lady Gaga, Rihanna, or Calvin Harris. So they sacrificed the careers of all the small, independent label artists in favor of paying out huge sums to the record labels. Thanks, guys.

This is not OK, and it is the secret that is causing the friction between streaming music in general and artists, and it is the direct reason for why artist payouts are so mindbogglingly low.

I’m strongly reconsidering stopping my Spotify subscription because it doesn’t help bands that I like make a career out of music.

What about an alternative model? Check out this one proposed by Sharky Laguana in Medium’s Cuepoint.