Why Wilt Chamberlain Is Not On Spotify

How much should artists be paid? It’s a tough question to answer.

For writers, dancers, actors, musicians, poets, and more, performance is an individual affair, remunerated by the audience. A painter doesn’t expect a salary; a writer hopes to find admiring readers of her work, who are ultimately willing to pay for it.

It’s tempting to think of the economics of art as a pure form of a free market. The value of a cultural product is set by what the consumer is willing to pay for it, and a demand for such a product creates an incentive for more of it to be produced — or so the logic goes.

One of the most famous defenses of the free market is based on the example of individual performance being rewarded. In his 1974 text, Anarchy, State and Utopia, the political philosopher Robert Nozick invoked the case of basketball legend Wilt Chamberlain to make his point. (In 1974 Wilt Chamberlain was a contemporary reference; today we could substitute LeBron, Steph Curry or any other NBA star.) Nozick writes:

“[S]uppose that Wilt Chamberlain is greatly in demand by basketball teams, being a great gate attraction. (Also suppose contracts run only for a year, with players being free agents.) He signs the following sort of contract with a team: In each home game, twenty-five cents from the price of each ticket of admission goes to him. […]

Let us suppose that in one season one million persons attend his home games, and Wilt Chamberlain winds up with $250,000, a much larger sum than the average income and larger even than anyone else has. Is he entitled to this income?”

Of course, Nozick thought the answer was “yes” — but his simplified example omits many factors that are present in the real world.

Wilt Chamberlain cannot just play basketball on his own: he needs a team to play for, and a stadium to play in. Since that requires a huge, expensive infrastructure (and permission from the NBA to operate), there are a limited number of options to choose from, making it harder to negotiate his 25¢ cut.

So how does this relate to music?

In the artistic and creative world, value is controlled not by the performers but by the gatekeepers. Each creative field has a commercial structure built around it — record labels, art dealers, publishing houses, and so on — and this structure mediates the relationship between creators and consumers.

In the digital age, the most powerful players are the music streaming platforms. In fact, these streaming platforms now account for 75 percent of all music industry revenue. In a way, they are the music industry. And with this near monopoly comes a tight grip on payouts.

Though the company is reluctant to release exact figures, Spotify pays somewhere between $0.006 to $0.0084 per stream — but that money goes to the rights holder of the song, which means an artist signed to a record label will take home only a fraction of that amount.

Depending on the nature of the artist’s record deal, this can result in depressingly small payouts even for very successful music. One illustrative example is rapper Lil Uzi Vert’s megahit XO Tour Llif3: a song which first found viral success on SoundCloud, and went on to become one of Spotify’s most streamed songs of summer 2017, racking up a combined total of 1.3 billion plays across all streaming platforms.

But with the this huge amount of airtime only brought Uzi Vert $900,000 dollars, equivalent to just six hundredths of a cent for each time the song was streamed. And if one of the biggest hits of last year failed to earn the recording artist even a million dollars, making any serious money starts to look impossible for less well-known acts.

If we think of the music industry as an employment market, whereas artists were once able to negotiate a price for their labor, they are now offered minimum wage jobs and the choice to either take the low pay or get nothing. It’s similar to Uber’s disruption to the taxi market: the platform now sets the rates, and though the service is convenient for consumers, drivers find it hard to make a living.

But there are alternatives. The podcast industry, which is currently booming, has been successful in providing audio content on a different model. With more control over how their media is distributed, podcasters have tapped into both advertising and direct subscription services like Patreon to monetize their content, leading to a flourishing industry in which creators are fairly rewarded for their efforts.

Like Wilt Chamberlain, musicians need an infrastructure around them to bring their talents to an audience. But that structure should reward them fairly for their work, and incentivize them to create, rather than setting up a monopoly market for their labor. For a long time, the industry model has given the largest share of profits from creative work to gatekeepers and middlemen, but we think that a new model is emerging: one where artists retain control over what they make, fans connect directly with creators they admire, and content producers receive the payout they deserve.

The age of centralized platforms is over, and a paradigm shift is on its way — and that’s why we’re building the new, decentralized world we want to live in.