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Spotify or bust?

  • Earning a crust. For musicians working the streaming world, it isn’t easy. The last few years have seen a steady flow of artists voice their frustrations with the streaming model and its meagre royalty payments, especially in the wake of rapidly declining CD sales. Artist earnings are now indexed to how many times a song is played more than they are the number of physical units shifted (which are play frequency agnostic). The UK’s House of Commons is currently hearing evidence on how streaming is affecting musicians’ livelihoods and its long-term sustainability. Should audiophile folk be more mindful of these issues? Or are streaming services relying on us to look the other way?

    Music streaming services typically payout 60 – 70% of their total revenue as royalty payments. These numbers come anecdotally but also from a Soundcharts article, which itself draws on reports from The Trichordist and Digital Music News. If we assume that a streaming service is paying out 70% of its revenues as royalties, our gut reaction might not be one of discomfort. Soundcharts tells us that 13% goes to the songwriter and 57% to rights holders (usually a record label or its distributor). That means a streaming service generating $1m in annual revenue will hand over $570,000 to labels and $130,000 to songwriters.

    Why then do so many artists complain that streaming remuneration is woefully insufficient, especially now that the Coronavirus has wiped live concerts off the map? The answer lies in the amount generated by each stream. It isn’t fixed. Each time we press play on a song, we allocate a tiny percentage of a pool of money to the artist. And that the monetary value of that percentage depends not only on the streaming platform’s total revenue but also the total number of streams generated for all artists.

    Let’s exemplify: a song streamed 1,000 times on a platform sending out 1 million total streams and making $1m in revenue, all in the same year, will earn the song’s writer and rights holder $700: (1,000/1,000,000 x 70% x $1m). That’s a theoretical $0.70 per stream.

    Of those 70 cents, the songwriter would see 13 and the rights holder 57. The rights holder then takes its cut before handing over the rest to the artist. How much money the artist receives will be set by the T&Cs of his/her artist-label contract.

    What if our theoretical streaming platform’s annual revenue count isn’t a million dollars but a billion? Assuming total streams remained the same, the song’s writer and rights holder would net 1000x more money from those same 1,000 streams: $700,000. Or $700 per stream.

    But – and this is the big’un – if the total number of streams from all artists also increases to one billion, that $700/stream becomes $0.70/stream again.

    I posit this hypothetical to illustrate how the streaming service payout model protects its host against financial downturns. As overall revenue goes up, so does the per-stream payout rate. As revenue falls, so too does the per-stream payout rate. Furthermore, that same payout rate goes down the more the platform delivers streams by other artists.

    According to The New Statesman, Spotify presently enjoys 320 million global subscribers, of which 124 million subscribers pay for the Premium tier that dispenses with ads and permits offline content. It’s tempting to think that multiplying the 124 million payers by US$120/year will provide an estimate of Spotify’s annual revenue – say hello to a pool of US$14,880,000,000 (almost 15 billion dollars).

    However, such simplistic thinking ignores Spotify Premium’s variable pricing around the world. Spotify charges what it thinks the market will bear in any given territory, its subscription fee often determined by competing services. According to Music Business Worldwide, UK residents pay the equivalent of around US$13/month but Mexicans pay just over US$5/month and Indians a mere US$1.7/month.

    Furthermore, Spotify’s free tier can only serve to drive up the total number of streams by all artists to reduce the per-stream payout rate established by its Premium subscribers.

    So — how much does Spotify pay per stream? The Swedish company doesn’t make public its streaming revenue nor how many streams it generates per year but The Trichordist has enjoyed access to a mid-sized indie label’s streaming service figures since 2014. The label’s 250+ albums reportedly generated 1 billion streams in 2019 and the resulting artist paychecks suggest that Spotify is paying out US$0.00348 per stream. That means 1000 streams net a mere $3.48, which must be divvied up between songwriter and rights holder. And then between rights holder and artist. And if there’s more than one band member…

    We can see how many times a song has been streamed on Spotify if – when in album view mode – we hover our mouse pointer over the bars to the right of the song length.

    Consider the 2019 remix of Pink Floyd’s The Delicate Sound of Thunder which, at time of writing, has been on streaming services for a week. Opening cut “Shine On You Crazy Diamond (Pts 1-5)” has already been streamed 709,164 times for a payout of US$2467. The second track “Signs of Life” has done 500,000 plays (US$1740). “Learning to Fly”, the third track, has clocked up almost a million streams (US$3480). Clearly, big-name heritage artists like Pink Floyd are making bank. But we don’t have to travel too far down the food chain to see where things aren’t working out so well for lesser-known artists.

    Solo producer Surgeon is one of the biggest names in techno; he’s been making cerebral club music for over thirty years. And yet the four tracks that comprise his recent Europa Code EP have clocked up 6577, 5791, 15,919 and 6458 respective Spotify plays in the two months since their release. That’s a total of 34,745 streams for an (approximate) payday of US$121. Would that cover your rent for two months?

    With Spotify now effectively the world’s number one music source, what hope for artists like Surgeon (or those less popular than he) to make a modest living from their work via streaming? I think we already know the answer.

    This isn’t, of course, just a Spotify issue. Back to The Trichordist’s findings: one thousand streams currently net US$6.75 from Apple Music’s 60 million paying subscribers, US$4.26 from Amazon Music, US$0.22 (!) from YouTube and US$8.76 from Tidal. Tidal’s current subscriber count is rumoured to be around 6 million. Qobuz’s subscriber count and payout rate remain unknown.

    My regret in relaying this information doesn’t only relate to musicians toughing it out in 2020 but also to the hi-fi world that has embraced streaming and will continue to rely on streaming sector growth in order to realise its own. The world’s slow migration from the CD to streaming, audiophiles included, only exacerbates the income issues faced by musicians.

    Manufacturers aren’t putting Spotify Connect inside their streaming products just for LOLs. They do so to broaden their hardware’s appeal. They know that newcomers to the high fidelity lifestyle are more easily found among Spotify users.

    And if you happen to stumble across someone who currently listens to Spotify but wants to know about better sound, approach him/her with caution. They might be wholly unprepared for your audio geek speak. Mention 24bit this or DSD that and they’ll be gone for good, never to return. And never forget the golden rule of newcomer engagement: do not under any circumstances refer to their chosen streaming provider’s sound quality as ‘garbage’.

    Your fervour for source-first thinking is irrelevant to the newcomer at this time. Why stream CD-quality (or hi-res) content when the hardware that would expose its audible superiority to lossy streams isn’t yet in situ?

    We should first talk to our would-be convert about the hardware that will allow them to hear first-hand any audible differences. A new pair of loudspeakers and an amplifier will be such a profound improvement over any previously existing setup – a 90s mini-system or Bluetooth monobox – that the resulting desire to upgrade streaming source quality will eventually take care of itself.

    Tomorrow’s Qobuz Hifi, Deezer Hifi, Amazon HD or Tidal Hifi user is already out there: on Spotify, Apple Music, YouTube Music or the aforelisted platforms’ lossy tiers. And, for better or worse, our future reliance on Spotify (and its kind) should not be underestimated.

    And yet amongst all the online chatter about artist remuneration, one question screams to be answered: are consumers being charged enough for the privilege of having 50 million songs at their fingertips? If we really want musicians to earn a living in the streaming age, is a lossy streaming subscription not worth US$30/month and lossless US$50/month?

    Or perhaps we should be paying according to the number of songs we stream per month. Music streaming could be priced like mobile phone data where heavy users pay more than those who only stream a few albums worth of songs each month. With new release CDs still selling for US$15 a pop and vinyl up to twice that amount, it’s hard to argue against the possibility that we should be paying more for our streaming kicks.

    Camera: Olaf von Voss | Editor: John Darko | Motion Graphics: John Darko | Ad Segment: Jana Dagdagan

    Written by John

    John currently lives in Berlin where he creates videos and podcasts for Darko.Audio. He has previously contributed to 6moons, TONEAudio, AudioStream and Stereophile.

    Darko.Audio is a member of EISA.

    Follow John on YouTube or Instagram

    Campfire Audio Dorado 2020, Vega 2020 review (and podcast)