How Much Does Spotify Pay Independent Musicians?

For years, I’ve believed that subscription-based services would be the future of mainstream music distribution.

But that doesn’t make me a genius. Anyone who’s tried Netflix can see how much of a no-brainer the model is. It’s cheaper than buying or renting, easier than stealing, and it helps content producers get paid. The best ideas are often the simplest.

As I’ve been proselytizing since the first days of Pandora, the missing link in getting audiences to adopt this type of platform would be the creation of a free and fully functional ad-supported version to help grow a substantial userbase.

As of this Summer, Spotify has succeeded in doing just that. (It’s also earned people like me the right to bore you to death with I-told-you-so’s at cocktail parties for months to come). Their service passed the 10-million-registrations mark this time last year, and this March they had reached 1 million paying subscribers, or 15% of their 6.5 million “active” listeners. And all this before the service even launched in the America.

Last month, Spotify landed in the U.S. and brought subscription-based music services to mainstream media attention (thanks to an aggressive PR campaign and a streamlined interface. Now, it’s no longer a question of “whether” models like this will gain traction – it’s “how” and “to what effect”?.

For the few readers who are still completely unfamiliar with Spotify, the tech magazine Wired once described it as being like “a magical version of iTunes, where you’ve already bought every song in the world.” The free version subjects users to a few minutes of ads every hour, while paid versions unlock add-free listening, additional songs, higher quality files, and uncapped listening even after the introductory period runs out.

It’s a smooth, user-friendly system, and aside from woefully un-targeted and mind-numbingly loud advertisements (a solicitation to check out T-Pain while I’m listening to Oscar Peterson? Really?) it’s effortlessly executed. As a music magazine for music-makers, we’re less interested in the user experience and more interested in its effect on artists.

(If you’d like to try the free version, there’s currently a brief waiting list for signup unless a current user sends you an invitation. If you want to check it out don’t feel like waiting, email us and we’ll send you an invite as long as we have some left.)

Some of you may be familiar with a beautifully-rendered but woefully innacurate infographic that shows how many sales or plays artists would need per month to make minimum wage.

The graph starts off with some solid and fairly-up to date numbers. It begins by suggesting that self released artists would need to sell 143 self released CDs per month, 200 iTunes album downloads or 2,000 single downloads to justify quitting their job at Long John Silver’s. For reference, it shows that label artists who don’t write their own songs would need to sell between 1,500 and 3,000 conventional CDs per month to make minimum wage.

Things get a little out of hand by the time the chart gets to Spotify. It suggests that non-writing artists would need to get 4 million plays per month on Spotify to avoid working at Walmart, while artists who write their own material would need 1 million plays in 30 days. (That second part is not mentioned on the graph but shows up in the creators’ supporting evidence). Unfortunately, these numbers have nothing to do with reality.

Another sensational factoid sites a finding that Lady Gaga earned a mere $167 for 1 million plays of her song “Poker Face”. This statistic, while startling, is also not actually true.

If any of this was indicative of the current payment structures at Spotify, Rhapsody or similar services, I’d be up in a fury like many frightened musicians seem to be. Unfortunately, many of us are basing our fears on fear itself, rather than facts. In all the hours of research I did for this article, I came up with next to no published information on how much musicians can expect to receive per play from Spotify. Not in the New York Times, not in Billboard, not in The Guardian, not from distributors or aggregators. The truth it seemmed, was nowhere, online or in print.

So I did what journalists are supposed to do: I called Spotify. I called the distributors who can get your music placed on Spotify (including CD Baby and Tunecore.) I asked musicians to look at their royality checks.

Only once did I find an online or print account that matched my findings. In an unassuming blog post, on a Spotify aggregator site a musician offers a graph showing his Spotify earnings. To quote:

“I have just received the Q2 statement on the Spotify payouts to the band Little Things That Kill. Spotify must be doing really good because they now pay 0.4 Eurocent per stream. That means the payout has almost doubled over the last 3 months.”

This artists earned .4 Euro cents per play, almost .6 American cents

This artist earned .4 Euro Cents per play in in June 2011, which translates to almost .6 American Cents per play. For this artist it was a 100% increase from the rate in March of the same year.

6 tenths of a cent, or $0.006 per play amounts to $6,000 per million plays.

For perspective, this means that if 1 million people listened to your song and hated it so much that they’d never want to listen to it ever again, you’d still get $6,000. (I’d love/hate to see where this leads when it comes to provocative or misleading song titles. A search of YouTube will be some indication.)

It also means that if 10,000 people loved your 10-song album so much that they listened to it 10 times, you’d also get $6,000. Things start to get interesting when you realize that this is almost exactly what you’d earn as an independent for the sale of 1,000 albums through iTunes. (They currently pay out $0 .63 on the dollar, compared to the $0.006 per-play on this chart)

The Spotify rate however, is open to fluctuations. Rather than being fixed the rate is based on the percentage of a single play compared to the total amount of plays and the current revenue from ads and subscriptions. I’ve heard rates as low as $0.004 and as high as $0.008 per play. a rate almost 30 times higher than the $0.00029 cents claimed by the infographic that wouldn’t die.

Strictly speaking, whenever this $0.006 figure is accurate, it means that selling an album on iTunes ($6.30) is approximately 10 times as lucrative as convincing a fan to listen to your 10 song album 10 times on Spotify ($0.60). If Spotify helps artists gain revenue from 10 times as many fans willing to listen for free than would be willing to buy an album, revenue from digital “sales” essentially evens out. In that scenario, having 10 times as many fans to draw on for concert tickets and merch sales would be a major plus.

Obviously, this is an optimistic assessment, and surely many independents will remain unconvinced. Our goal here is not to take one side or another, but to provide information that will allow us to have a meaningful debate. If you think streaming services pay too little, how much do you think would be fair? (I, for one, would like to see a fixed rate of at least $0.01 per play.) Are you using Spotify as an artist? If so, are these numbers similar to your own? How have the facts changed your perspective?

Let us know by emailing us some science of your own.

You can read our August 2012 follow up on Spotify payouts and profits here.

Justin Colletti is a producer, an engineer, and a journalist who writes about music and sound.

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