Spotify launches “Spotify Artists”

One of the world’s largest Commercial music streaming service Spotify recently launched Spotify Artists – a new artist-friendly site that will be an interface between the streaming music platform and the musicians/managers that put their content on it, giving the latter a lot more transparency on how payouts essentially work and how they can benefit from the service. Concurrently, Spotify has further teamed up with Next Big Sound to create a dashboard for artists and managers to have real-time access to data about how their music is performing on the site and other details.

 

Since launching in 2006, Spotify has faced severe criticism from many artists over the years, including the likes of Swedish musician Magnus Uggla, Mike Vennart, Patrick Carney,  Radiohead frontman Thom Yorke and former Talking Heads bandmember David Byrne, over the risks and dangers of investing on the platform. Even though Spotify has claimed to have paid out $500 million+ in 2013 alone, a certain ambiguity has always followed the service on its Business model (The $500 million+ paid out in 2013 effectively means that to date, Spotify has paid out over $1 billion in royalties since 2009). Spotify Artists’s opening message on their new website attempts to provide some clarity on their financial program, suggesting an overall profit for artists and labels registered to it, despite recent market surveys. They explained that for an artist to have his music streamed on Spotify is more advantageous for artists than purchasing said music (with the concept that every time a song is streamed, it pays back the artist more than it being purchased a single time). Spotify could have bitten off more than it can chew as it promised artists that based on their current financial model, artists payouts will quadruple, provided they reach a target of 40 million paid users. Spotify currently has about 6 million paid users.

Some more facts regarding Spotify came into light with the launch of their website and the explanation if their financial model:

• Spotify had over 24 million global users in March 2013. 18 million Spotify users stick to its free tier, supported by ads. More than 6 million users pay $9.99 per month to subscribe to Spotify’s premium tier. By contrast, YouTube has 1 billion users and iTunes has over 575 million users. Despite the disadvantage in numbers, Spotify is paying artists more than 2x the amount that popular video services are paying out (supported by advertising) and significantly more than both online and terrestrial radio services.

• The company pays out over 70% of its total revenue to rights holders who “split amongst the rights holders in accordance with the popularity of their music on the service. The label or publisher then divides these royalties and accounts to each artist depending on their individual deals.”

• Averaged across its free and premium tiers, Spotify pays out between $.006 and $.0084 each time a track is streamed. This may seem an insignificant amount at first, but with the number of streams and users Spotify has accumulated over the years, the predictions could seem probable.

• As an example for monthly royalties of July 2013, a “niche indie album” earns a payout of $3,300, compared to a “breakthrough indie album” that earns $76,000. A “global hit album” earns $425,000 in the same month.

• Spotify claims it precipitated a decline in piracy, by allowing users access to songs, albums and playlists through an integrated relationship with Facebook – thus garnering a social revolution in music.

It’s important to note that many artists and labels accusing Spotify of being difficult to work with have cited the major reason being that their hasn’t been a decent enough way for them to assess how well they are performing on the platform. So, hopefully with the launch of the analytics dashboard, Spotify attempts to provide some much-needed transparency to its clients. Also with the launch of its many applications over the years, such as Spotify Mobile, Spotify Open, Spotify Free, Spotify Unlimited & Spotify Premium, the company is likely to be releasing a web-version API for developers and other third parties soon. With Spotify making so many progressive changes in its structure, times ahead seem exciting for the Swedish based company.