Spotify Explains How It Pays Artists, Over $1 Billion In Royalties Paid


Spotify

Spotify raised $250 million in new funding last month, and the streaming music service has launched a new portal geared towards artists.

Simply titled “Spotify for Artists,” the main section “Spotify Explained” is organized into multiple categories.

The first section talks about how it’s contributed to the music business, and since launching in 2009, has paid over $1 billion in royalties.

With physical album sales decreasing, and digital downloads increasing, Spotify says it helps recoup some of this lost value through its premium subscriptions which start at $4.99 per month.

A Spotify Premium user delivers more than 2x the amount of revenue to the industry (per year) as the average US music consumer currently does.

As of March 2013, Spotify had over 24 million users worldwide, and over six million users were paying $9.99 per month for a premium subscription.

Spotify

In 2013 alone, Spotify has paid out $500 million, and says it’s also increased the value of each user.

By 2013, the amount of money we earn per user (average revenue per user) has grown to $41 per year. This is an average between our premium users who spend $120 per year and our free users who pay for their consumption by viewing and listening to advertising.

This is up from $25, and what the streaming music service claims is the average amount of money spent by U.S. adults.

Similar to other music services, Spotify takes a 30 percent cut of royalties with the remaining 70 percent going to the “rights holder.”

Rights holders are defined as “labels, publishers, distributors, and, through certain digital distributors, independent artists themselves.”

Here is the formula for how artists are paid:

Spotify

Spotify breaks down each section in detail, and you can learn more here.

One misconception is that Spotify pays a set rate per stream, but there are several different variables:

  • In which country people are streaming an artist’s music
  • Spotify’s # of paid users as a % of total users; higher % paid, higher “per stream” rate
  • Relative premium pricing and currency value in different countries
  • An artist’s royalty rate

On average, per stream payouts range from $0.006 to $0.0084.

Theoretically, another service could generate higher effective “per stream” payouts simply by having users who listen to far less music. We believe, however, that our service and the lives of artists will both be best if the World’s music fans enjoy more music than ever before in a legal, paid manner.

Spotify says that 55 percent of 18 to 29-year-olds who have access to a free, legal alternative end up pirating less music.

The Spotify for Artists portal also shares best practices, and how to get your music on the super popular streaming music service.


Mike Stenger

Lover of technology, Mike often makes jokes that nobody laughs at.

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