Royal-ties Rumble: Artists v Spotify

Spotify, a moniker for ‘spot and identify’, is a commercial music streaming service accessible in over 60 countries. Since its establishment in 2006, there have been disagreements over the amount artists receive from Spotify in royalties, prompting some to remove their music from the website. Is the furore justified?

Each time a song is played on Spotify, the artist receives around 0.6 cents. The mathematicians amongst us will have figured out that the particular song would have to be played 166 times for the artist to earn $1 in royalties.

In December 2011, Mercury-nominated artist Jon Hopkins (umm, who?) Tweeted: “Got paid £8 for 90,000 plays. F*** Spotify.” He later added: “Radio 1 pay about £50 for each play.” Fair enough Jon, £8 barely covers the price of a cheeky Nando’s, let alone 90,000 plays. It is easy to join the Jon Hopkins bandwagon, but a comparison between Spotify and Radio 1 is far-fetched because a song played on Radio 1 reaches nine million listeners, an audience roughly 100 larger than his Spotify fan base.

The paltry royalty figures do add up for more established stars though. Since releasing his album ‘X’ in June, Ginger Wizard Ed Sheeran has been named the most streamed global artist of 2014, amassing an impressive 430 million streams on Spotify. The organisation claims to pay 70% of its gross revenue in royalties to artists – I’m thinking out loud when I say Ed is benefiting from this Spotify venture.

Make no mistake about it, 70% is a lofty figure. Royalty disputes tend to arise due to a lack of transparency on licensing deals: non-disclosure agreements (NDAs) between Spotify and record labels mean artists are not involved in negotiations. Apportionment of royalties is left to the discretion of record labels. The fact that many of these labels have shares in the company doesn’t help. Such a conflict of interest only serves to frustrate the artists – if only they could get Harvey Specter on the case.

In actual fact, uploading music to Spotify is a mutually beneficial relationship. Artists have a platform from which they can market their music whilst the company gains fee and non-fee paying subscribers. Before Lorde climbed the charts with ‘Royals’, her music regularly trended on Spotify, which illustrates the merits of rising talents making their music accessible. If only she named her song ‘Royalties’.

CEO Daniel Ek appreciates the need to do ‘a better job’ of convincing musicians of their value. Taylor Swift pulled her music from Spotify because the company did not accede to her demands of making her music available only to paying customers. Uh oh, they knew she was trouble when she walked in. But what do you do when you have a net worth of $200 million and you miss out on a few royalties? Shake it off.

Moving on swiftly, Taylor might as well have kept her songs on Spotify; she used to receive $6 million a year from them. The frequency of plays over time equate to a higher earning per song as opposed to a one-time purchase on iTunes. Whilst it is understandable that she declined to support Ek’s ‘freemium’ policy, in all likelihood these subscribers will end up as paying customers. Consequently, her royalties would have risen; there is a long-term gain to be made. However, Miss Swift represents an exception to the rule because her career was established before Spotify became relevant; she did not need Spotify like Lorde arguably did.

Although Taylor Swift is far from being a Luddite, artists must move with technological developments. Streaming is here to stay because of its convenience. Perhaps in the future, she might consider getting back together with Spotify.

 

By Kamran Khan

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