In an effort to be more transparent, and help artists get their money, Spotify has recently launched a new site, SpotifyArtists.com, which aims to give tips to artists looking to put their music on the service. They are also being incredibly transparent about their pay structure.
A new report from Musically reveals just how Spotify determines how much an artist gets paid per stream:
The Spotify Explained section contains the juicy bits at launch, including this claim about Spotify’s American users: “The average amount of money spent by US adults on music is $25, whereas the average Spotify user is worth $41 (our total revenue divided by our total # of users). Simply put, a Spotify customer is 1.6x more financially valuable than the average adult non-Spotify US music consumer.”
The section also outlines the way Spotify calculates its monthly payments to music rightsholders: working out a market share for each artist’s streams, then dividing 70% of its total revenues according to those shares, rather than using per-stream payments for its calculations.
That said, the site also provides for the first time (from Spotify, at least) a rough estimate for the average payout to rightsholders generated by a single Spotify stream: “Between $0.006 and $0.0084″ split between labels, publishers and collecting societies, and subsequently split with musicians and songwriters according to the terms of their contracts.
Spotify also compares its payouts to some not-quite-direct rivals, claiming that its $6k – $8.4k per 1m streams is much better than the $3k the same number of streams would make from a “video streaming service”, $1.3k – $1.5k from a “radio streaming service” – names aren’t mentioned but it’s clearly referring to YouTube and Pandora. – and $41 from a play on US terrestrial radio.
As low as that might seem, that is actually really good pricing for streaming. Get 100,000 streams of your record and you secured yourself around $600, which is more than you would make with Pandora or Youtube.
Additionally, since payouts are based on market share and profitability, Spotify says that the more subscribers it has, the bigger the payouts will be. Other items on the agenda, are launching the ability to buy tickets and band merch through the service, which they hope to add in 2014. The whole report is definitely worth reading, especially if you are an artist.