Thom Yorke may see Spotify as “the last desperate fart of a dying corpse”, but the streaming music service hopes its appeal to artists will be alive and kicking in 2014.
Today, Spotify is launching a new website for musicians and managers – Spotify Artists – that goes into more public detail than ever before on how the company’s business model works, how it calculates its payouts for individual artists, and how much they can expect to be earning as the company grows.
What’s more, Spotify has also partnered with Next Big Sound to open up its analytics to artists and managers for free: they’ll be able to log in and see the kind of streaming totals and (aggregated and anonymised) listener demographic data that have previously been restricted to labels.
Finally, Spotify is confirming one e-commerce partnership we already knew about – its ‘On Tour’ section of artist profiles spotlighting artists’ upcoming gigs through Songkick – but announcing another that we haven’t. Soon, Spotify will also be incorporating merchandise in artist profiles, courtesy of a deal with D2C firm Topspin.
Oh, and just for good measure, Spotify is announcing today that it’s hit its target of paying out more than $500m to music industry rightsholders in 2013, taking it to a total of $1bn since it first launched in 2008.
THE DETAILS
It’s a lot to unpack: we’ll go into a bit more detail about what’s being announced, before chewing over the implications.
Spotify Artists
The new website is a portal for artists to find out how Spotify works, how the company believes it will pay off for them in the long term, and get some tips on best practices they can use to make it work better for them straight away.
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.
Payout predictions
Spotify is also using its new website as a chance to get specific about its payments. Well, not with specific artist names, but it has published “actual, but anonymised” payouts from July 2013 for streams that month of five particular albums on Spotify, with descriptions rather than titles.
The payments – remember this is to rightsholders, not to the actual artists or songwriters – range from $3,300 for a “niche indie album” to $425,000 for a “global hit album” for a month’s worth of streams.
(Which taking the midpoint of the payout range listed above, suggests the former’s tracks were streamed around 471,000 times, and the latter’s around 60.7m times – or if you assume 12 tracks per album, these albums were streamed around 39k times and 5.1m times respectively. But this is fairly wobbly maths.)
Spotify also provides estimates for how much these albums will be earning a month when the company reaches 40m paying subscribers: around a 5x increase per album.
And the company has also published figures for the annual payouts (again, to rightsholders) for the entire catalogue of a “current global star” over the last two years – nearly $1.5m between August 2011 and July 2012, and nearly $3.1m for August 2012 to July 2013 – as well as predicting that these will rise to $6.5m and then $13.5m in the next two years.
Analytics and merch
There isn’t much more to say about Spotify’s other two announcements today. The company already has one analytics partnership with Musicmetric, but that’s for labels to dig into Spotify data rather than artists.
The Next Big Sound partnership is just for the latter, plus managers. There’ll be an authorisation process to ensure people only get access to the data they’re entitled to – no nosy journalists getting Lady Gaga’s stats – with Spotify’s existing verified-profile system giving the company a head start in that authorisation process.
Why Next Big Sound and not a dedicated Spotify Analytics portal? The company tells us that it wants its data to be viewable alongside stats from YouTube, Facebook, Twitter and other services on Next Big Sound’s dashboard. Spotify is also stressing that artists won’t have to pay for Next Big Sound’s premium service to access their Spotify stats – they’ll be part of its free service.
Merchandise? The exact details of Spotify and Topspin’s deal, as well as the timescale to launch, aren’t yet public. But the two companies are working together, and artists selling clothing, vinyl and other items through Topspin will be able to pull those products into their Spotify profiles, where they’ll sit alongside the Songkick-powered On Tour bar for gig tickets.
THE IMPLICATIONS
Those are the basic details, so what does it all mean? Here’s our take on what Spotify’s announcements today mean for artists (and labels), for the company, and for its rivals.
Good news for artists (but not all will be won over)
Giving musicians access to their Spotify data is an encouraging, important step forward, and it’s what a number of artists have been asking about for some time. Remember Zoe Keating’s What I want from internet radio blog post?
“I want my data and in 2012 I see absolutely no reason why I shouldn’t own it. It seems like everyone has it, and exploits it…everyone but the creators providing the content that services are built on. I wish I could make this demand: stream my music, but in exchange give me my listener data. But the law doesn’t give me that power. The law only demands I be paid in money, which at this point in my career is not as valuable as information. I’d rather be paid in data.
How do I reach them? Do they know I’m performing nearby next month? How can I tell them I have a new album coming out? The new model says that in the future I’m not supposed to sell music: I’m supposed to sell concert tickets and tshirts. Ok fine, so put me in touch with the people who will buy concert tickets and tshirts (p.s. I’d like the same from on-demand services like Spotify too).”
Every streaming music service should be doing this (don’t forget, YouTube has been doing it for a while) and Spotify’s decision to do it through Next Big sound, for free, also feels like a plus for artists.
Will it make a SpotiFan out of Thom Yorke? Well, that’s a tough ask: judging by his public statements, his criticisms of Spotify go well beyond its data-sharing policies.
We’ll be interested to see what Yorke, bandmate/producer Nigel Godrich and other critics have to say about the Spotify Artists website though. If this is to be a debate rather than a mud-slinging match, Spotify’s figures and predictions deserve proper scrutiny rather than insults.
A potential headache for some labels
The subtext of Spotify’s announcements today is worth digging into: the company is providing the ammunition for some very interesting discussions between artists/managers and labels, especially where the contracts are dodgy and/or the distribution of royalties isn’t as transparent as it should be.
Think about it: Spotify Artists includes this flowchart explaining how money flows from streams to rightsholders and on to artists. Today, Spotify is helping artists fill in the gaps: tools to track their streams throughout the month, and rough figures on how much money it’s paying to rightsholders for those streams.
It’s lighting the fuse and stepping back: artists and managers can now compare streams for a specific period with their royalty statements. For some, that’ll mean arguments over how much they’re paid, and for others, it’ll mean questions about how long it takes for the money to come through.
Spotify taking the fight to rivals
The graph above on Spotify Artists is the company’s most public jab yet at YouTube and Pandora: two services that aren’t direct rivals in the way that Deezer, Rdio and Rhapsody are.
Pandora payouts have been getting plenty of negative publicity in the last year – more from songwriters than artists – but YouTube hasn’t caught anywhere near as much flak as Spotify on this score. The latter company is now out to prove that it’s a much bigger friend to artists than YouTube when it comes to payouts.
“Spotify’s high royalty payments in comparison to these other services means that if all of this streaming activity (from video and radio services) was through Spotify instead, then the amount of royalties generated in the US by streaming activity would more than double from $530m in 2013 (actual streaming royalties across all services) to $1.3bn (if all streaming occurred on Spotify),” claims its new website.
This promises to be fun, although for now Spotify hasn’t tackled the other obvious comparison – Apple’s iTunes downloads store – which would require getting to the bottom of how much an iTunes sale pays out per subsequent play, rather than simply comparing a download payout with a per-stream payout.
(Try this 2011 blog post and this follow-up from David Touve for a primer on the complications of that comparison.)
Beating up Beats?
But you can also see today’s merchandise announcement as Spotify getting in with an early swing at Beats Music, which in January was being flagged as the first streaming music service to integrate Topspin. “Our plan is to set the standard for how consumer music services can integrate and benefit artists,” wrote Topspin’s Bob Moczydlowsky at the time.
Now Spotify has its own deal with Topspin, although we don’t know yet whether it will launch before Beats Music does. It’s the latest example of Spotify spending the 11 months since being written off as “a search box” by Beats executives adding functionality to make it anything but.
While we’re at it, think about Spotify’s debunking of per-stream payments as a useful metric in the context of the increasingly competitive streaming music market. The company’s director of artist relations, Mark Williamson, made this explicit in an interview with Music Ally this week:
“You could have a similar service with an identical model that had far fewer users listening to far less music. Their per-stream rates could be significantly higher than Spotify, but they could be paying out significantly less dollars to the industry,” he said.
“Are we going to be concerned about what happens when you click on a track, or on the amount of money we’re bringing in and paying out?” Translation: rivals boasting about higher per-stream payouts may unwittingly be boasting about how little they’re used.
About that sustainable business model thing…
Spotify’s pitch to the music industry (including musicians) has always been ‘when we get big, we’ll really pay off for you’ – Sweden and Norway are already two examples of countries where that’s happened, and streaming has a.) become the dominant source of recorded music revenues and b.) helped the industry return to growth after a decade-plus long slump.
Spotify Artists shows how rapidly Spotify’s payouts to rightsholders have grown over the last five years, and makes a convincing case for the service’s value if it reaches 40m paying subscribers. But it doesn’t answer the nagging questions about whether the company can survive long enough to reach that milestone.
The recent $250m funding round lengthens Spotify’s runway, but it doesn’t guarantee a takeoff at the end of it. Its revenues have grown sharply every year, but so have its losses – and Spotify is still in investment mode as it continues its global expansion.
That’s a separate debate about the economics of streaming music, but the point is that the more Spotify talks about the riches for artists when it reaches 40m paying subscribers, the more questions it’ll face about balancing the costs of that growth.
Still, today’s announcements are a positive response to the demands of musicians. They wanted more transparency, so Spotify is giving out more figures. They wanted access to their data, so Spotify is providing it.
They wanted more bridges between streams of music and income from other products, and Spotify is working with Songkick and Topspin – what price a Kickstarter deal to add crowdfunding into the mix, incidentally?
If the goal is streaming music services that work for artists of all sizes as well as they work for major labels and shareholders, today is a step in the right direction. But competition from Deezer, Beats Music, Apple, Google and others – and just as importantly, continued pressure from artists and managers – should ensure that more steps will follow.
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