Spotify launched its Loud & Clear website in March 2021, with the aim of “increasing transparency” around its payouts to the music industry. A year later, it is refreshing that site with new figures.
Yes, this is data storytelling with a clear corporate purpose: to back up Spotify’s argument that it has a positive impact on musicians and rightsholders alike, at a time when the rows over streaming economics and creator earnings is more heated than ever.
However, Spotify’s figures are also a useful snapshot of that streaming economy: something the company’s supporters and critics alike can get their teeth into as they prepare for the next round of debate about these issues.
Start with the biggest number. Spotify is announcing today that it paid more than $7bn to music rightsholders in 2021, up from $5bn in 2020 and $3.3bn in 2017. The company has now paid out more than $30bn since its launch in 2008.
“It’s more than any other retailer paid last year, and we did a bunch of research and analysis to confirm that it’s the biggest cheque that any retailer has written to the industry in the history of recorded music,” Spotify’s VP, global head of music product, Charlie Hellman told Music Ally in an interview ahead of the website’s relaunch.
Spotify also estimates that its payments accounted for around a third of the $12.5bn streaming revenues earned by the three major labels in 2021. That’s $4.2bn, with the rest of the $7bn made up of payments to independent labels and (via distributors) to self-releasing artists, as well as to publishing rightsholders.
The $7bn figure is also useful to cross-reference against Spotify’s financial results for 2021, when its revenues were €9.67bn. This is $10.63bn at current exchange rates, which means the company is paying out 65.9% of its revenues to music rightsholders.
The refreshed Loud & Clear website drills down into payouts generated by artists on Spotify. That’s the money paid to their rightsholders (including labels and publishers) for streams of their music, although remember that how much the artists see of that money will depend on the terms of their contracts with those companies.
In 2021, 1,040 artists generated more than $1m of payouts from Spotify, up from 860 in 2020, and 460 in 2017 – and thus a 125% increase from the latter year. 450 generated more than $2m of payouts, and 130 more than $5m.
However, Spotify is just as keen to shout about the next tiers down from these stars. 52,600 artists’ catalogues generated more than $10k of royalties (to reiterate: this is recording and publishing royalties) from Spotify in 2021, up from 42,500 in 2020. 16,500 artists are generating more than $50k a year; 9,500 more than $100k; and 2,170 more than $500k, before we hit the million-dollar bracket.
Don’t forget the caveats
Spotify is also keen to set these figures against the context of the wider digital music world. It estimates that if an artist’s music is generating $10k of Spotify payouts, it’s likely to be generating more than $40k “across all recorded revenue sources”. This is based on Spotify’s calculation that it accounts for around a quarter of global recorded music revenues.
There are important caveats to these figures, as there always have been. An artist whose music earns $10k of recordings royalties from Spotify might only see $2k of that if they are on a 20% royalties deal with their label. If they’re a four-piece band, that will then be split four-ways.
Artists working through distributors, or on label deals where they get a bigger share of royalties, will obviously get more. And that’s before factoring songwriting royalties in: does an artist write their own material, do they have co-writers, how are those shares divided, and what are the terms of their publishing deal?
Just remember that we’re talking about payouts generated by artists’ music, not the final sums that end up in their bank accounts, and you’ll be in a good position to think about what these numbers mean.
One thing that Spotify thinks they mean is growth in the numbers of artists whose music is generating meaningful royalties. “We’re seeing so many artists level up,” said Hellman, of the $10k, $1m, $2m and $5m tiers in Spotify’s data. “All of those different thresholds have more than doubled since 2017.”
‘There’s roughly 200,000 professionally aspiring acts…’
In the Q&A section of the Loud & Clear site, there are some very interesting stats on the size of the artist community – and specifically how many artists Spotify thinks are trying to make a living from their music.
Around eight million artists have uploaded tracks to Spotify, but 5.4 million of them have released fewer than 10 tracks. “So they are quite early in their journey, or maybe doing it more as a hobby,” said Hellman.
Spotify says that 165,000 artists have released at least 10 songs AND average at least 10,000 monthly listeners on its service. “Some combination of a critical mass of work, and some viable audience,” as Hellman put it.
Spotify has also analysed data from Songkick, Ticketmaster and other ticketing companies to calculate that in 2019 (pre-pandemic) there were around 199,999 musicians with some form of live event listed online.
“These are artists with some place outside streaming where they’re commercially engaged,” said Hellman. “With a margin of error, and acknowledging that these are estimates, we’re assessing that there’s roughly 200,000 professionally aspiring acts.”
This is going to be an important figure for the music industry to think about, especially in debates about how the ‘pie’ of streaming royalties is being spread more thinly. Understanding how many ‘professionally aspiring’ musicians there are, versus just how many have ever released music, is a useful process. Spotify’s numbers may not be the final answer, but they are a step towards it.
‘The pathways to success are much more diverse…’
In Spotify’s view, the fact that 50,000 of those artists are generating at least $10k of payouts a year from its service – and potentially more than $40k overall from recordings – is a positive ratio given the fact that (as Hellman puts it) “it’s hard to make it in music!’
The Loud & Clear site also compares the long tail of Spotify with that of the music industry in the 1990s heyday of CDs. Back then, the company says that nearly 25% of US album sales were by the 50 biggest artists, but that in 2021, only 12% of Spotify’s US streams came from the 50 top stars.
“The industry is half as top-heavy and half as star-concentrated as it was in the heyday of the CD era compared to now,” said Hellman. “There’s a lot more programming capacity and user attention being spread around to a broader community of artists.”
Other new figures published by Spotify play into that. 28% of the artists generating more than $10k of payouts on Spotify in 2021 were self-releasing through distributors.
The site goes into more detail: 72,700 DIY artists had more than 10,000 Spotify listeners in 2021, and those artists generated an average of $15.1k of royalties each. That’s just under $1.1bn, which is 15.7% of Spotify’s total payouts.
“What the data is revealing to us is that the pathways to success are much more diverse and much more open than they’ve been in the past,” is Hellman’s take.
He also pointed to figures showing that 34% of the artists who generated more than $10k from Spotify in 2021 came from outside the recorded music industry’s 10 biggest markets, and that 10% of them released their first song on Spotify in the last two years.
Meanwhile, in his introduction to the site, CEO Daniel Ek wrote that “the figures we’re sharing show that Spotify is improving on the music industry of the past, and more and more artists are able to stand out in the streaming era”.
A second year of $1bn+ publishing payouts
If you’re not statted out yet, consider another number that’s been newly updated on Loud & Clear: Spotify says it paid out more than $1bn to publishing rightsholders in 2021, the second year in a row that this payout was a 10-digit figure.
The site also points to existing data showing $3.5bn of streaming revenues for publishing rightsholders in 2020 – from all services, not just Spotify – and claims that this is “more than publishing revenue from CDs and downloads any year in the 21st century so far, even during the peak of the CD”.
You can’t read this without thinking of the two hottest potatoes in the music publishing world right now. One is the debate about whether songs (compositions) should get a bigger share of streaming royalties, and whether recordings should thus get less. The other is the ongoing appeal against new songwriter royalty rates in the US by Spotify and several other streaming services, which sparked a furious response from publishers.
Pointing out that streaming is generating “record revenues” for publishers can be seen as Spotify’s latest contribution to that debate, although it’s one likely to receive some pushback from publishing bodies like the NMPA in the days ahead.
Loud & Clear also has some new stats on major label earnings, pointing to UMG, Sony and WMG’s collective $25bn of revenue in 2021, including the $12.5bn from streaming that Spotify estimates it paid a third of.
“Major label profits in 2021 exceeded $4 billion,” notes the site. Which might sound like very deliberate shade – look at those nasty big corporations keeping all the money and leaving musicians penniless! – if it weren’t for the “meaning more money to reinvest to grow the industry” that completes the sentence.
Spotlighting major label profits while also backing those companies’ arguments that they are reinvesting the fruits of the streaming boom in artists is careful diplomacy. Hellman stressed the positive aspects.
“It’s good news. If you’r rooting for the industry to be healthy, and for there to be more profits available to reinvest, that’s a very healthy thing to see that there’s more total revenue being paid out to rightsholders than ever before,” he said. “And that gives an unprecedented opportunity for them to do what they do so well: to invest in artists.”
‘The biggest opportunity for everyone is to innovate…’
Hellman also hopes that the data on Loud & Clear will strengthen Spotify’s argument that its growth is good for artists and rightsholders.
“What I hope stands out to people is that the incentives are so well aligned between Spotify and artists. Our incentive is to try to maximise, as best we can, how we can generate as much money from musically interested people as possible,” he said.
“We take two thirds of that and pay it out to rightsholders, as all streaming services do, and every initiative that we have to drive our growth is aligned with rightsholders’ and artists’ incentives to generate more payouts.”
One possibly-encouraging point is that the $7bn of payouts in 2021 – and indeed the $30bn since Spotify’s launch – have come from a single source: access to the music, be that subscriptions or advertising. There is room to grow in other ways.
Spotify and its rivals are still in the relatively early stages of exploring what they can do on top of subscriptions and ads, from features to sell tickets and merchandise, to tips economies, top-up subscriptions and other ways for fans to pay artists more directly.
“When you look at the way the numbers have evolved, the biggest opportunity for everyone – streaming services, labels, artists – is to innovate. To get more people spending more money on music. That’s the thing that changes the numbers dramatically,” said Hellman.
“People get focused on what is a totally legitimate conversation: what are the micro-tweaks to the way the [streaming] pie is divided up? It’s obviously an important conversation, but when you think what has materially changed payouts to artists, it hasn’t been the tweaks in the margins.”
“It’s been: let’s globally expand, let’s get more people paying for music. And you’re right, there is a whole world around direct payments and incremental businesses that we can create. We are investing in that too.”
‘Sunlight is the best disinfectant…’
Hellman added that Spotify’s aim is for Loud & Clear to continue sparking music industry conversation, and possibly even similar data drops from other companies.
“I was surprised to not see it last year. I’m certainly hopeful that more will happen. I think it can only be a good thing… let’s look at how these economies are shaped, and what kind of payouts different services are able to generate for creators,” he said.
“It can only drive good conversations when there’s transparency about how much is being paid out to artists at different levels. And artists are speaking out and demanding transparency from different platforms. Sunlight is the best disinfectant.”
Given the nature of the streaming economy debate, a Spotify exec talking about sunlight and disinfectant in the context of transparency… well, it’s going to rile some people up.
Spotify remains a lightning rod for criticism of the streaming economy in general, even if some of the brickbats thrown its way – over Joe Rogan for example, or CEO Daniel Ek’s investment in defence technology, or that US rates appeal – are specific to the company and its management.
Spotify putting out figures designed to show its positive impact on musicians and rightsholders will get a public pushback, whether that be from the NMPA; from musicians’ rights campaigners like Tom Gray in the UK or David Lowery Damon Krukowski in the US; or from individual songwriters and musicians who are struggling to stay afloat in the streaming era.
And yet… this is a good process. It’s good that Spotify is publishing these numbers because they help us to understand the streaming economy’s workings, and it’s also good that those critics are being heard in the follow-on discussion, to aid our understanding.
We need more transparency in the music industry, and a website like Loud & Clear is part of that, as are the critics who’ll prod and poke at these numbers and say what’s left unsaid. We’re looking forward to seeing what impact the site’s refresh has in this wider conversation.