Posted in music on December 4, 2013
You may have heard by now that there's a ton of artists bashing Spotify, like Beck, Thom Yorke, David Byrne, and more. Spotify might not be able to answer every problem these artists have, but on the often brought up topic of how they're paid, Spotify just shed some light on how that works. They just uploaded a long post titled Spotify Explained, which they go into detail about the service. Here's how the royalties work:
1. Spotify Monthly RevenueGot it? Head over to Spotify Explained to read the rest of it.
The total revenue Spotify makes in a given month from advertising and subscriptions as explained above. This varies from country to country depending on a range of factors including how many users we have in that country, how many of them are premium subscribers and how much advertising we sell in that country.
2. Artist's Spotify streams divided by total Spotify streams
This calculates an artist's popularity on the service, their "market share." Dividing an artist's streams by the total streams on Spotify determines the percentage of our total pay-outs that should be paid for that artist's rights.
3. Royalties paid to master and publishing owners
Spotify negotiates our royalty economics with labels and publishers in each territory where we operate. Our current payment agreements lead us to distribute (~)approximately 70% of our gross revenues to master recording and publishing rights (both mechanical reproduction and performance) holders. The precise division between these types of rights holders varies by territory in accordance with local laws and negotiated agreements. In the United States, for example, statutes dictate that publishers receive ~21% the amount that master recording owners receive.
4. Artist's royalty rate
Once Spotify has paid a rights owner the total royalties due for their accumulated streams, that label or publisher pays each artist according to that artist's contractual royalty rates. This will likely also take into account other factors including recoupment status, which is one reason that different artists in different deals might ultimately receive different royalties from their respective labels and publishers.
Independent artists can retain up to 100% of their royalty payouts from Spotify by using one of our aggregator partners such as Tunecore (a small fee may apply).
5. Artist Pay Out
The end royalty paid out to the artist after the rights holder royalty split and any other deductions have been applied.