If you trust the headlines about Spotify, you may believe all musicians are receiving rolls of pennies for our creative work. Perhaps you remember Thom Yorke calling Spotify “the last desperate fart of a dying corpse” in 2013. More recently, you may have seen Jay Z’s not-so-subtle jab at “a tech company selling advertisements.” No matter who you are, you heard about Taylor Swift’s public breakup with the Swedish-based streaming service.
As both an independent musician and a music fan, I’m here to give you a new headline: I believe Spotify is saving the industry.
Add Up the Dollars, Percentages and Payouts
Let’s start with the numbers. In April, Portishead’s Geoff Barrow announced via Twitter that he had earned approximately $2,511 from 34 million streams. With this in mind, I’ll compare Portishead with my band, Fort Frances.
Portishead is a massive band. They’ve headlined Glastonbury.
We are an independent band. We played in New York City recently for around 90 people.
So how do our streaming revenues compare?
According to the most recent report from our digital distributor Tunecore, our songs have been streamed 284,575 times on Spotify. We’ve earned $1,359.01 from those streams. Our stream count is a whopping .008 percent of Portishead’s, yet our revenue represents approximately 54 percent of the band’s earnings from streaming.
The difference is how each band delivers music to Spotify. We pay a flat fee of $49.99 per album per year to have Tunecore push our material to Spotify and 23 other digital download and streaming stores. Their cut? Zero. We keep every cent of our earnings. In Portishead’s case, their earnings are subject to the terms of their record deal. I’m not privy to those terms, but it’s safe to assume the label is taking a hefty portion of those profits. With this in mind, assigning blame to Spotify (or the number of other streaming services such as Rdio, Rhapsody, and Deezer) is pointing the finger at the wrong problem. The old adage of “the numbers don’t lie” doesn’t ring true; here, the numbers don’t tell the whole tale. The real antagonist, in this case, is likely Portishead’s label, Universal.
This is not an anti-corporate-label, “every-band-should-do-it-themselves” kind of argument. Record labels like Universal deliver powerful support that plays a crucial role in elevating a band to new heights. Instead, it’s a reminder that bands should take extra efforts to understand the terms of their deals and work to negotiate and keep higher portions of their streaming revenues.
Wait, What Does $1,359 Buy You Anyway?
I’m not opening Fort Frances’ financial statements to impress anyone. Let’s face it: $1,359 is not a game-changing amount of money for a band. In our case, though, we’ve earned enough to cover the costs of mastering our next full-length record. At the rate our Spotify plays have been increasing, I’m betting we’ll earn enough revenue from Spotify alone to help cover gas and hotels by the time we release that record, too. That’s more than a lot of other streaming services are doing for us. Consider Pandora’s compensation model, which pays around $1,370 for one million spins. Translation: we would need four times as many listens to earn the equivalent of our revenue on Spotify.
This Is About More Than Direct Money
Outside of actual dollars and sense, Spotify delivers the intangible value of social currency. Thanks to its Facebook integration, users can easily discover new bands based on trusted opinions of their friends. Rather than asking for recommendations, those suggestions are constantly rolling in, waiting for users to click and stream. As a listener, when you play your favorite song, you aren’t just treating your own ears. You’re spreading the word to the rest of your community, and that is a huge help for bands in our shoes.
There is another essential piece of the platform that increases the value to independent and major bands alike: Spotify’s integration with Songkick to automatically display upcoming nearby tour dates. Bands invest plenty of money in Facebook advertisements and banner ads to promote shows and sell tickets. In a crowded digital landscape, these free reminders of when and where to see groups and artists perform are crucial factors for success.
How About This #TIDALFORALL Movement?
Back to the cash discussion. If you’ve been following new from the streaming world, you’re well aware that Jay-Z, Jack White, Alicia Keys, and some other massive stars are throwing their weight behind TIDAL. The governing philosophy is one that resonates with all songwriters: music deserves money. There’s no free tier in the service. There’s a $9.99 per month introductory level and a $19.99 per month level that includes high-fidelity audio. Based on the very little data available on TIDAL’s payouts, the company does provide a significantly higher royalty rate. Here’s a statistic, to give you a laugh: we’ve earned $0.27 from 18 spins on TIDAL. That’s an average of $0.015 per stream. If Spotify averaged the same payment rate, our current earnings would be more than $4,200. So, to be fair to Jay-Z, the pricing model is more rewarding for musicians.
However, the content model at a broad level feels more prohibitive. TIDAL’s approach is very much based on exclusivity: exclusive songs, exclusive videos, and exclusive access to the owner’s concert in New York. This model may prove to be beneficial to bands with massive reaches and die-hard loyal fan bases. For emerging acts, though, the key is casting as wide net as possible. We need as many sets of ears as possible to be open to hearing our music. I appreciate any service dedicated to increasing financial compensation for creative work, but I’m not convinced TIDAL will reach the critical mass necessary to make streams really start to add up.
Spotify, on the other hand, is charting a promising course toward taking streaming mainstream. The company currently has around 60 million active users, 15 million of whom are paying for enhanced access. There is clearly room for expansion, and Spotify is pursuing some innovative partnerships to increase its reach. For example, its relationship with Uber lets passengers control music during their rides and listen to their Spotify playlists, and a newly announced partnership with Starbucks is built to help drive coveted paying subscriptions. Members of the My Starbucks Rewards program can earn loyalty points for subscribing or upgrading to the premium level. There is a healthy appetite for music discovery in 2015, and Spotify is helping feed it with these innovative efforts to reach new users.
Nostalgia vs. What’s Next
Would it make me and every member of every band happy if listeners wanted to pay yesterday’s standard of 99 cents for each of our songs? Absolutely. It’s clear I’m better off asking people to download our record. However, that’s a foolish approach, and it’s a problem that continues to challenge the music industry, as it’s plagued by nostalgia.
Years ago, the industry was spoiled by a lack of consumer choice. If you wanted music, you went to the store. You spent $16.98 on a 12-track album. In 2000, listeners bought 730 million physical compact discs. Too many of the leaders in the industry cling to the hope that somehow, in some way, listeners will wake up and want to pay what they used to for music, or something approximating that
Simply put, that’s not going to happen. In 2014, music purchasers bought just under 141 million physical albums. Digital downloads didn’t cover the gap, either; there were just 106.5 million of them sold.
However, these doomsday numbers only tell part of the story. Taken out of context, one might assume music fans don’t care as much about soundtracking their lives in 2015. They still do; they just don’t need to own the soundtrack. In 2014, statistics from Nielsen SoundScan show that streaming increased by 54 percent. Listeners gave songs over 164 billion spins last year.
Like it or not, though, those listeners have grown accustomed to seeing a very low price tag for those streams. Sure, no one who plays music or works in the music business wants to make less money, but there’s no turning back now. Rather than focusing on the negatives of smaller revenues for recordings and the algorithms that calculate fraction-of-a-penny royalty rates, consider where those streams lead: More fans. More ticket sales. More opportunities to build momentum in today’s continually evolving digital landscape.
And, yes, all of that equals more revenue.