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Business News Digital
Spotify defends royalty pay outs, DIY band hone in on the secrecy
By CMU Editorial | Published on Wednesday 21 September 2011
There has been more debate about whether Spotify is fairly compensating artists. This debate now occurs on a regular basis, mainly when a songwriter reveals what they have received from Spotify via their collecting society, which, of course, ignores the fact that labels will likely be getting a significantly higher pay out on the very same tracks being played.
That said, the latest debate was initiated by a self-releasing indie-folk outfit called Uniform Motion and was based around the royalties they earn on their sound recordings (as both label and recording artist) rather than their publishing (as songwriters). They posted a long blog about the economics of being a DIY artist, providing some interesting insights into what artists can make from the various digital services out there (both download and mail-order).
The blog post led to an online debate comparing the money artists can make ‘per download’ via a la carte music services, and ‘per stream’ via Spotify et al. But that’s not the right way to assess the Spotify model, or so say Team Spot, who were asked about the debate by Hypebot. They responded: “Spotify does not sell streams, but access to music. Users pay for this access either via a subscription fee or with their ear time via the ad-supported service – they do not pay per stream. In other words, Spotify is not a unit based business and it does not make sense to look at revenues from Spotify from a per stream or other music unit-based point of view. Instead, one must look at the overall revenues that Spotify is generating, and how these revenues grow over time”
They then repeat various stats, that Spotify has paid out $100 million to rights owners, that they are the second largest source of digital revenue for European labels, and that they are turning file-sharers into music consumers, etc etc. Much of which is fair argument on Spotify’s part.
Though, interestingly, Uniform Motion has since noted on their blog that their problem with Spotify and other streaming services isn’t so much how much they get paid per stream, but rather how that fee relates to what the streaming firms earn for ad sales and subscriptions. They say: “What we dislike about Spotify, is the lack of transparency in their business model. With Apple, it’s simple. They take 30%. With Spotify, we don’t know if we’re getting a fair deal or not”.
Of course, Spotify’s business model is more complicated than that of Apple’s iTunes, plus most streaming services are currently operating loss-making businesses that they would probably rather not expose to the world (and potential buyers and dotcom investing idiots). And, of course, some of the secrecy surrounding the likes of Spotify comes from confidentiality clauses put into licensing contracts by the big rights owners. But it’s also a fair point that, while Spotify’s exact business model is only known by insiders and, possibly, the top execs at the majors and collecting societies, it’s hard for the average artist to judge whether they are being ripped off or not.
Check the Uniform Motion blog here.
