Music Royalties and Spotify

The BBC World website is reporting that Thom Yorke, the singer from Radiohead, has pulled some of his music off Spotify and Rdio because he says that their royalty payments are too low.

To be exact he tweets:

%CODETWEETTB7%

Radiohead are not new to this type of provocation however. In 2007 they released an album “In Rainbow” that could be downloaded only from their website. The interesting line was that the listener could pay whatever they wanted for the download, there was no fixed price.

They came in for a lot of criticism as this article in the NME shows, with some people claiming they were making it more difficult for new bands to make any money from their releases.

Well Thom does not agree. The album was “bought’ 3 million times in its first year of release and Yorke himself says that the band made more money from this one album than all of the others put together.

So this leads to the obvious question about Spotify, how much do they pay?

Busking pays more than Spotify

Busking pays more than Spotify

As a musician myself I have a good knowledge of how the payment systems worked in the days before digital downloads. When my band released albums or singles and we received radio play we were paid. In the UK about 15 years ago an artist was paid about $30 a minute for a play on national radio. This means about $90 to $100 for a song, minus the 20% that the PRS take for collecting it and distribution. It’s good money. One single that gets 10 plays on John Peel or other fringe shows could make $1000, enough to make another.

Now Spotify is different of course because a play is personal, not to an entire country. This article on the Music Think Tank blog explains how royalties are worked out, but I will try to explain here as simply as I can.

Spotify make money from advertising and subscriptions. They pay 70% of their income out in royalties for the music they play. They pay out pro-rata, so if 1% of all streams happen to be your music, you get 1% of that total payment. Simple enough (maybe).

So lets look at the numbers.

In 2011 Spotify generated $20,333,333 per month.

They distributed 70% which is $14,233,333.

They had 1,083,333,333.333333 streams per month.

Let’s say I got 20 streams a month, about 0.00000184615% of the total royalties payout.

I make $0.26 a month, that is 26 cents. $0.01 per stream, minus the 15% that the digital distribution company takes for putting the tracks up and the 10.2% publishing fee.

About a quarter of a cent per play, in round terms, anyway not a lot of money by anyone’s standards.

Of course the more people use Spotify, the less an individual stream is worth.

In the US Pandora, another streaming site is pushing Congress into passing legislation that will cut this rate further, by 85%.

Even Pink Floyd have been complaining that artists are being duped.

I for one keep making music and releasing it to the world, I don’t expect to get rich though!

UPDATE: This week the BBC has a follow up article about Thom and Spotify. Check it out here.

UPDATE: Spotify has now revealed it pays artists $0.007 per stream. That’s a lot less that previously thought.

Is paying for music a thing of the past?

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With the availability of streaming music services like Pandora, Spotify, and Rdio all available for free and unlimited access, there are fewer people than ever actually paying for their music. According to a recent article on TechCrunch, Tom Conrad, the CTO of Pandora, said that about 50 percent of Americans don’t pay anything for music while another 40 percent only pay $15 a year for it.

If you were to walk into a big retail shop ten years ago, one of the biggest sections in the electronic media department would have been a massive collection of compact discs. Today with the likes of iPhone, and Android, CD’s have made technologies like compact discs seem old and obsolete technologies of the past.

The biggest culprit to the recording industry has been the proliferation of bit torrents and peer-to-peer piracy software. According to Torrent Freak, the Canadian Broadband Management Company says that forty percent of all internet traffic in North America comes from either Netflix or Bit Torrent. While the original intention of this sharing software was to make it easier for business to transfer important files, most of the traffic from it today comes from the illegal trade of music, television shows, and movies.

While services like Pandora, Spotify, and Rhapsody have a paid-premium option available, their free services are so convenient that there is no real reason to purchase them. Unless you want a completely advertising-free experience or simply want an unlimited data cap on what you can access per a week, the free versions of these programs work just as well and include almost all of the features. Ironically, the only companies that actually have to purchase these plans are the small retail stores that are selling you the music.

Spotify's LogoThe RIAA is having an abysmal time selling digital copies of singles and albums to consumers. Not only are the versions that are available online cheaper and make less money, they are also much easier to steal, copy, and distribute illegally over the internet. Google is partially to blame for this widespread availability of illegally traded music.

According to an article in the Daily Mail, if you type in your favourite artist into a Google search, several unauthorized and pirated versions of the song will show up available for stream or download. While Google is not implicitly to blame for this, they are turning a blind eye to the practice by ranking them higher in search results.

The person who is most responsible for the digitisation of music is the late Steve Jobs. When the iPod first appeared on the market, Steve spearheaded the movement to make iTunes the ultimate way to purchase music online. In an article in the Inquirer, David Hughes (head of technology at the RIAA) claimed that Steve was a hypocrite for claiming to be a spiritual leader but not putting enough piracy protection on digital downloads.

There is no turning back from the digital way of selling and listening to music. We have come too far in our technological advances and reverting to older methods such as CD’s and cassettes would seriously hamper our tech advances.

The music industry will need to find new ways to make income such as advertising, product placement, and incorporation in order to continue to make a profit… or it could just go away and make music an art form.

Spotify and its changes

I am an avid user of Spotify, and have been an avid user for almost two years now. Spotify was able to find music for me that iTunes and YouTube couldn’t find for me. But now Spotify is having a few changes. For example people who signed up for the free service in the past few months have been able to listen to 20 hours a month of music, this is being culled to just 10. And people like me who signed up when Spotify first joined the music market will only be able to listen to a single track 5 times a month.

Spotify's LogoThese changes don’t really appeal to me very well because I listen to some music 5 times a day, even 5 times in an hour! So these changes will have a detrimental effect on me. So what do I do? Do I put up with it and clog up my PC with gigabyte after gigabyte or music that I record from Spotify. Or do I sign up to a paying account (either £9.99 pm, or £4.99 pm)? I’m  not too sure to be honest, I’d rather not pay for it, but at the same time I’d rather not spend money on buying an external hard drive to put all of the songs onto. So I’m sort of stuck between a rock and a hard place.

Well why are Spotify making these changes? Well record labels and artists are complaining that Spotify is playing their music for free, even though their is advertising between songs occasionally. This unfortunately is sort of the truth, and so I don’t think Spotify are going to be making any u-turns in their decisions any time soon.

So you tell me what do you think is the best thing that I should do, should I upgrade and pay for it, or pay for a hard drive?

I hope also you like my first article too 🙂

EDITOR NOTE: May I just point out to all readers, that it may not be 100% legal to record off Spotify, depending on the track and the artist – note by Christopher