Music industry

7 billion dollars paid to the music industry

Last year, Spotify launched an initiative called Loud & Clear that positioned itself as a pay transparency initiative for artists and songwriters. In direct response to global protests demanding higher royalty payments, it was evident from the language of the announcement that the statistics provided were not truly transparent. Spotify released the 2021 annual report today, and the company is again using carefully crafted language to market itself as an artist-friendly company.

The biggest number highlighted in the report is the $7 billion it paid out in royalties to rightsholders, which the company says is more than any single service or retailer in history. Given that Spotify has over 180 million paying subscribers worldwide – far more than any other streaming platform – that amount isn’t actually that impressive.

Moving on to more granular royalty breakdowns, Spotify boasts that for the first time, more than 1,000 artist catalogs generated over $1 million for rightsholders. Of these catalogs, 450 generated $2 million and 130 generated $5 million. Further down the scale, more than 50,000 catalogs generated $10,000 from Spotify.

“Generated” is the operative word here, as the vast majority of artists or songwriters see none of this money until it falls back to the rightsholders – labels, publishers and distributors – who then split the payouts according to their contract. Bringing that point home, Spotify says the $4 billion it paid out to major labels in 2020 means “more money to reinvest to grow the industry.”

It’s worth noting, however, that there’s a rosier picture for artists using smaller distributors like DistroKid, TuneCore, and CD Baby to stream music independently on Spotify. 28% of artists who reached $10,000 in revenue on the streaming service used this method.

Another issue that Spotify avoids in the report concerns per-stream royalties. “We don’t believe the per-stream rate is a meaningful rate for analysts because fans don’t pay per song,” reads the Loud & Clear FAQ. “Spotify, like all major streaming services, pays royalties based on an artist’s share of all streams on the platform. We call this ‘streamshare.’

So what’s the big picture here? Spotify CEO Daniel Ek has previously said his desire is to help a million artists “make a living from their art”, and the streaming service falls far short of that. Artists signed to labels are tied to a particular royalty rate stipulated in their recording contracts, and even then, they don’t start receiving money until they get their advance and fees back. other expenses.

And while there’s a growing number of artists who self-distribute their music and pocket the majority of their streaming royalties, that’s still only 15,140 who generated $10,000 before aggregators took their go. It’s no wonder David Crosby’s advice to young artists is not to become a musician in the first place.

Read the full report here.