The Economics of Spotify - Local Band Version
March 6, 2018 8:15 AM   Subscribe

Is Spotify Pay to Stream for small bands - inquiring minds want to know.

I've read lots of articles about how small the per stream payments are from Spotify (and I assume the rest of the streaming providers as well) but I had an interesting discussion with a local band. This band is a small country/honky-tonk outfit that appears to be relatively popular in our geographic area and have 5 CDs available (BTW - all already purchased and in my collection). Spotify shows only 1 of these CDs and it is fairly old (2008). I was asking about the mechanics of Spotify (why can't I hear your other CDs) and who determines which albums are available for streaming - I would have thought that any income, however trivial is still more than $0. Her answer was that artists have to pay to be available on Spotify and the net result for them would be negative. She suggested that I use Apple (iTunes or Apple Music? not sure which) instead. I couldn't find any real discussion on this aspect of the streaming economy and was wondering if anyone had any insights?

posted by gsquared to Media & Arts (7 answers total) 2 users marked this as a favorite
I would have thought that any income, however trivial is still more than $0.

I don't know what it takes to get on Spotify, but I can tell you that I used to do accounting which included some royalty allocations for a band that was indeed on Spotify, a group that is not now particularly popular but that had some previous success especially locally and definitely still had a following in the area I lived in, and where they overall made enough on royalties to at least provide a nice income supplement to the main group members, if not enough to live on comfortably full-time.

The amount they made off of Spotify plays for their entire catalog in a given year was roughly what you could find scrounging in your couch cushions. Not like I have access to their royalty statements anymore to go look since I changed careers, but we're talking maybe five or ten dollars a year max, and the per-stream rates are only getting worse over time. There's definitely a point where you're talking about dividing that amount among a whole group and it just can't possibly be worth any amount of effort to set up and maintain, much less any setup fees if they exist.
posted by Sequence at 8:41 AM on March 6 [1 favorite]

Bands without any kind of record deal - and it sounds like this may be the case here - tend to use an aggregator like CD Baby. Band pays aggregator, aggregator uploads music to all kinds of music services (Spotify, Apple Music, Tidal, Deezer, iTunes, etc etc), band gets the royalties. It doesn't cost a great deal ($35 per album for the basic) and CDBaby currently boasts 95 digital distribution services worldwide.

The economics of getting paid through Spotify streams are widely discussed but bear in mind that you will see selective reporting: Spotify are not going to reveal the exact royalty rate paid; the record companies won't; and only certain artists will be prepared to. The Trichordist has some data: a per stream rate of $0.004 is the (very) rough average for Spotify. Try and ignore anything on Digital Music News which tends to yell and scream whenever possible.
posted by giraffeneckbattle at 9:02 AM on March 6 [4 favorites]

You have to either be on an established label that has contracts with them or go through an service that does digital distribution. The fees for them doing so can be ~$30+ per album. Per stream payments are rather low, so they may not think it's worth it.

It's possible that they could actually use Spotify through their current distribution and chose not to because iTunes pays so much better than Spotify does.
posted by Candleman at 9:04 AM on March 6

When I've been looking at adding my stuff to streaming platforms I found services that asked something around $15/year or $40 one-off for each album, or progressively less for EPs and Singles. The numbers going around for the biggest players, Spotify and Apple Music, is a per-track payout of around 0.004 and 0.008 r, so I'm averaging it to 0.006.

Now, last year I released a 10-track album. For each person listening to it from start to finish, I would get 6 cents. To recoup the cost of one of those services, I would need 250 complete streams every year, or 667 on the long run (assuming payout rates don't decline).
Next step, I have five albums, three EPs and a single. With some headmath, I would have to spend around $110 every year to have them all on streaming for a year, or $270 for good. To recoup that, I'd have to get 18333 streams every year, or 45000 on the long run.

Or I could sell them at all Bandcamp or iTunes or the Google Play Store. Can't say for Apple or Google, but if someone purchased the discography for €6 on Bandcamp, I'd end up with maybe €4.5 on my account (post Bandcamp and Paypal fees, both services with free setup). That single album costs €3, which should get me around €2. To get that kind of rock-star money from streaming, I'd need 2833 individual streams. Far more likely someone would throw me a fiver for a single album.
Also: to buy a Learjet ($11.3 million), I'd need to shift around 3.75 million albums or 188 million streams (and use the jet to escape the IRS).

tl;dr: for unsigned artists, unless you are dead certain there's an audience, stick with digital sales. For labels, that have been thrilled to re-sell your favourite album first on vinyl and 8-track, then on cassette and CD ans SACD, then on "anniversary", "remastered", "collectors", 180g vinyl", etc, streaming is the gift that keeps on giving, because listeners are constantly micro-purchasing the songs.
posted by lmfsilva at 9:44 AM on March 6 [2 favorites]

Spotify shows only 1 of these CDs and it is fairly old (2008). I was asking about the mechanics of Spotify (why can't I hear your other CDs) and who determines which albums are available for streaming - I would have thought that any income, however trivial is still more than $0.

Getting music up on Spotify isn't free, and musicians really are making literally fractions of a cent off Spotify streams. Combined with the likelihood that having music available on Spotify makes it less likely that some people would pay to purchase that music outside of the streaming world, chances are, their income as a result of being available on Spotify would become negative as opposed to being $0.

Put another way, it would take thousands of Spotify streams to make up for the loss of one album sale. A lot of musicians are aware of this and put their music up on Spotify anyway for maximum visibility and reach, but that's not something all musicians are comfortable with.
posted by bananana at 11:07 AM on March 6 [1 favorite]

Interesting comments and viewpoints. I look at it from the other side (user/listener) data point of 1! I probably haven't listened to a physical CD in 5+ years though I have bought 25+ CDs in that time - all at live shows. Not sure what would get me to actually buy a new CD from Amazon or CDBaby especially knowing that most of the purchase price is not going to the artist. Realistically if I can't stream it I probably won't listen to it. $40-$60 /CD to get the product on the services seems to be a cheap way to get at least some exposure - at this level there is unlikely to be any radio play - not sure how many CD sales would be forgone if the music is available. Lots of fascinating information.
posted by gsquared at 1:54 PM on March 6

Well it's not just physical CD sales, it's digital album/download sales as well. But yes, lots of music listeners are at the point where something like Spotify is basically their permanent music library, so it is a trade off for some artists between maximum exposure and maximum potential sales, or at least not feeling like they're just giving their music away for nothing.

One of my favorite bands just released their long-awaited new album as a download only, not available on Spotify. And so I bought it and downloaded it, because yay new music by one of my favorite bands, but the fact that it isn't on Spotify means I haven't even listened to it yet. Most of the time I'm listening to music it's either in the car via Spotify or at work, via Spotify. So I know exactly what you mean.

But I think of my digital download purchase as being basically a donation to the artist, because I know how hard it is to sell any music at all anymore and how much time, effort, and, yes, money it takes to make and release good music. And I keep hoping that eventually something will crack in the streaming payment model and maybe streams will start paying musicians more, somehow. A premium Spotify membership is damn cheap for what members get.
posted by bananana at 5:11 PM on March 6

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