The way Spotify pays you is kind of dumb. I mean strange. I mean maybe the best way? Ahhh nah who am I kidding it’s probably not. It’s dumb…
Back in the glory days (before I was releasing music) artists could sell a CD for oh let’s say $10-$15 a pop. When I say “glory days” I mean “glory days?”. Things were simpler then. This example demonstrates a pretty clear transaction: Artist make music. Artist make CD of music. Fan of music by CD. Artist get money from fan. *Please read in caveman voice*
Those days for many artists are gone and things are a little stranger now. When I say gone this is what I mean:
A look into the mind of an 18-35 year old fan: “Don’t sell me a CD bro. I don’t want it bro. Oh no he’s giving it to me for free. Shit.. I have to take it now or else be rude. What am I gonna do with this? My car doesn’t have a CD player. My laptop doesn’t have a disk drive. Paper weight? Trash?”
Now show of hands who here knows how exactly Spotify calculates how much money to pay you for your streams? If you raised your hand you are the exception. I think most artists don’t understand what’s going on behind the scenes. I’m gonna break it down.
Spotify makes a pot o’ money.
Spotify takes 30% off the top of the pot.
The remaining 70% is paid out to all the artists on Spotify (there are approximately 2 million of us).
This is where it get’s weird. You the artist are paid relative to how much you own of the total market share of streams on the platform. For example, if 50% of all the streams on Spotify in a given year were of Ed Sheeran (I would guess he actually gets close to 1%) then Ed would get half of the pot - Half of the 70% leftover after Spotify gets theirs for that year.
What’s wrong with that? Many things actually:
I did a silly experiment. What would happen if we took Drake off of Spotify and redistributed his streams evenly across all artists? Let’s look at how this would have effected my 2018 royalties from Spotify. Disclaimer: I like Drake and do not want his music removed from Spotify. His was the easiest data to find. Math time:
According to google Spotify made $5.3 billion of revenue in 2018. 70% of that was paid to artists.
Drake had 8.2 billion streams in 2018 alone.
The average stream is worth about $0.004 (often less than).
We can kind of extrapolate the total number streams on Spotify in 2018:
(0.7 x $5.3 billion) / $.004 = 927.5 billion total streams
Drake had about 0.008% of all streams on Spotify in 2018. Not bad.
I had about 200,000 streams in 2018 and made about $800.
With no Drake taking 0.008% of all the streams I would have made:
(200,000 / (927.5 B - 8.2 B)) x (.7 x 5.3 B) = $807
That’s seven crispy chicken sandwiches.
$7 is not a lot of money, but 200,000 streams is also not a lot of streams. Every independent artist with 200,000 streams in 2018 would have made near $7 more. There are probably tens of thousands of us. Also I got most of these numbers from google and I do not know where they were sourced from.
RELEVANT NEWS: The streaming platform Deezer is experimenting with a new method for calculating artist payouts. Read more here.
Zach Hughes is the founder of Lost Harbor Music. Zach is an independent music producer & recording engineer based out of Nashville, TN.