How Spotify pays musicians (2021)

It starts with two questions:

1) Who is paid?
Rightsholders.
This can be a musician/artist, a songwriter (who may not be the artist), a record label, or a number of other entities. Or some combination.

The Details: Rightsholders

Copyrights:

When you think of a song, there are two copyrights. One is the composition (the notes, melodies, lyrics, etc that make up a song). A composition is created — but not necessarily owned — by a songwriter.

Loans for recording music:

Often, artists need money to record music.
Often, a record label gives them that money as a loan.

Then there’s the composition copyright…

…which is also called publishing or songwriter side. The publisher (sometimes a subsidiary of a label) can also become the rightsholder and get royalties here too, especially until it is “recouped” and a loan is paid back. Publishing can get really complicated.

It gets even more complicated (and we’re skipping it):

There are a variety of other copyright collections and payments for rightsholders involved with music. We’re skipping them today. Broadly speaking, let’s just assume a musician who enters a traditional recording and publishing deal will see about 10% of the money both copyrights from their song generates. These aren’t exact terms, and they vary a lot, but this is a fair example conceptually. Here’s Spotify’s rundown of it if you want to learn more.

Put all of this knowledge into bucket #1…we’ll connect it all together in a moment.

Now, in bucket #2, we have Spotify. They bring in billions of $’s a year in revenue from ads and subscription fees. After deducting some taxes, card fees, etc, they claim they pay out ~67% of all revenue money to *rightsholders.*

Wtf is a rightsholder in this context?

A rightsholder is whoever owns & controls the composition and recording copyrights. This might be an artist, label, publisher, or likely, a combo of these parties.

One dollar ➡ 67 cents ➡ 6.7 cents.

The artist gets paid almost nothing, but it’s not really Spotify’s fault (simplified).

The Details: Streamshare

There is a second major caveat to streaming payments: streamshare. This is the dreaded “Spotify only pays $0.003 fraction of a penny per play.”

⚠pay per listen ≠ streamshare⚠

Key takeaways

  • The music streaming payments system is still too opaque.
  • Artists don’t get paid by streaming services; the rightsholder do.
  • Two copyrights for a song: composition and sound recording.
  • Streaming doesn’t pay rightsholders per play; they pay per proportional plays to other streamed music. This is called streamshare.
  • The common argument is for streaming services to pay artists more. An alternative argument could be that streaming services need to generate more revenue, which means there is more money to split.
  • Low artist payments are primarily a mechanism of current recording deal structures and contemporary copyright ownership models.

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Doris & Company

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