Zimbalam just presented me the statements for 2012 Q1. The per stream rate has improved a bit. 0.38 Euro cent (0.47 US dollar cent) over January, February was good for 0.41 Euro cent (0.51 US dollar cent) per stream. In March the rate slipped a little to 0.4 Euro cent (0.5 US dollar cent).
Here is the updated graph:
Have you seen the interview with Daniel Ek and Sean Parker at the D: All Things Digital Conference? They dance around the issue of payments to artists. Makes me wonder why.
The truth is basically very simple. About 70% of Spotify’s revenues (advertising + subscriptions) gets paid to the rights holders of the music. This is before Spotify covers their own operational costs (which are still higher than the remaining 30% ) Each month the pay out is calculated based on the revenue and the number of streams. That explains for the different rates each month
How many songs do people stream? 20 songs per day maybe? That would mean 600 a month? Let’s say 700 a month for the sake of an easy calculation. You pay $10 a month, 70% is for royalties, so $ 7 is paid out to labels and artists. Now let’s do the math:
$7 for 700 streams means $0,01 per stream
Okay, this is in a perfect world where every user pays 10 bucks a month. You know that is not the case, only 20% is paying. Still Spotify was able to pay $ 0.005 per stream in March 2012. Not that bad if you ask me, advertising revenues are quite well I take it.
I do realize that this calculation is oversimplified, but it explains why Spotify just cannot pay more per stream. No streaming service can pay more without raising subscription fees or limitations on the number of streams.
And it doesn’t matter if Spotify has a thousand or a trillion paying users. The revenue may rise but the number of streams will rise in the same proportion. The per stream payment will always be a fraction of a penny.
A lot of artists believe that are getting screwed by Spotify. These artists probably expect a much higher payment per stream and are convinced that big labels are getting a far better rate. But is this very likely? I don’t think so. Why doesn’t Daniel Ek or Sean Parker present a rough calculation of the payout? What harm can that do?
Spotify is taking all the heat, but do other streaming services pay better? Here is a snapshot showing what MOG pays: 0.46 Euro cent per stream.