Spotify Pays Less Than 0.5c Per Stream and I Honestly Couldn’t Care Less (Op-Ed)

Since Spotify launched its music streaming service in 2008 there’s been constant shock, fascination and outrage at the amount it pays artists, per stream.

But ultimately the figures have been misunderstood, misappropriated and given far more importance than they deserve.

So why do these metrics persist, what are the myths around them and how can we develop a better understanding of the way most of us pay for music? 

Although the “half a cent per stream” notion is thrown about, the truth is platforms like Spotify don’t actually pay a standard amount per stream. They pay pro-rata, based on the content that is streamed across various territories and account types.

A per stream fee would mean, if every Spotify user halved the amount of tracks they streamed in a month Spotify themselves would have an increased profit for that month, as they would be paying away a smaller batch of royalties.

In fact, if this was to happen the payaway would be exactly the same in total but the per stream payment would be doubled. Those paying undue attention to the per-stream payment would be celebrating as not one additional cent was paid out to artists and labels. Even with such a large spike, the per-stream payment would say nothing about the state of the industry as I argue it does now.

Last month’s Spotify subscription price increase could have been seen as a pay rise for the musicians we love and adore. However, Spotify’s struggle to articulate their business model left many seeing the rise as a cynical money grab rather than a much needed boost in revenue for the industry.

The focus on a per-stream payment is perhaps behind the misunderstanding and the relentless insistence in seeing good news as bad.

Spotify did themselves no favours with their official communications around the price change justifying the move as; “…so that we can continue to invest in and innovate on our product offerings and features, and bring you the best experience.”

This mentions nothing of more money for artists and may even imply a new method of calculating their pro-rata payments, if the lion’s share of this price difference is really going to innovations and products.

I highly doubt that Spotify will vary from the 30% margin that they have claimed to operate on for the majority of its existence. With so many licenses in place they are unlikely to even have the legal capacity to manipulate their revenue splits at will. 

In the early years of Spotify, the platform was available only in affluent, high-cost-of-living countries where a premium subscription price could be justified. As newer territories opened up, the subscription price was adapted depending on the cost of living in those countries.

This has meant that over time the per stream payment has averaged lower because the latest markets to come on board have a lower subscription cost.

Many of these markets were unavailable to musicians historically, either due to widespread piracy, poor label representation in these territories or the prohibitive cost of distributing physical music products to the far reaches of the globe.

So, it’s new money.

Artists are making fans and generating revenue in the Subcontinent, Latin America, Africa and Eastern Europe for, in most cases, the first time.

The lowering effect that these new markets have had on the average per-stream payment has led those insistent on using this metric to cry foul.

Clearly, treating this new money as a reduction in payments to artists and rights holders is at best cynical if not outright dishonest. 

Another persistent complaint comes when comparing the per-stream payment to the royalties generated by a whole album purchase. But when we bought a CD, cassette or vinyl record, we paid upfront for a lifetime license to listen to that album.

Streaming generates royalties every time a track is listened to (and always will), so there’s no fair comparison between these two systems. 

So where did the attachment with per-stream payment start?

My guess is that the key metric of total number of streams that appeared next to a track on Spotify, helped suggest to the public that a stream was a transaction.

As we were struggling to get our heads around the new streaming model, consumers, artists and industry wanted to ask: “So, how much is that worth?”

However, a stream on a “free” (ad supported) account in Turkiye is going to have vastly different value to the per-stream payments of a premium account in Switzerland.

These values don’t average out that simply, yet without a replacement metric for people to understand varying successes of an artist on Spotify, the average per-stream payment became a point of focus.

If we focus on the average per-stream payment as a metric for the state of the music industry, we’re left with a sorrowful story of consistent decline.

The reality of the music industry revenue is very different with the uptake of streaming reversing thirteen straight years of decline growing our total earnings beyond the previous peak, at the turn of the millennium.

It is true of course that there are many more musicians releasing music now so the pie does have to be cut up into more pieces. But I struggle to find anyone who’s willing to say this a bad thing and who would really want to return to the days where releasing music was expensive and exclusionary.

It’s hard to replace a widely-attended metric with a not very convincing “it’s complicated” explanation. But we can change the narrative from a transactional perception of individual streams to a growing family of music lovers who’ve chosen to subscribe to legitimate music services. Services that have given the industry much needed growth and connected fans and artists from all over the world for the very first time.

The per-stream payment may continue to trend downward or it may make a recovery as more users graduate from the “free” tier to premium accounts. Either way the focus should be on the growth of the user base and the proliferation of music globally, rather than a varying metric that proves nothing.

Arlo Enemark is owner of Melbourne-based Boss Fight PR, and a music industry veteran with experience from label & artist management to distribution & promo. A lifelong music producer and artist, he has released projects under the guise of Watermelon Boy and more.