Big Steaming Services Don't Pay Artists

The economic principle I’m exploring is Institutions are the “rules of the game” that influence choices.


My research question to help me study the economic principle is What are the economics of Pandora, Spotify, and other streaming services for newer vs more established artists?

The article published in Digital Music News and The Verge titled “What Streaming Music Services Pay” and “Spotify's Year in Music shows just how little we pay artists for their music” demonstrates this economic principle by arguing/showing despite having more paid subscriptions or popularity, some streaming music services won’t pay artist much at all.

Digital Music News

As we discussed in my last blog post, YouTube is maybe not the best for paying artist, but a great way to start in the music industry. This made me curious and decided to look at other streaming services to see how they compare. What I found was remarkable! “Spotify and YouTube, arguably the largest streaming music services, had the worst payouts.”


I would have never thought Spotify, just like YouTube, didn’t pay their artist that much. “Last year,{2017} the service paid out $0.0038 per play. Not much has changed this year{2018}. With a reported 51.51% market share in the US, Spotify pays $0.00397 per stream.” And what surprised me more is that Napster and Groove Music (aka Xbox Music) have the highest payout to artists, but lowest streaming numbers. “Though it ranked the highest on this list, it had the lowest streaming music market share of 0.65%.“ How are companies that have the highest number of revenue have the lowest payout to artists and vice-versa?


So I went around looking for answers to this question and found that Spotify uses a complex formula to determine the royalties artists earn from streams. Major labels likely receive a sizable sum from Spotify, but not all of that money is going to artists. As said in article titled “Spotify's Year in Music shows just how little we pay artists for their music” published by The Verge “Not all artists get the same cut of Spotify revenue either: depending on their contracts with the label, some musicians might only recoup 15 to 20 percent of the streaming revenue they brought in. Other factors also come into play too, like the country in which a song was streamed and the currency value in that country. “Still, Spotify admits the average "per stream" payout to rights holders lands somewhere between $0.006 and $0.0084.”


“Here’s what that means for me. My top artist of the year was Built to Spill, whose songs (mostly from There's Nothing Wrong with Love) I streamed 267 times over the course of 2015. Using the upper limit of Spotify’s estimated payout, that would be 267 x .0084, which means I paid Built to Spill somewhere around $2.24 for an entire year of music. And that $2.24 is distributed among the music's "rights holders," which includes labels and publishers.” said Lizzie Plaugic, a Spotify user and author of this article. That means that the artists get almost nothing compared to the other big artist like Drake which racks in $15 million on Spotify with his 1.8 billion streams.


This is like getting the rich more richer and the poor more poorer. I don’t think that is fair. As discussed in the YouTube blog post, this makes smaller artist have to go out and make other business plus do live concerts to try to make a living profit.


Napster and Groove Music don’t have to pay as many other bills because they are not so big and can pay the artist more than the other companies. Plus, they don’t have that complex formula as Spotify does making they the highest payout companies out there. On the downside, they don’t get that many steams and something loses money which can make companies go out of business like Groove Music is in 2019. “With few users lining up behind the service, the company just couldn’t compete against established market leaders.”


“Much has already been said about how little Spotify pays artists and how unsustainable the current streaming model is for artists. Unless this model changes or labels take a smaller cut of the profits, the numbers will remain minuscule for smaller artists.”