Business Matters: A Brief History of Spotify Royalties
Business Matters: A Brief History of Spotify Royalties

Spotify's per-stream royalty payments to one independent artist are showing the heft people might have thought impossible just a few years ago. David Harrell of the band t he Layaways regularly posts numbers from his band's CD Baby royalty statement at his blog, Digital Audio Insider. Harrrell's latest post sums up nearly three years of Spotify royalties.

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Warning: reading about Spotify per-stream payouts may cause a person to compare these royalties to the revenues of iTunes and CD purchases without regard for the volume of streams or the period of time over which an artist can receive streaming royalties. This often leads to feelings that artists are underpaid by subscription services based on the historical rates of payments for downloads and physical items. Such a conclusion cannot be reached without taking into account volume of streams and the period of time over which royalties are collected.

From August 2009 to June 2012, and before CD Baby's 9% fee, the band has received:

- an average of $0.0046623, or 0.46623 cents, per stream;

- a high of $0.011926, or 1.1926 cents per stream, (in November 2011);

- a low of $0.0000237253, or 0.00237253 cents per stream;

- and most recent payouts of $0.008246668, or 0.8246668 per stream, (in June 2012).

Streaming critics will be happy to note the group's average per-stream payout has increased greatly over nearly a year and a half. As Harrell noted in his July 2011 post, the average payout from August 2009 through March 2011 had been 0.2865 cents per stream. Now, the group's average stands at 0.46623, implying the payouts since March 2011 have been above a half cent per stream.

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The miniscule royalties of Spotify's early days are gone, and it's now clear that people needed to wait for the revenue to catch up to the business model. As payouts have improved, Spotify has added subscribers (it grew from 1 million in March 2011 to 4 million today) and expanded to a handful of other countries, including the United States, Germany and Australia.

Recent per-stream payouts of 1.19 cents in November 2011 and 0.824 cents in June 2012 suggest better economics lay ahead. The missing variable is volume, of course, but can materialize with time.