Spotify Royalties Grew to $300 Million in First Quarter

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Chief Product Officer at Spotify Gustav Soderstrom with Tiesto at a Spotify news conference May 20, 2015 in New York to announce an entry into video and original content, hoping to expand its reach beyond music. 

The subscription service has paid $3 billion of royalties since launching in October 2008.

Spotify may have its critics, but the embattled music subscription service can routinely point to growing pile of royalties it has paid to rights holders. Billboard has learned the music subscription company paid out $300 million to rights holders in the first quarter of the year. To the present day, Spotify has now paid $3 billion in royalties since the company launched in October 2008.

This means one-tenth of Spotify's total payouts came in a single, three-month period, the company's 26th of 27 quarters in operation. The latest $1 billion comes six months after Spotify announced its payouts had reached $2 billion in November. A year earlier, in December 2013, the company announced it had paid out $1 billion in the roughly five years since its launch.

What's more, Spotify appears to have accounted for a sizeable portion of global subscription revenue since its launch. Consider global subscription revenues from 2009 to 2014. According to IFPI reports, global revenue totaled $5.05 billion from 2009 to 2014. Recorded music revenues were $4.4 billion of that sum. Corresponding publishing revenues were in the neighborhood of $640 million, which assumes publishers got 10.5 percent of services' income and content costs accounted for 72.5 percent of services' income. (The standard 70 percent number was adjusted upward because Spotify's content costs have well exceeded 70 percent.)

So while global subscription revenues were roughly $5.1 billion from 2009 to 2014, Spotify probably paid out something like $2.5 billion, or half of global subscription revenue, over that time. To arrive at $2.5 billion, start with $3 billion total payouts, subtract $300 million for the first quarter of 2015, and subtract an estimate $200 million for payouts in April and May of the current quarter. For these purposes, whatever small amount Spotify paid out in the fourth quarter of 2008 is assumed to be zero.