Spotify Serenades Artists With Data, Commerce

A screen shot of the new Spotify Artists Blog.

Amid a growing chorus of debate about how much streaming services pay artists, Spotify on Tuesday tried to present its own side of the argument, outlining in a new website how it has paid out $1 billion in music royalties since its launch five years ago.

The website, entitled Spotify Artists, goes into detail about how the streaming service calculates royalties and how it generates revenue. The Swedish music service also launched two free features for artists, data and commerce, aimed at sweetening the deal for bands whose music is represented in Spotify's catalog of 20 million tracks.

The first allows each band to get analytics on how their music is being consumed on Spotify, including the age distribution of listeners, their gender split, their location by country and the number of streams for each track, among other data. The second, commerce, lets artists sell tickets directly to Spotify listeners via Songkick, a ticketing app that lists concert dates by location. It also partnered with Topspin to sell merchandise on the service. The analytics service will roll out in the next several weeks as artists sign up and are authenticated to ensure data is given to the proper people. Topspin's integration will occur over the next several months.

Spotify's efforts are designed to counter skepticism among artists riled up by high-profile beefs between prominent musicians about the effect streaming service have on their incomes. Thom Yorke, for example, pulled two of his albums from Spotify earlier this year, saying "new artists get paid fuck all with this model." The sentiment was echoed when The Musicians's Union, representing 30,000 members in the U.K., followed up with an informal demand for minimum payments for musicians, according to The Guardian.

At each flashpoint, Spotify issued the same statement -- that its service will have paid out $1 billion in total royalties by the end of 2013. But the lack of transparency over Spotify's business hampered its arguments, further fueling suspicion. Tuesday's move was an attempt to shed more light on the matter.

"This is an attempt to be as open and transparent as we can," Mark Williamson, Spotify's Director of Artist Services told Billboard.

Contrary to much of the discussion around its royalty payments, Spotify says it doesn't pay a fixed rate for each stream. Instead, it uses a formula centered around market share -- the number of times a song has been streamed as a percentage of all streams played on the service in any given month. Those rates also vary by geography since Spotify charges different subscription fees in different countries.

By "reverse engineering" the total payments, the company said it pays out on average between 0.6 cents and 0.84 cents per stream. As a demonstration of how those fractions of pennies can add up for individual artists, the company gave anonymized examples of actual payments it made in July to various artists. 

The company also showed how its payments compared with other types of music services, presumably Pandora for Internet radio, YouTube for online video.

"We wanted to show how artists can impact an artist's career," Williamson said. "Without artists, there would be no service."