What does one of the world’s richest hip-hop artists stand to lose by continuing to withhold his latest release from the world’s dominant music streaming service?
JAY-Z is likely foregoing weekly payments of hundreds of thousands of dollars — potentially close to $1 million a week — from Spotify, as a result of his decision to release 4:44 nearly everywhere online but through the world’s biggest streaming outlet, industry insiders tell Billboard. Their calculus is based on an analysis of likely payouts to other prominent artists in the initial weeks following an anticipated new album release.
Industry sources approximated the cost of the Spotify snub based on the service’s share of the market and the average rate paid per song stream.
Some estimated that JAY-Z’s potential Spotify payday would approach $1 million the week immediately following the album’s debut on Spotify — even three weeks after its release elsewhere — if another hip-hop luminary serves as a guide.
Drake’s 2016 album Views was streamed 250 million times in its first week of exclusive release on Apple Music. Once Drake’s chart-topping album made it to Spotify, the numbers skyrocketed — doubling the number times the Canadian rapper’s songs were played on the streaming service last year (to 4.7 billion global listens, up from a record 1.8 billion in 2015) and generating an estimated $20.7 million in royalties.
Another insider camp, though, calculated that JAY-Z would only pocket an estimated $250,000 after releasing his chart-topping album on Spotify’s premium paid tier for a week. That math assumes 4:44 would have attracted as many streams in a week’s time on Spotify as the service’s top-ranked track, the “Despacito” remix by Luis Fonsi, did in a single week.
Royalty payments from streaming services can vary considerably depending on a number of factors, such as the ratio of paid to free users streaming certain music and their geographical concentrations.
Over time, JAY-Z’s hypothetical payments would likely decline because of Spotify’s lower payments for its free, ad-supported tier, resulting in a blended royalty rate of around .0044 of a cent per stream, sources say. Apple Music, by contrast, pays almost twice as much (about .008 cents per stream).
But MusicWatch industry analyst Russ Crupnick tells Billboard that streaming royalties for such superstar acts are still “pocket change,” in the scheme of their other earnings.
“I’m guessing the diapers for those wonderful new children aren’t being paid out of streaming royalties,” he said referring to the twins born to JAY-Z and Beyonce.
JAY-Z, whose real name is Shawn Carter, isn’t talking about his reasons for the Spotify rebuff. But those familiar with the artist’s thinking said the move reflects Jay-Z’s grievance with Spotify over what he perceives as its role in devaluing music by giving free users the ability to play any album or artist catalog on shuffle.
The rapper pulled most of his catalog from the streaming service this spring in protest over its free, ad-supported version of the service. JAY-Z used distribution off his 14th album to reward the services, like Apple Music, that encourage people to pay for the songs they love, sources told Billboard.
“He would choose to frame this as potentially saying all music should be paid for and positioning his release against Spotify’s free tier,” said MIDiA Research analyst Zach Fuller. “Whether or not that argument stands up depends on who you speak to. You can commend Spotify for engendering this audience that previously would be downloading the music illegally.”
JAY-Z could have elected to release 4:44 exclusively on Spotify’s paid tier — but such an approach has a limited shelf life. But the album would be made available through the service’s free streaming offering after two weeks, under terms of its deal with Universal Music, which handles distribution for Roc Nation.
Whatever payments JAY-Z elected to sacrifice, he’s not likely eating instant ramen.
Few artists, especially those of JAY-Z’s stature, survive on streaming revenue alone. Like many contemporary musicians, he stands to derive substantial revenue through sponsorships and touring. And he is in the enviable position of owning his own masters, his own record label, Roc Nation, and his own digital distribution platform, Tidal — all of which allow Jay-Z is to reap greater financial rewards from his art.
People with knowledge of his thinking said the entrepreneurial JAY-Z carefully crafted an album release strategy to benefit his business interests and keep his partners happy. Consider Sprint’s $200 million investment in JAY-Z’s streaming service, Tidal, which resulted in early exclusive access to 4:44 for the mobile carrier’s customers.
The fourth-place telecom company got a bit of cool, while JAY-Z’s Tidal collected the cash. The rapper also renewed his long-standing touring partnership with Live Nation, with a 10-year deal that Billboard reported is worth $200 million.
It’s harder to evaluate the limited exclusive’s potential lift to Tidal, the ad-free, high-quality music streaming service JAY-Z launched to much fanfare March of 2015.
The service — which became home to such artists as Rihanna, Kanye West, Nicki Minaj and Calvin Harris — has attracted a combined 4 million trial users and subscribers, according to MIDiA’s estimates.
That’s small compared with Spotify’s 140 million active users and Apple Music’s 27 million subscribers.
Tidal and Apple Music experienced a bump in streaming numbers during the first week of the album’s wide release, simply because Spotify wasn’t an option for consumers, David Bakula, a senior vice president of analytics at Nielsen, tells Billboard. Fans eager to hear JAY-Z’s confessional album may have turned to one of Spotify’s rivals to listen to the new release, which means the rapper would have recovered some of the proceeds he lost by excluding the dominant streaming service.
It’s unclear how many fans the album coaxed to sign up for Tidal or switch their mobile carrier to Sprint, but Bakula says artists are nonetheless embracing the new business model: “‘I understand I’m an entertainer, not just a singer who puts music on shiny discs. People want access to me and my brand.’ That becomes a part of the artist’s overall pay.”