Calls to control a growing internet menace has reached fever pitch this week. “Protect the vulnerable!” goes the cry. It’s a dirty, filthy business everyone is agreed.
No, not the government’s crackdown on online pornography, but the far murkier issue of the music industry, and the question as to whether Spotify is its saviour, or the final nail in its coffin.
Whilst Spotify has over 6 million paying subscribers and 24 million active users, the artists that produce all that content are looking about as happy as Professor Snape at an especially “hilarious” Shakespeare comedy.
All too often they have bounded up to their letter boxes like highly caffeinated puppies when the Spotify royalty cheques drop through, only to burst into tears when they look at the numbers involved. It would appear these cheques are provoking the sort of disappointment that HMRC feel when they look at Amazon’s tax return. Although Spotify has paid over $500m to rights holders since launch, (and say that figure will reach $1bn by year end) the amounts per stream are tiny.
Sam Duckworth of Get Cape. Wear Cape. Fly – in an article in the Guardian – noted that nearly 5,000 plays of his songs has earned him just £20 – about the same income as if he had sold two CDs at one of his shows, and barely enough money, presumably, to buy a single cape. And Thom Yorke has removed his Atoms For Peace album from the service in protest at the rates he receives, in a selfless move that might cost him as much as £50.
For the record, I use Spotify in this blog and I am also one of those 6 million premium subscribers who use the service to listen to music all the time. For the consumer, it’s a terrific deal and an excellent service. But is it fair to the artists? The best people to answer that question are the artists themselves. And they say “No!”.
This isn’t the first time that musicians have complained about being unfairly treated. It’s a fine and noble tradition dating back to 400BC involving Stratonicus of Athens who was executed by the King of Cyprus after he set some particularly sarcastic remarks about the ruler to song.
Musicians are usually right, too. At least Spotify isn’t pretending it wrote the songs, as some more unscrupulous record label bosses have done in the past.
To counter these grumbles, Spotify has told us we need to look at the whole picture. Rather than cannibalising sales of CDs, they say, it has actually reduced piracy – by converting users who were formerly illegally downloading music for free on torrents to Spotify where they can now legally download and pay for music.
According to Spotify, most of their users report having paid little to nothing for music before joining. Getting young people used to paying for music rather than thinking it should always be free is no bad thing. Anecdotally there may be some truth in this – I know several people who used to use torrents regularly who no longer do so because of how easy Spotify is to use, and how inexpensive it is. CD sales have not fallen because of Spotify, but because of piracy. Spotify have some charts showing how piracy has reduced in the Scandinavian countries that most use the service. But just because it may be reducing piracy doesn’t mean the rates it pays is fair. Fairer than people stealing stuff, certainly. I’ll give them that much. But being “fairer than theft” is a pretty low benchmark against which to measure yourself.
Can it be right that the royalty rate Spotify pays is so low that 5,000 plays of a tune equates to £20? 4p every time someone plays the aforementioned Sam Duckworth’s album all the way through sounds low.
Let’s do some sums and work backwards to see what a “fair” royalty might equate to:
First, there is a difference between owning a CD and streaming a Spotify tune. If I pay £10 for a CD, I might typically play it (judging from the play counts on my iTunes library) between five and twenty times. Let’s split the difference and call it 12.5 plays per CD. This ignores the outliers, either those I have played once and never played again (we’ve all got them), or those favourites I have played fifty times or more over the course of many years.
If Sam Duckworth sold 40 CDs – each with ten tunes – and the CDs were played an average of 12.5 times; that would be equivalent to 5,000 streams. In my CD scenario, Sam would be paid £400. On Spotify he was paid £20.
If your base assumption is that every CD is played twice as much – say 25 times, then 5,000 streams would equate to 20 CDs sold, or £200 in CD sales income. So compared to his selling CDs at a show Spotify isn’t paying Sam a “fair” rate .
However, if Sam was on a typical (which is to say, massively unfavourable) record contract and the CD was sold in Tesco, he may only get 10% of the sale price of the CD in royalties. He’d have to sell 20 CDs to earn £20 in that scenario. That’s the same as my assumption that each song is played 25 times on Spotify to equate to a CD sale. Hmmm. Neither sound great, but depending on your base assumption about how often people play CDs it either makes Spotify anywhere between “the same” to “twice as bad” as a record company selling CDs and ripping off the artist in the good old fashioned traditional way.
Another way to look at the problem is to see whether it will ever be possible for Sam to earn good money from Spotify. For example, might he be okay with a low royalty rate if he received a thousand pounds a month from Spotify in royalties?
Right now, £1,000 per month equates to 250,000 plays per month of Sam’s music. That’s 3 million plays per year, equivalent to 24,000 CDs played 12.5 times in a year. Sadly, assuming Sam’s cheque was for a six month period (and I don’t know if it was) he’d need Spotify to grow three hundred-fold to provide £1,000 per month. The argument that people will be paid more as the service grows rings a little hollow when you look at the numbers.
Spotify pay out 70% of their income to rights holders (although their financial accounts suggest their cost of sales – i.e. the amount they pay in royalties – has historically been higher – 97% in their last set of accounts), and according to their site they pay each artist pro rata. Therefore, if you account for 1% of Spotify’s streams, you get paid 1% of the money Spotify pays out. The more they pay out, the better your income.
So Sam has to either increase the number of times his songs are played on Spotify compared to other artists, or hope that Spotify continue to grow their paying subscriber base. To the latter point, they are growing fast – it took just three months to grow from 5m in December 2012 to 6m paid subscribers when they last announced the numbers in March 2013. If they carry on at that rate, they will have doubled in size in just over twelve months ….and Sam will get a £40 cheque.
So if you want to be an ethical music buyer, what should you do? I think the answer is to not just use Spotify. Buy Vinyl. Go to shows. Buy direct from the artist if you can. Perhaps then can you listen to Spotify with a clearer conscience. Here’s a song from Sam Duckworth. Please play it on a continuous loop, and see if we can’t get him a triple-digit royalty cheque from Spotify. Better still, listen to the track and if you like it, buy the CD via his website.
Record #217: Get Cape Wear Cape Fly – Once More With Feeling
Sam Duckworth’s new album “The Mannequin” is released on 29th August
Every record tells a story 
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