Spotify doesn't make profit from music streaming, despite having over 400M monthly active users, because it pays two-thirds of all its revenue to the rights holders.
Spotify doesn't make profit from music streaming, despite having over 400M monthly active users, because it pays two-thirds of all its revenue to the rights holders.
Despite being the king of music streaming, Spotify is struggling financially, but why?
Honestly, Spotify is only half bad compared to the real scumbags of this industry, and that's the "rights holders".
It's not the artists who created the music I'm talking about. It's the record companies taking the largest piece for themselves.
They are the ones earning on other people's talent and success.
Sometimes, I see some of the takes on here, and it's hardly surprising that the fediverse isn't particularly popular.
Spotify are somewhat responsible for their current position. They hired too many people, extended into markets they didn't need to enter, and have a CEO that has blown money in places that didn't need it. Let's not forget that Spotify spent $300m on sponsoring FC Barcelona, which could have allowed Spotify to employ ALL of the employees it laid off for 1-2 years. Spotify had no need to give $200m to Joe Rogan, either! That's half a billion spunked up the wall on decisions that have done nothing for the company but cause grief. Instead, they could have focused their efforts on paying more out to smaller artists that provide the long tail for their service, while also making deals to promote merch and tour dates where possible.
With that being said, if you think that Spotify didn't play a huge part in making music streaming accessible you're just being contrarian for no reason. They provided (at the time) a solid application, good connectivity with services like last.fm, and had the social connection sorted from the start. Once phones took off, Spotify removed the need for mp3's for the majority of people, largely killing iTunes. Spotify was the winner of the music streaming wars.
Frankly, a lot of people were praising Spotify for their "good" severance package, but IMO shareholders should be livid, and should be calling for a new person at the helm.
Man, a lot of people here don't understand how the music industry works. From the perspective of someone who's been loosely following the music industry, what I've learned is that it doesn't matter if Spotify gave up 2/3rds of their revenue, or 100% of it, the artists would still make fuck all.
Why?
The labels love taking their cuts and as a result, artists make very little. Instead of taking the blame for giving artists a <10% cut of the label's revenue from their music (my understanding is that it's pretty common for musicians to get <10%, sometimes <5% if you're on a particularly shitty label), the labels are blaming platforms like Spotify.
Now, I'm not saying that Spotify is blameless, however I think there's a lot of misdirection from the labels going on. I don't remember anyone complaining about pre-spotify services like Pandora Radio for not paying out enough when they were largely ad-supported, which is another reason I'm not totally buying the, "it's cause it's free" argument either.
Fuck, remember Pandora?
How is this news? The price you pay for media of any kind I can think of goes mostly to the rights holders, not the companies physically delivering it to you. You may object to the rights holders being shitty record labels, but that term also includes independent artists. And more to the point, rights holders are by definition the people who are entitled to profit from selling access to the media they own.
If you want to get pissed at someone, get pissed at the record labels sharing a ridiculously small part of their licensing fees with the artists who make their product.
I'll take "Unethical accounting" for 500, Alex
From the article:
The answer lies in the power imbalance between Spotify and its music suppliers, namely the major record labels that control most of the music streamed on Spotify.
Spotify licenses most of the music it streams from three companies: Universal Music Group, Sony Music Entertainment, and Warner Music Group, also known as The Big Three.
Together, The Big Three hold a 70% share of the music recording industry and a 60% share of the music publishing industry, forming a sort of unholy monopoly over the music industry.
....
The difference between having or not having The Big Three’s music catalog is a life-or-death situation for Spotify.
This gives The Big Three a lot of leverage over Spotify and forces it to pay them nearly 70 cents of every dollar it makes, leaving little room for profits.
Ugh, yes poor poor spotify, fuck that. Artists can't even make a living making music anymore thanks to spotify. Fuck off blaming artists for trying to get paid. Fuck this article. Oh no it only gets a third of the revenue?! Abhorrent, no it should get ALL the revenue, for doing what, having a server with music on it. Amazing. Fuck spotify.
Equity.
In total, at the close of last year, SEC documents show that exactly 65 percent of Spotify was owned by just six parties: the firm’s co- founders, Daniel Ek and Martin Lorentzon (30.6 percent of ordinary shares between them); Tencent Holdings Ltd. (9.1 percent); and a run of three asset-management specialists: Baillie Gifford (11.8 percent), Morgan Stanley (7.3 percent), and T.Rowe Price Associates (6.2 percent). These three investment powerhouses owned more than 25 percent of Spotify between them — a fact worth remembering next time there’s an argument about whose interests Spotify is acting in when it makes controversial moves (for example, SPOT’s ongoing legal appeal against a royalty pay rise for songwriters in the United States).
Furthermore, according to MBW estimates, which my sources suggest are still solid, two major record companies — Sony Music Entertainment and Universal Music Group — continue to jointly own between six percent and seven percent of Spotify (Sony around 2.35 percent and Universal around 3.5). With Sony and UMG added into the mix, then, the names mentioned here comfortably own more than 70 percent of Spotify.
https://www.rollingstone.com/pro/news/who-really-owns-spotify-955388/>And yet, they still aren't even close to the highest paying service when it comes to musicians getting their cut.
https://dittomusic.com/en/blog/how-much-do-music-streaming-services-pay-musicians
It's hilarious that Napster now tops the list. I use Tidal, myself, since it's got great quality audio. Spotify is horrible quality for 2023.
This is probably why you get a nearly endless stream of covers and remixes if you just let Amazon Music play random music.
This is why I thought some of their recent actions that hurt the lowest played artists was strange, you want to encourage artists to NOT use the big publishers to help break their triopoly.
I think the most recent changes are fine in practice, but the optics are not great which probably matters a lot.
How much money would they want to skim to distribute the music? 33-66 split doesn’t sound so bad considered that they don’t produce the music, sign artist, promote them, etc
They can always start their own label if they believe that vertical integration will be more profitable for them.
They tried that with podcasts and it didn’t go as planned
Poor Spotify. Here's a Link to a documentary about the dark side of Spotify, by Slightly Sociable. Their illegal business, extortion of artists and support for scamming.
ok. they should get a job then. pull themselves up by their bootstraps
I believe Spotify is largely responsible for its own financial struggles. Knowing that 2/3 of their revenue goes to the greedy labels, they should consider scaling back on operational costs and excessive investments in advertising and celebrity podcast deals.
In a way, it serves them right. Spotify plays a significant role in transforming music into a product akin to fast food, prioritizing mass consumption over artistic value. This approach not only impacts their profitability but also contributes to a broader devaluation of music as an art form.
So fuck Spotify.
BLITZSCALE BABY
Permanently Deleted
Subscribe to the newsletter if you like these kind of informative content.
For a company that has revolutionized the music industry and changed the way we listen to music, one would expect Spotify to be making a lot of money.
How has spotify "revolutionized" the music industry? Are thy doing anything new? Streaming isn't new, yearly reviews aren't new, freemium isn't new, discovery isn't new... Is the revolution that it's now a standard target for artists?