Spotify Royalty discussion

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Spotify Royalty discussion

Postby jb » Thu Dec 17, 2015 1:17 pm

Anybody spot any flaws in this spreadsheet I made? I'm trying to come up with the most succinct way of illustrating how stupid Spotify's royalty mechanism is.

Kind of inspired by this article: https://medium.com/cuepoint/how-to-make ... .isgscx2l6

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Spotify Royalty Illustration
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Re: Spotify Royalty discussion

Postby Niveous » Thu Dec 17, 2015 2:01 pm

Month B in How It Works Today seems off by 7 bucks. How do those last seven dollars end up with Adele if Slayer has a flat 0.1%?
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Re: Spotify Royalty discussion

Postby jb » Thu Dec 17, 2015 3:08 pm

Ah, that's because I have it set to round up the display, but the calculation isn't rounded up. The percentage is really 0.09990%. Good catch.

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Re: Spotify Royalty discussion

Postby fluffy » Fri Dec 18, 2015 1:18 am

Looks good to me.
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Re: Spotify Royalty discussion

Postby jb » Fri Dec 18, 2015 11:05 am

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Re: Spotify Royalty discussion

Postby Niveous » Fri Dec 18, 2015 3:06 pm

Well done. I enjoyed that article.

I also put together a wonderful playlist of nothing but Katy Perry & Slayer. It makes for an interesting world.

(For the curious, the playlist has:
Katy Perry- Dark Horse, Electric Feel (MGMT cover), Head Over Heels (Tears for Fears cover), Hot N Cold (Remix), Roar, This is How We Do, Ur So Gay, Birthday, E.T.
Slayer- Angel of Death, Cast the First Stone, God Send Death, Seasons in the Abyss, You Against You, Raining Blood, Dead Skin Mask, Mandatory Suicide, Psychopathy Red)
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Re: Spotify Royalty discussion

Postby Lunkhead » Sat Dec 19, 2015 12:43 am

I really don't think you can blame only Spotify. The record labels still basically get to dictate terms to the tech companies because they are the gatekeepers to the vast majority of the music that the vast majority of listeners want to hear. They aren't interested in a system where it would be possible for Spotify to make $7 off a person who only listened to one song in a month. Their perspective is that companies like Spotify and Pandora depend on the labels' music for their entire business so the labels want their cut. Labels would like the greater of per play royalties (roughly) OR a percentage of revenue. There is not going to be equity or transparency as long as the labels are the gatekeepers. Pandora so far has had relative transparency in its royalty structure because it was operating under federally mandated rules, but even that was not as simple as it seemed (I always assumed it was a straight $/spin * # of spins calculation but Roymond did some consulting for them before I worked there and said it's more complicated than that). Now that is going to go away as they make direct deals, the terms of which will be largely private to whatever degree is possible for a public company.
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Re: Spotify Royalty discussion

Postby jb » Sat Dec 19, 2015 9:56 am

Lunkhead wrote:I really don't think you can blame only Spotify. The record labels still basically get to dictate terms to the tech companies because they are the gatekeepers to the vast majority of the music that the vast majority of listeners want to hear. They aren't interested in a system where it would be possible for Spotify to make $7 off a person who only listened to one song in a month. Their perspective is that companies like Spotify and Pandora depend on the labels' music for their entire business so the labels want their cut. Labels would like the greater of per play royalties (roughly) OR a percentage of revenue. There is not going to be equity or transparency as long as the labels are the gatekeepers. Pandora so far has had relative transparency in its royalty structure because it was operating under federally mandated rules, but even that was not as simple as it seemed (I always assumed it was a straight $/spin * # of spins calculation but Roymond did some consulting for them before I worked there and said it's more complicated than that). Now that is going to go away as they make direct deals, the terms of which will be largely private to whatever degree is possible for a public company.


I don't think diluting the blame is going to have any effect though.

If Labels want the best deal for themselves, then whose responsibility is it to guard the interests of those NOT on a label-- but who are still participating in the system? It's Spotify's responsibility, because to do otherwise means allocating revenue to labels that IS NOT DUE TO THEM.

Basically, they're aiding and abetting a theft of revenue from indie artists to the mainstream artists, and it's simply not right.

My band has a 6-song demo on all these services. Now, we never expected to get any money for it-- but I do know that the only way I will ever actually see a dime from the work I do to get people to listen, is if someone buys the demo on Bandcamp or iTunes. And it *is* work-- I'm actively trying to get more people to listen, by promoting and playing shows, etc. etc.

The more I think about it the more I get pissed off.

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Re: Spotify Royalty discussion

Postby Lunkhead » Sat Dec 19, 2015 1:25 pm

I disagree, I don't think it's Spotify's responsibility. Their primary business is not being a fair equitable outlet for unrepresented artists. Even in the case of Pandora, where we talk a lot about how we serve listeners, music makers, and advertisers, artists are not the sole or primary focus. There has to be a balance that pleases all those constituencies enough while still making enough money. The costs of dealing directly with unrepresented artists would be huge (because there is no existing system for doing so and because there are so many of them), and the benefit to listeners would be minimal. As far as I know none of the streaming services are profitable yet, either, so they've all got bigger fish to fry than worrying about making sure your band gets paid for its streams. If they all go out of business, who benefits from that, right? Not the consumers, but honestly the labels don't give a shit, because they'll still be around to bilk the next streaming service. Really I think the blame should be mostly on the shoulders of the labels, who operate in a way that doesn't make it seem like they care about artists or listeners at all. Maybe you'd fair better if you got representation from a label, particularly a major or one of their imprints, but that is a hard path to even progress down and as many have seen not one that necessarily leads to a good outcome for the artists.
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Re: Spotify Royalty discussion

Postby jb » Sat Dec 19, 2015 1:55 pm

Hmm, just because it's not their primary business, does that make it not their responsibility to be fair? Is that good business? I don't think so, and I think it will eventually come back to haunt them-- and all of us.

Also, they actually ARE responsible, by law, for getting everyone their payments. They do it via entities like DistroKid if not the labels, and they absolutely do track who is getting listens. Why do you think they don't?

That's not the issue-- it's how those payments are divided that I have an issue with.

From the perspective of getting the appropriate share of streaming money, how would being on a label benefit me? Major Lazer would still be eating my lunch-- and my own label would have been the entity that negotiated a terrible deal for me.

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Re: Spotify Royalty discussion

Postby jb » Sat Dec 19, 2015 2:21 pm

This would make a good podcast discussion!

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Re: Spotify Royalty discussion

Postby Lunkhead » Sat Dec 19, 2015 3:59 pm

jb wrote:Hmm, just because it's not their primary business, does that make it not their responsibility to be fair? Is that good business? I don't think so, and I think it will eventually come back to haunt them-- and all of us.


"responsibility to be fair"? I'm pretty sure corporations' only legal responsibilities are to make money and to ostensibly obey the law. My guess is choices get made based on balancing the interests of labels/investors/etc. with an eye toward sustaining the business. If Spotify chose a licensing model that was even less affordable than the one they have, wouldn't that be irresponsible to their investors? (So far it's only the investors' perpetual rounds of funding that allow Spotify to stay in business while they lose money.)

jb wrote:Also, they actually ARE responsible, by law, for getting everyone their payments. They do it via entities like DistroKid if not the labels, and they absolutely do track who is getting listens. Why do you think they don't?


I never said I don't think they are paying anybody or that I don't think they have any legal obligation to pay people. If you got your music onto the services via an aggregator like DistroKid then you should be getting paid according to the terms the aggregator made with you, which will be to a degree dependent on the terms between the aggregator and the service. If you got your music onto the services via a label then you should be getting paid according to your terms with your label, which will be in some ways related to their terms with the streaming service. If that is not happening, you should sue somebody!

What I was saying before was that while e.g. Pandora can give very precise numbers about which tracks got "spun" how many times, their royalty payout was not solely based on those numbers, those numbers went into a formula with other factors.

jb wrote:That's not the issue-- it's how those payments are divided that I have an issue with.

From the perspective of getting the appropriate share of streaming money, how would being on a label benefit me? Major Lazer would still be eating my lunch-- and my own label would have been the entity that negotiated a terrible deal for me.

J


If you had a deal with a label then you could provide your input to them as a participant in that process, saying "Hey, I don't like your terms with Spotify, and subsequently how they effect my deal with you in terms of digital royalties payments." To me, a discussion like that between a large enough number or artists, and/or large enough artists, would be something that could start to change things.

Anyway, I guess what I was originally trying to get at was, it sounded to me like you were putting the responsibility on Spotify. Do you know for sure that the
aspects of their payout system that you disagree with were chosen by Spotify? Or were they chosen by the labels? If they were chosen by the labels, then maybe you should focus more on how labels are unfair to artists. That seems like an even more egregious issue to me since the label's primary non-investor constituency is the artists.
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Re: Spotify Royalty discussion

Postby Lunkhead » Sat Dec 19, 2015 4:02 pm

You could probably even just find/replace "Spotify" and "streaming services" with "Sony" and "record labels" and your piece would describe the way the record industry has worked for a long time, in my admittedly uneducated opinion. Aren't the stories of small bands being financially screwed by labels pretty widely covered? And that's been happening since before streaming services.
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Re: Spotify Royalty discussion

Postby Lunkhead » Sat Dec 19, 2015 4:15 pm

This makes me think about if there were a non-profit label that was also a streaming service. You sign to the label, your music goes into their service, payout is on a transparent purely pay-per-play rate. Listeners can listen as much as they like but they pay the per-play royalty rate, plus whatever administrative costs there would be to operate the service and label. At that point you could get down to just looking at how much artists think they should get paid per stream, vs how much listeners are willing to pay per stream, vs the costs of running a label and a streaming service.

You pay $10/month for Spotify, right? How many songs do you listen to? Do you think $10/# of songs results in a fair amount for artists? What if you listened to way more than the average person, would you feel like it was fair if you had to then pay more?
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Re: Spotify Royalty discussion

Postby fluffy » Sat Dec 19, 2015 4:26 pm

Lunkhead wrote:This makes me think about if there were a non-profit label that was also a streaming service. You sign to the label, your music goes into their service, payout is on a transparent purely pay-per-play rate. Listeners can listen as much as they like but they pay the per-play royalty rate, plus whatever administrative costs there would be to operate the service and label. At that point you could get down to just looking at how much artists think they should get paid per stream, vs how much listeners are willing to pay per stream, vs the costs of running a label and a streaming service.


There's a few of those already. Magnatune, for example. But they're pretty selective these days, and of course quite obscure. Once upon a time I had a standing invite to join (they were trying to recruit a lot of song fight artists) but by the time I felt ready to, they had retracted it. Oh well. (Also they mostly focus on mechanical rights granting rather than streaming; I don't know if they even still have their subscription service.)

To your point, I think the Spotify model is the easiest for them to deal with because it's a model the RIAA was already happy with for Internet radio stations. It's also slightly easier to do accounting on, especially when multiple subscription tiers (including ad-supported) come into the mix.

I think Apple Music pays out the same way too. Rhapsody and Napster2 definitely do, and Rdio did. They basically just negotiated a per-stream license cost and set their subscription prices to cover it. And when you boil it down that's what Spotify is doing too, they just presumably adjust the per-stream price on a monthly basis. That's definitely how the data gets presented to the intermediate distributors (CDBaby, DistroKid, etc.) in any case.

So yeah the system is broken but it's an industry standard brokenness.

Best way to support a band: buy their music on bandcamp. That's the only no-bullshit artists-first distribution channel.
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Re: Spotify Royalty discussion

Postby Lunkhead » Sat Dec 19, 2015 4:27 pm

Just to throw some numbers out there, based on some recent federal royalties rulings:

$10/month / ($0.15/100 plays to artists + $0.05/100 plays to label/service) = 5000 plays/month
$10/month / ($0.20/100 plays to artists + $0.05/100 plays to label/service) = 4000 plays/month
$10/month / ($0.25/100 plays to artists + $0.05/100 plays to label/service) = 3333 plays/month
etc.

Where in that is the balance that seems fair to you as both an artist and a listener?
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Re: Spotify Royalty discussion

Postby Lunkhead » Sat Dec 19, 2015 4:30 pm

fluffy wrote:So yeah the system is broken but it's an industry standard brokenness.


I think this is largely due to the recorded music industry being an old entrenched industry that is slow to change and evolve. Tech evolves on a completely different and faster lifecycle. There is a big disconnect. Eventually I think the labels will be disrupted. The tech companies just don't have the clout yet to upend them.

fluffy wrote:Best way to support a band: buy their music on bandcamp. That's the only no-bullshit artists-first distribution channel.


Seems like that is still the case, from what little I know about it. I'd be curious to hear more from folks like Brad, MC Frontalot, etc. too although MCF already admits he's really in the t-shirt business, right? ;)
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Re: Spotify Royalty discussion

Postby fluffy » Sat Dec 19, 2015 6:38 pm

Front kind of screws himself on the Bandcamp, er, front, because he feels that since they provide a FLAC option that he should charge more on Bandcamp. Even though Bandcamp would pay him WAY more for the download in the first place (and I seriously doubt most people buying music on Bandcamp are getting anything other than MP3), and also gives true fans an option to pay more if they want. But, hey, it's his decision to make.
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Re: Spotify Royalty discussion

Postby jb » Sun Dec 20, 2015 3:45 pm

Lunkhead wrote:Just to throw some numbers out there, based on some recent federal royalties rulings:

$10/month / ($0.15/100 plays to artists + $0.05/100 plays to label/service) = 5000 plays/month
$10/month / ($0.20/100 plays to artists + $0.05/100 plays to label/service) = 4000 plays/month
$10/month / ($0.25/100 plays to artists + $0.05/100 plays to label/service) = 3333 plays/month
etc.

Where in that is the balance that seems fair to you as both an artist and a listener?


I apologize-- I'm on my phone so I can't properly respond at length on the thread.

But as a listener I don't care what the labels get.
As an artist, the split between my label and I should be between us, and I'd expect Spotify to pay to the label who would get me my cut.

To a previous point, the suggested new method does not cost Spotify an extra nickel. It's just a different way to calculate the dispensation of the current pool of money.

I haven't seen anything in the thread to this point that disputes the fact that Katy Perry gets money from Slayer fans. You KNOW Slayer fans would be appalled if they realized they were giving money to perpetuate Katy Perry.

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Re: Spotify Royalty discussion

Postby jb » Sun Dec 20, 2015 3:49 pm

And I'm not certain, but listing the proposed royalty numbers does not seem to address the dispensation issue.

If it were the case that I can earn money by generating plays, that would be fair, and we'd move on to botching about the low rate.

But that's not how it works, and how it DOES work is not fair. Currently there's no flat streaming rate for PAID subscription services.

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Re: Spotify Royalty discussion

Postby fluffy » Sun Dec 20, 2015 3:58 pm

Right, what I mean is just that Spotify is calculating its per-stream royalty payment based on having the same per-stream royalty for everyone, i.e. aggregating them all into a pool. Which is totally unfair but it makes their accounting easier (and easier does translate to cheaper, even if it's just a one-time cost for building the software to handle it - you have maintenance, auditing, ongoing etc. to deal with, and so on), and also works with how the distributors were already getting per-stream royalty payments.

And yeah it's totally unfair and broken and stupid, and why the crap does Spotify need to deal with distributors in the first place instead of letting the label negotiate directly, etc.etc.etc. I don't think anyone disputes that, and I think we all agree that it'd be great if Spotify did the accounting in a fair per-listener way instead.

I'm also not in a target audience for Spotify in the first place, though. I still believe in the sanctity of the album and the power of a curated collection. To me, radio or radio-like services are promotional channels for discovering what music to buy - not a primary means of listening to music. But I know I'm incredibly atypical in that regard (and my dissatisfaction with radio/Pandora/marketing-based playlists/etc. are why I have such a gigantic music collection to begin with).
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Re: Spotify Royalty discussion

Postby jb » Sun Dec 20, 2015 4:07 pm

In other words, every month they take:

revenue pool / total streams

Then pay out according to the number of streams you got that month.

Which is equivalent to my description, resulting in Slayer fans paying money to Katy Perry.

It's just not the right way for the calculation to work, ignoring the intent of listeners--- which is unfair to listeners just as much as artists!
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