Spotify Unveils ‘Loud and Clear,’ a Detailed Guide to Its Royalty Payment System
As more and more artists have learned in the nearly 15 years since Spotify first launched, the way that it pays out streaming royalties is very, very complex, based on a dizzying number of factors that add up differently for each artist.
On Thursday morning, the company made a welcome step toward demystifying that process by unveiling “Loud and Clear,” a relatively straightforward explanation of the way its payment system and related factors work. (Speaking of working, the site does take a minute or so to load — don’t worry, it gets there!)
First things first: It will not tell you how much money Drake made from Spotify; in fact there are no artist names on the site at all. Instead, it “aims to increase transparency by sharing new data on the global streaming economy and breaking down the royalty system, the players, and the process.”
All of the information is explained in far more coherent detail than we can muster here — particularly in the three-minute “How the Money Flows” video — but there are two all-too-common misconceptions that we can help in clearing up, right off the bat:
*There is no single, uniform amount paid per stream to every artist. It’s based on a wide variety of factors that are unique for each artist, and when you see an artist saying that they made X on X million streams, that’s their number, not anyone else’s.
*Spotify does not pay artists directly. It pays the rights holder, the entity that owns the rights to the music — which usually is a record label, not the artist — and the rights holder then determines how the Spotify streaming revenue generated by the artist’s catalog is distributed (to labels, producers, collaborators, managers, distributors, etc.). Spotify cannot say how much money a specific artist netted from its streaming royalties because it doesn’t know.
Now that that’s out of the way, Spotify’s head of marketplace Charlie Helman agrees that the site is long overdue.
“We talk about these things internally constantly, but externally I think we’ve been too quiet,” he tells Variety. “Artists deserve more clarity about how the streaming economy is working. Obviously, it’s not simple: it’s a complicated ecosystem and Spotify is just one piece of it. As of 2019, we represent 20% of the recorded-music industry. But we want to do our part to be more transparent with the data we have about artists achieving levels of success. We’re all hearing that the industry is experiencing incredible growth: who’s benefiting? Hopefully this gives some answers.”
One thing that the website shows is that the number of artists who are making money from streaming is expanding dramatically. Under the “Spotify and the Streaming Economy” section, it shows:
*As of 2020, Spotify has paid over $23 billion in royalties to rights holders — including over $5 billion in 2020 alone, up from $3.3 billion in 2017.
*207,000 songs racked up more than 1 million streams in 2020
*In 2020, 184,500 artists generated recording and publishing royalties over $1,000; in 2017, the number was 89,700
*In 2020, 7,800 artists generated over $100,000; in 2017 the number was 4,200
*In 2020, 870 artists generated over $1,000,000; in 2017 the number was 450
Under the “Meet the Artists” section, we see what types of artists are generating how many streams and how much revenue — and it’s not based on musical genres but rather where the artist is in their career.
“For those segments of artists, we stayed away from musical genres and thought about stages of artists’ careers,” Helman says. “For example, a heritage artist has more than 500,000 monthly listeners last year, and 80% of their streams come from tracks that are more than five years old. On the other hand, a breakthrough artist had virtually no streams two years ago and now they’re in the top 50,000.”
And there’s plenty more to dig into. But the upshot, Helman says, is clear. “Looking at the numbers, we see two trends,” he says. “Overall payouts have grown 50% in the past five years — and more artists are sharing in that success than they were in the past. The number of artists who represent 90% of steams has quadrupled in the last six years. It’s less hit-driven and is distributed across a much larger pool of artists.”