The streaming debate has been raging on and on ever since streaming services were normalized a few years back, and it never seemed to go anywhere. There was one fundamental truth behind the matter: artists were not getting paid enough. With that one pretty massive detail in mind, people have been bickering relentlessly about the whether or not it was right to participate in streaming services. Artists, like Taylor Swift, have already started pulling all of their music from Spotify, details about how much money is going to artists from streaming have been released, but there always seems to be a missing piece of the puzzle. Now, thanks to the magic of the internet age, an important contract between Spotify and Sony has leaked, that details just how much money is flowing through streaming, and provides even more insight into just what is happening on the business end of streaming.
Thanks to TheVerge, a relatively big tech website, this contract has seen the light of day, where before, it would’ve definitely been kept in the dark. In their original article, the site featured the full contract between Sony and Spotify, which gave exact numbers on how much money Sony was receiving from Spotify, and how much money Spotify was keeping for themselves. Since then, the contract has been pulled by Sony, who hilariously sent 4 separate Cease and Desist notices to TheVerge in an effort to contain their secret contract. The main take away from the contract was an exact dollar amount for how much money Spotify was paying Sony $42.5 Million in advances, which are broken down by years (9$ Million for the first year, $16 Million for the second, and $17.5 Million for an optional third). According to TheVerge, most of these advances are just kept by the label, and are not figured into actual revenues for streams that go to artists. The contract itself didn’t contain any dollar amounts for exactly how much each artist is receiving at Sony, but some calculations can be made based on studies in the past.
It was revealed via the Selling Out study that signed artists were receiving an average of $0.0011 cents per play, as of this year. This study revealed that Spotify is paying Sony around $0.00225 per play, and $0.00225 per play if a certain revenue break point is reached. To put that into more rational numbers, if we take just the bare minimum per play that Sony is receiving, they are handing 50% of that revenue to their artists. This is atrociously large, and on top of that payment to Sony, Spotify has the option to keep up to 15% of it. While this figure pales in comparison to the cut that Sony is taking, it still takes away from the artist in some way, who we already know are making next to nothing off of streams.
Essentially, the take away from this is that Spotify is paying out a lot of money to labels in the end, for streams and advances, but still keeping a pretty hefty cut for themselves. The disconnect, however, is that the money just isn’t getting from the label to the artist, like it should. There’s only so much money to made from streaming, since it’s all ad revenue, and since there’s no real product being sold, a pretty big portion of the ad revenue, and even all of the advance money that the label is getting should go directly to the artist. The $42.5 Million in advances that are supposedly going directly to Sony should also be split among the various artists of the label as well, or at least be the only source of revenue that Sony sees from Spotify, leaving just the money from play counts for Artists.
In most cases, it’s so easy to blame a label for every dispute with revenue, but in this case, it really just seems to come down to the label taking a bigger cut from artists than they should. Of course, these findings could be instantly confirmed negated a few months down the road, when someone looks into exactly how the money is moving throughout labels, but until then, any anger you might have towards Spotify should probably be directed at Sony and other major labels…