Spotify Passes the Transparency Baton to Artists

Transparency of reporting to artists, or lack thereof, has contributed to a poor signal-to-noise ratio in the streaming debate.  Instead of a clear picture of what streaming brings to artists and songwriters we have been left with a dizzying array of conflicting statistics that in turn has resulted in a bewilderingly diverse set of artist opinions.  Spotify today announced the first move towards remedying this situation with artist self-serve analytics, as well as stating its exact range of payments per stream (which for the record are between $0.006 and $0.0084).  The impact of these moves may be slow to be felt but they will be of truly seismic proportions, and here’s why.

In the digital era, with such an increase in both the volume and granularity of data from digital services, the issue of transparency should have lessened but has paradoxically become more intense than ever.  This is because the greater the depth of data that artists get from other sources (web site and Facebook analytics, CD Baby reports etc) often contrasts strongly with how much detail artists get from record label accounting.  Assumptions and allegations about accounting procedures and commercial agreements that affect how much artists and songwriters get paid have always been just that, assumptions and allegations.  In addition to contractual and accounting issues that blight some artist relationship, many labels – and not just majors – can pay as little as 15% royalties to some artists for streaming.  But without clear and transparent accounting, no one quite knows exactly what goes where nor at what rate.

Now that Spotify has introduced self-serve analytics, artists will be able to start to create a robust understanding of just how many plays they have received and to then compare this with what is reported back to them by rights owners.  And if it doesn’t match up with what the labels pay them then artists will be able to use discrepancies as a basis for requesting sales audits from their labels.  Expect a building wave of account audits with the onus on the labels to use this as the catalyst for striking a new generation of improved, more transparent streaming deals for artists.  Normally the ‘anomalies’ that come out of audits are swept under the carpet with artists securing pay outs in return for signing NDAs.  That cycle needs to be broken for streaming related audits.  Hopefully labels will choose to change the systems rather than expend non-scalable audit effort on a surge of streaming-driven audit activity. Ultimately it is in the interests of labels to have artists on board with streaming.  It is much easier to persuade artists to become part of the solution if their earnings are not hidden behind obscure accounting.

Spotify was getting tired of being painted as the bad guy in the transparency debate with its hands tied by confidentiality deals with the labels.  Now Spotify are extricating themselves from the debate, giving artists the tools with which they can engage in direct conversations with labels.  If artists genuinely feel that they are part of a community, then there is as much onus on them as there is on the labels, to sacrifice individually beneficial audit settlements that commit them to omertà in favour of pouring data into an open debate.  Otherwise all that will happen is that artists will perpetuate the lack of transparency, banking a nice cheque to buy their silence once they discover the skeletons in the closet.  Over to you artists…

13 thoughts on “Spotify Passes the Transparency Baton to Artists

  1. This is great, it’s about time it got pushed back to the labels who everyone has seemed to forgotten has a well deserved reputation of short changing the artist. If I’m to understand this correctly, when, for example, David Lowry checks Spotify and sees Camper Van Beethoven has had 1000 plays in the last year but he’s only been payed for 500 from his label, he can’t blame Spotify right? Any comment from Rdio, Pandora, etc on this? They should be on this as well.

  2. $.0072 is just plain beating around the bushes leading to $45B industry by 2025.
    Still under ambitious condition that we will bring 500 million subscribers ( @ $6avg./mth.) and some extra income from advertising.
    At that point, inflation adjusted 1999 will equal 75B.

    We do not need this commotion leading to slightly more than half of our best times.

    We can take today over billion users of discovery services like Shazam, Sounhound, Gracenote, The Echo Nest and in tandem with terrestrial and internet radio extract 100 billion dollars by 2020.
    Streamers and YouTube in present mode are roadblock to this simple jackpot!

  3. Shazam 400 millions, Soundhound 300M, Gracenote ??, Echo Nest ?? if you add all lyrics ID services you will be over 1.5B.
    All we need to do is Reduce Radio display info and convert all above mentioned current piracy promoters to cash registers of the industry!
    It will allow for normal Digital Music Market with goods contained inside of virtual walls.
    Today all is in the open and we have to monetize based on convenience and ads. Sorry, internet allows for normal merchandising of music, let’s go to basics.
    $.39 for purchase or addition of the tune to your play list will deliver 100B by 2020.

  4. Remi – I’m afraid that those ‘hundreds of millions’ of users are not in fact anything like as numerous. Firstly the Shazam number is downloads, not active users. Secondly most of those services have overlapping user bases. Also Gracenote is a meta data provider, not sure how they fit into this equation?

    Though I like the concept of being able to monetize discovery, in many ways that is a concept tied to yesterday’s consumption model. The idea that you bought something to own it when you discovered it. Of course there’s lots of money in that still (more than streaming for now in fact) but it is the model which is going to decline over the coming years not increase. Access based models are where consumption is heading. The technology and bandwidth is finally in place to allow the inevitable shift in consumer behavior to take place. It can be halted no more than the railroad companies could halt the advance of the automotive.

    It would be fantastic to reintroduce content scarcity but if you put those walls up around legitimate content by stripping out YouTube, Soundcloud, Spotify free etc from equation then you simply give a free hand to the illegal sector. I think there is great opportunity to create scarce experiences, but not scarce content.

  5. Mark, There is no walls or disruptions in discovery monetization.
    There is many seamless ways to collect $.39 including uninterrupted addition of tune charge to you cellphone bill.
    Any tune that is not part of your play list should come as a 60s sample with no artist or tune info – you want it you pay. 24h 3x replay allowed before it is gone.
    YouTube and streamers with all discovery tools on board are just plain unti-monetization entities.
    The Echo Nest similar tune suggest machine should generate at least 10B in annual revenues – as is, it works as a free service to all – any reason for this desperation?

    I think to much golf and old profits consumption prevented profitable utilization of those great assets. Fortunately it is not to late to wake up!
    Discovery engines have never been noticed by labels and out of desperation became passers from broadcast to free. Then out of another desperation YouTube Vevo was created to divert discovery activity to ad supported almost free.
    Conventional sales is the only way to go.
    Music Industry which is made of creators and corporations managing and distributing the music should work for own financial success first.
    Most productive monetization should have the highest if not ONLY priority.

    Today total pleasure and convenience of the music consumer at no cost is the King!
    Cuba and S. Korea are last enclaves with similar ideas.

  6. Hi Remi – a final note on this – unfortunately content scarcity is gone, and no amount of changing of the licensed music landscape is going to change that because there will always be free legal alternatives. At least with Pandora, Spotify free, YouTube etc and of course radio, there is *some* monetization for the free music audiences. Most of these consumers simply won’t tolerate the restrictions you are suggesting. They’ll opt for either radio or Torrents.

    Also the ‘industry’ is well aware of discovery tools. But they are still an unproven quantity that are not yet foolproof. They work well within stores and services but are unlikely to translate to the model you suggest. The harsh but simple reality is that a whole generation of music fans have no desire to pay and won’t suddenly pay within the confines of the closed ecosystems your suggesting (and yes, there are walls, as you’re suggesting this is the only licensed place they can get music, so whether defined by service, DRM, or device it is a closed ecosystem).

    I’d love for the solution to be this simple, but it’s not. In fact I’ll go as far to argue that it is actually a good thing it is not that simple because it places an onus on the wider digital music marketplace to innovate the product and experience away from a near-sole dependence on the static audio file.

  7. Wow! They pay out less then a penny or shamefully less then a penny per play! What a great deal for artists! Spotify is truly the future of music! Can’t wait to quit my day job! I’m really envious of musicians starting out now too, if only it was like this when I started making music!!! GUSHHHHHHHHH!!!!!!!!!!

  8. @ Remi:

    “We do not need this commotion leading to slightly more than half of our best times.”

    Why? These were absurd times and let’s be glad they’re finally gone. It’s like comparing current house prices to the peak of the pre-crisis bubble.

  9. It’s good to see Spotify’s information about its payment system, but it raises a few puzzles.

    If the information is correct, the only differences in payment rates per stream should be differences between ‘territories’. For example, if Spotify users in Spain on average generate little revenue but listen a lot, whereas in Sweden they generate a lot of revenue but don’t listen a lot, than the payout per stream will be higher in Sweden than in Spain.

    This will lead to some differences in the payout rate to different artists or labels, if they have relatively more listeners in some territories than others. But apart from this ‘territorial’ difference in payout rates, the payments per stream, in a given accounting period, should be the same for all streams. There should be no difference between payout rates to different record labels or aggregators. Which is great, if it is true! But is it? It seems to conflict with much previous commentary suggesting that some labels get a better deal than others, and the labels get a better deal than independent artists represented by Tunecore, etc. So are these previous claims just a myth? And if so, why has it taken so long for Spotify to put the record straight, and why have the details of Spotify’s deals with the labels been kept secret? If there is nothing to hide, why hide it?

    It also follows from Spotify’s information that there should be no differences in the payout rate on ‘free’ (ad-supported) streams and paid (premium) streams within the same accounting period and territory. For example, if an album appeals to teenagers who are mainly ‘free’ users, the payout per stream should not be any less than for an album which appeals to high-income adults who are mainly premium users. But this also conflicts with previous reports claiming that payments are broken down between ‘free’ and ‘premium’ streams, with a much bigger payout for the latter. Is this also just a myth?

    Finally, I don’t see anything in the information about the much-alleged big upfront payments by Spotify to the major labels. Another myth?

    Overall, it’s good that Spotify are ‘opening up the books’ but they need to be pressed on puzzles like these. It also doesn’t help that they have given anonymous examples of ‘indie niche albums’, ‘breakout indie albums’, etc, which are at the upper end of what is plausible for those categories.

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  11. Pingback: Transparency | Music

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