Last summer, Hip-Hop Wired attended a Spotify event in which the music sharing company boasted about the amount of money its paid out to artists. Since 2008 Spotify has worked its way up to become a go-to destination for listeners who want to try out albums before making a purchase.
Unlike illegal sharing entities like Napster, entities like Spotify and Pandora are hailed for actually paying musicians to stream their work, and a New York Times article looks deeper into how much money is actually exchanging hands.
“This is a relationship with you and the fanbase for the rest of your life,” noted Disturbed member David Draiman, speaking about Spotify during the aforementioned event. “I applaud them [Spotify] for trying to dissolve the piracy bug.”
In 2011, Spotify paid out more than $100 million in artist royalties, and $500 million since its inception. However, the amount of artists' checks are based on their streaming numbers. In the case of independent musician Zoe Keating, she earned $1,652.74 from Pandora after her music was played more than 1.5 million times. On Spotify, 131,000 plays garnered her a check for $547.71, which breaks down to an average of $0.42 cents per play.
As for iTunes, artists typically earn 7 t0 10 cents off a 99-cent download, once deductions are taken from the record company, the songwriter, and the retailer.
Spotify board member (and former Napster frontman) Sean Parker said that the company is helping to restore the struggling music industry, but that may not be the case.
“No artist will be able to survive to be professional except those who have a significant live business, and that's very few,” said BMG Right Management Chief Rights Hartwig Masuch.
While Spotify has failed to reveal its exact rates, insiders say the company pays $5,000 to $7,000 per million plays, which breaks down to $0.05 to $0.07 cents per stream, and its last fourth quarter reports revealed that Pandora shelled out $202 million in “content acquisition” fees. Yet, with more than 70 million users between the two of them, their financial contribution to the recording industry—which made $7 billion in annual revenue—is minuscule.
But there are ways to make money from an online presence. Korean rapper Psy earned over $1 million from YouTube thanks to his “Gangnam Style” single which has been viewed over a billion times on the site. On the flip side, YouTube recently stripped billions of page views from some of music's biggest names for inflating figures.