Spotify Myths

I was watching John Oliver talk about ICE and I thought if everybody saw this there would be change.

But everybody didn't.

You can watch the video for free on YouTube:

https://www.youtube.com/watch?v=DfTBhrkae74

But that's not the point. The point is we used to get our news from a limited number of sources, which had fact-checkers and authority. Now we get our news from a plethora of sources, many repeating information they've garnered elsewhere which is repeated to the point where people believe it, even though it is untrue.

Which brings me today's e-mail from Mike Froedge:

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Of course the hate isn't as bad for Apple Music, etc. 
Apple Music (and Tidal) pay nearly TWICE the average per-stream royalty rate that Spotify does. 

Spotify may be the biggest player, but their average per-stream rates are some of the worst in the game.  

Basically, they're the Walmart of streaming; They are the giant amongst the hobbits, so they pay people shit, because they can. 

Mike Froedge
Step Up to the Mike Productions, LLC

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1. There is no per stream rate. Period. On any of these streaming services. There's a pool of money which is divided amongst the tracks based on how many times they were played.

2. Tracks are streamed less on Apple and Amazon. And therefore each stream is worth more.

Let me dive in a bit here. There's a pool of money. If there's only one track and it is played one time it gets all the money. If two tracks each get the same amount of airplay they each get 50%.

But what if a track is streamed A MILLION times instead of once!

The pool of money is still the same, therefore each stream is worth less.

The subscribers to Spotify are much more active listeners, therefore each stream is worth less (and what a stream is worth constantly varies, based on overall income and the number of streams...as I stated above, there is no per stream rate).

So Spotify is the largest streamer with the most active subscribers. This is where the action is. The overall numbers of streams per track is higher (obviously not in each and every case, Apple and Amazon skew older in their listeners), and therefore what is paid per stream is less. The MORE people listen, the less each listen is worth.

It's basic math. But I see this misconception repeated ad infinitum. Just like people believe all the fees go to Ticketmaster. Patently wrong, but it feels good.

Maybe some don't know math, or some want to ignore it, but it doesn't change the numbers. But someone must be screwing the artist, right? I mean you're broke, it must be someone's fault.

OR, you made bank in the old physical era. Well, the game changed. Just like musical tastes. Just like the horse and buggy evolved into the automobile. And these changes happen because the PUBLIC demands them. The PUBLIC wanted faster, lower maintenance transportation. AND the public thought paying for one good track on an overpriced CD was wrong. Ergo, Napster, et al. Spotify and streaming SAVED the music business because they gave the audience what it desired, the ability to stream only the music it wanted to when it wanted to for one low price.

Look at it this way... Do you want to pay a la carte for Netflix? For each and every show? You'd think that's a raw deal.

The irony here is Spotify rebuilt recorded music remuneration. Many are making a ton of money. Why? BECAUSE LISTENERS ARE STREAMING THEIR TRACKS IN PRODIGIOUS NUMBERS! Meaning the value of your track that is streamed a thousand or even a hundred thousand times is not worth that much.

As for basing payment on what subscribers actually play... There's a fantasy that there are all these fans of the alternative who are only listening to the non-hits, even though this is not the case in any other artistic medium. The foreign movie does not outgross the Marvel movie. As a matter of fact, grosses for almost all indie films are de minimis. Turns out MOST people don't want to pay to see them. Maybe they USED TO, but not anymore.

Studies have shown if the money is allocated based on what people listen to the actual payment to some smaller players will be LESS!

Which brings me to e-mail number two, from Bruce Katz:

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Regarding Spotify...I don't understand why you don't realize that all that has to happen is for Spotify to pay a little more of the money to the musicians! It's simple...then the whole system works - people get their music from streaming, the musicians are fairly paid and can continue to create music.  IT'S SIMPLE! Pay the musicians at least a subsistence wage!! Then there would be no "hatred" of Spotify that you are continually scratching your head about.

Bruce Katz

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There are only a hundred cents in the dollar, and if Spotify does not make a profit it goes out of business and artists get NOTHING!

Let's just assume you're not with a label, you've gone to an intermediary like DistroKid to get your tracks on streaming services... If you were on a major...you may never ever see a royalty, because of advances and low percentage royalty rates. The dirty little secret is some of the biggest acts of yesteryear, some still on the road today, NEVER got paid a royalty, NEVER EVER!

So, you're running a business. You have income. You sell a product or service. You've got the cost of goods, the margin between wholesale and retail, and you've got overhead and if your income exceeds your costs, you've made a profit. Voila!

At the end of July, Apple reported its quarterly numbers. There was a gross margin of 46.5%! As for NET margin...it was 24.92%.

When it comes to Spotify... The company pays out approximately 70% of income to rights holders. In its last report, Spotify had a gross margin of 31.5%. A full FIFTEEN PERCENT LESS THAN APPLE! As for Spotify's net margin, it's a paltry 4.77%, nearly twenty percent less than Apple.

But it gets even worse. Spotify doesn't scale. Its costs go up proportionately. The company continues to have to pay approximately 70% of income to rights holders AD INFINITUM!

Compare this to Apple...costs go down with volume, but not at Spotify.

Compare this to RECORD LABELS! The label amortizes costs based on consumption. Sure, it takes money to make a record, but now the distribution costs of yore are essentially history. No pressing, no shipping, no returns, just income. So each stream represents fewer costs for the label, the same way the ten millionth CD sale was more profitable than the first back in the physical era.

In other words, Spotify does not have more money to give to rights holders, as it is the company has frequently run at a loss.

BUT SPOTIFY IS THE ENEMY!

As for a living wage... Where did this come from? Talk to the acts of yore, almost none earned a living wage. But the ones struggling couldn't go on the internet and complain.

I've written all the foregoing multiple times but it never sinks in, I continue to get e-mails like those above. It's an emotional issue, not a factual one. Not everybody can get rich making music, not everybody can make a LIVING WAGE making music. Which is why traditionally parents didn't want their kids to be artists, they were fearful they would starve, ergo the description "starving artist."

So why can't today's players accept this?

Because they believe they've put in their 10,000 hours. Their parents like them, as do their significant others. Everybody they know says they're great, so why aren't they making bank?

Well, very few people are listening to their music. Never mind in most cases it's substandard. When I can listen to the greatest music of all time or the work of a wannabe from nowhere's poorly recorded imitation, which do you think I'm going to choose? There goes one more stream for Drake or Fleetwood Mac or Morgan Wallen...

BUT YOU HATE THESE ACTS!

When was life supposed to be fair?

It's not like music is one big corporation, it's not like you're on salary. It's entrepreneurial. If someone doesn't buy your product you stop selling it, go on to something else...but not in music! In this case the market is wrong, or Spotify is screwing you.

And no matter what I say most won't believe it. Because they don't want to accept that it's their fault, that they're just not that good, that most people don't want to listen to their music. Furthermore, you'd be surprised how many people on big stages are working day jobs! You saw Kenny Lee Lewis say that he worked at Guitar Center when Steve Miller was off the road. Kenny plays bass for a household name act who has sold zillions of tickets, but he has to work a straight job for a living, why don't you?

Not that most people want to advertise these gigs... My inbox is full of them. A guy with a well-known Top Ten hit is a substitute teacher. Another from a legendary act sold jewelry. But somehow today's wannabes are immune?

It's not that you can't handle the truth, YOU DON'T WANT TO KNOW THE TRUTH!

So not only is Spotify the enemy, I am too. I must be in bed with the streaming company, I must be earning bank. Otherwise why would I write this drivel? But I don't own any Spotify stock nor have I ever taken a dollar from the company. Which I guess makes me a chump in your eyes, but keeps me honest and credible.

Are you willing to be honest and credible? Tell your friends their music isn't good enough? That low stream numbers yield minimal payments? That Spotify is giving the lion's share of the money to rights holders and has rarely been profitable?

I didn't think so. Because then you'd become a pariah. It's like complaining about Kamala to Democrats, or tax reductions on the rich to Republicans. You'd be going against your TEAM!

But music is not a team sport.

Never was.

And that's its genius.


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