At a time when TikTok and Universal Music are at war over artist payouts, it’s a great time for Spotify to share some big headline-grabbing numbers about their support of artists. But it’s increasingly clear Spotify’s definition of the music industry is grossly out of step with the reality of their user base.
Record payouts
Numbers released by 2023 Spotify yesterday proudly explain how they paid the music industry $9B+ in 2023. That’s more than ever before and takes the total payout since their launch in 2008 to a whopping $48bn. When you remember that Napster and illegal file sharing had made music free before they launched this can only be a positive step in the right direction.
Spotify vs YouTube
When you compare Spotify’s payout with YouTube’s this number looks even better. Between July 2021 and June 2022 YouTube reported paying out just $6B to the music industry, but somehow their conduct seems to avoid the same scrutiny.
Indie and unsigned artists - the forgotten majority
However, the music industry Spotify speaks about is not representative of the total music industry. 96% of the music added to Spotify each day comes from Indie labels and DIY artists! The music industry that Spotify is talking about is the remaining 4% where ninety-five per cent (95%) of payouts go to just 200,000 artists. (Just 1.8% of the 11 million reported artists on Spotify).
To understand the disparity you have to remember the ownership structure. When Spotify launched they needed the catalogues of the three major record labels to just exist. The majors recognised they held the power and exerted it, demanding an 18% ownership stake in Spotify which equates to 63% of Spotify’s total revenue - ouch.
Universal and TikTok at war
We can see Universal Music now trying to demand a similar deal with TikTok, but unlike Spotify music is only a small part of TikTok’s offer. You could increasingly argue Universal need TikTok more than TikTok need Universal. Let’s also remember the other two major record labels have agreed to deals, Universal just got greedy!
Spotify a slave to the major labels
Spotify had an idealistic vision to democratise music but in reality, they are no more than a slave to the majors. Spotify’s job is to prioritise major label artists giving them prominent playlisting positions and front-page features. It’s no coincidence that Taylor Swift popped up to say hello in your Spotify Wrapped. While it’s easy to position Spotify as the bad guy, it’s the three major record labels who call all the shots, and those shots are becoming increasingly deadly.
Now the majors are worried that AI music clutter will prevent their artists from being heard. But rather than stopping ‘noise tracks’ from entering Spotify the major labels have cunningly used AI as an excuse to change the payout model to further skew payments in their favour.
A new tax on unsigned and indie artists
In 2024 tracks on Spotify must have reached at least 1,000 streams in the previous 12 months to generate royalties on the platform. To be clear this is not just a tax on AI-generated music, it’s a tax on every single unsigned, independent and DIY musician starting in music. As if their challenge wasn’t great enough already.
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Words Mark Knight