Last year, Spotify launched an initiative called Loud & Clear that was positioned as a pay transparency initiative for artists and songwriters. A direct response to worldwide protests demanding higher royalty payments, it was apparent in the announcement’s language that the statistics provided weren’t actually that transparent. Spotify released the 2021 annual report today, and the company is once again using carefully-worded language to tout itself as an artist-friendly company.
The biggest number highlighted in the report is the $7 billion it paid in royalties to rights holders, which the company says is more than any other service or single retailer in history. Considering Spotify has more than 180 million paying subscribers worldwide — far more than any other streaming platform — that amount actually isn’t all that impressive.
Moving onto more granular royalty breakdowns, Spotify boasts that for the first time, more than 1,000 artist catalogs generated over $1 million for rights holders. Of those catalogs, 450 generated $2 million, and 130 generated $5 million. Lower down the scale, more than 50,000 catalogs generated $10,000 from Spotify.
“Generated” is the keyword here, because the great majority of artists or songwriters don’t see any of that money until it trickles down from rights holders — labels, publishers, and distributors — which then divide the payments according to their contract. Driving that point home, Spotify says the $4 billion it paid to major labels in 2020 means “more money to reinvest to grow the industry.”
It is worth noting, however, that there’s a rosier picture for artists using small distributors like DistroKid, TuneCore, and CD Baby to release music independently on Spotify. 28% of those artists who reached $10,000 in earnings on the streaming service used this method.
Another issue Spotify sidesteps in the report is per-stream royalties. “We don’t believe the per-stream rate is a meaningful rate to analysts because fans don’t pay per song,” the Loud & Clear FAQ reads. “Spotify, like every major streaming service, pays royalties based on an artist’s share of overall streams across the platform. We call this ‘streamshare.'”
So what’s the big picture here? Spotify CEO Daniel Ek previously stated his desire was to help one million artists “live of their art,” and the streaming service is nowhere near that. Artists signed to labels are bound to a particular royalty rate stipulated in their recording contracts, and even then, only start receiving money once they have recouped their advance and other expenses.
And while there’s an increasing number of artists self-distributing their music and pocketing the majority of their streaming royalties, that still only amounts to 15,140 who generated $10,000 before aggregators took their cut. It’s no wonder why David Crosby’s advice to young artists is to not become a musician in the first place.
Read the full report here.