Barely Legally

Confessions of a Moot Court Bailiff

Why Spotify Pays So Little

Straight from the horse wolf’s mouth, Vulf Records’s Jack Stratton on why Spotify is such a lousy deal for artists:

Take a single stream of “The Birdwatcher” in March 2014. Terry, the user, lives in the US and pays $9.99/month for Spotify. I, the artist, receive a total of $0.00786 over the next nine months:

  1. Licensed Use of Master — $0.00668
  2. Writer’s Performance Royalty — $0.00030
  3. Publisher’s Performance Royalty — $0.00030
  4. Streaming Mechanical Royalty — $0.00058

Total — $0.00786

Less than a cent. How did Spotify get this number? Spotify pools its revenue for March, gives 70% to artists and takes 30%. This is based on iTunes’ 70/30 split.

Stratton runs the math and explains how Spotify works now, as well as how it ought to work. It seems like a simple fix, but there’s a tremendous amount of inertia in the music industry. Specifically, there are a lot of middlemen, and they all want their cut. Stratton says his proposition is “simple and will never happen.”

The Pandorica Opens

It’s not just Spotify. In the span of just three months last year, Pandora played that Pharrell song “Happy” 43 million times. For that, Pharrell and his record company split $2,700. That’s absurd. It’s not like Pandora is getting rich, either. They lost $30 million last year, despite generating $920 million in revenue. How is that even possible? They paid less than three thousand dollars for one of the biggest songs of the year!

Well, shucks. Let’s have a look. Pandora’s a public company, which means they have to publicly report how they made/lost their money every quarter. The latest one is for the 4th quarter of 2014, and the costs are on page 48.

Pandora’s cost of revenue in 2014 was 55% of its gross revenue. This is “content acquisition costs,” which is the costs of licensing music, as well as “other” costs. Pandora spent roughly $442 million just on licensing content for use on its site. In exchange for that, they played roughly 20 billion hours of music for 81.5 million users. My personal iTunes library is 566 hours of music, and I have stuff in there I haven’t listened to since I was in college.

In Perspective

How long is 20 billion hours? That’s roughly 2.28 million years. To put it in perspective, 2.28 million years ago, one of the apex predators of North America was an eight foot tall, 300-pound bird named Titanis walleri. Pandora played enough music in 2014 to stretch all the way back to the heyday of the Titanis.

This assumes you have a time machine and Pandora One (because the ads would drive you crazy before you even got to the Crusades).