Over the last couple of years, a few technology news outlets have published investigative articles about the business model of Spotify, the most popular and successful online music streaming service in the world. When Spotify released its mobile app in October 2008, the music streaming realm was mostly focused on desktop media players and on the web; by 2010, the Swedish company was recognized as a technology pioneer by the World Economic Forum. Spotify has managed to attract considerable venture capital from investors with very deep pockets, but the intricacies of its business model have been questioned by analysts and economists alike.

Nearly 10 years following the launch of Spotify, music industry analysts such as Hugh McIntyre of Forbes magazine are casting a shadow of doubt over the economic engine powered by Spotify. Ever since music largely transitioned from compact discs to digital formats such as MP3, musicians have come to realize that album sales are no longer profitable; in the days of iTunes and Spotify, money needs to be made through concert tours and merchandising. McIntyre describes the music industry as a tough business to be in these days, and this is surprising to learn at a time when gigabytes of music are being streamed across Spotify and its various competing platforms.

The Value of Streaming in 2017

The fact that the most popular streaming platforms pay the least to the artists whose music we include in our playlists should not be surprising to anyone who studies the digital economy. Like its main competitors Pandora and YouTube, Spotify does not pay too much, at least not on average. At just $0.0038 per single streamed, it is hard to imagine that independent musicians are getting rich off their Spotify catalog, and this situation is even more deplorable when looking at Pandora, which pays a measly $0.0011, and YouTube, which pays a measly $0.0006.

Special Contracts and Connections Help

Not everything is dire for artists on Spotify. In mid-2016, an electronic dance music act from Australia received $4,955.90 after one million streams; the musicians admitted that the promotion gained from the streaming exposure was worth it.

As can be expected, music marketers and promoters are still key in the era of streaming. A band that is skilled in the art of building up internet hype can approach Spotify and negotiate a lucrative contract to stream exclusively on that platform; this is a strategy utilized by the most popular acts, and the contracts could be worth millions. In the future, Spotify executives may review their Spark streaming analytics and determine the artists that they should be approaching for exclusive contracts.

Music Fans Get a Great Deal

Music fans who wish to see their favorite artists getting paid on streaming platforms would be better off installing the Napster app on their mobile devices. The former file sharing giant used to generate controversy over allegations of aiding and abetting piracy, but these days it stands out as the most generous of the music streaming services thanks to its average payment of $0.0167 per stream.

In late 2015, a fan of the modern rock band Built to Spill published an elucidating article on The Verge about how much she paid for the rights to stream 267 tracks over the course of a year. Using the aforementioned Spotify averages, Built to Spill received less than $3 from that fan alone. Another writer from The Verge paid the estate of jazz legend Donald Byrd less than $4 to stream a sizable portion of his catalog; considering that a box set of eight classic Donald Byrd albums costs about $15 on Amazon, a year’s worth of streaming sounds like a great deal.

In the end, it seems as if music listeners are getting the sweetest slice of the pie when it comes to streaming services; this will likely continue to push musicians towards live performances and merchandising.

 

by: Sia Hasan