“Football is played by millions of people – but there’s a very small number that can live off playing full time”: Daniel Ek addresses Spotify’s low royalty payments
Spotify put $9 billion back into the music industry in 2023 – but a boom in independent talent is diluting the payouts artists can earn.
Image: Antoine Antoniol/Getty Images
Technology has transformed the music industry. Now, the digital landscape plays a pivotal role in an artist’s success, and pulling in high streaming numbers is often vital. According to a poll by the World Economic Forum, internet-based streaming accounts for 64 per cent pf music consumption.
Streaming has allowed some amateurs to skyrocket in popularity, from playing their local pub to topping the charts. But every rose has its thorns. Streaming infamously generates very little royalties.
Spotify is under constant fire due to its low royalty payout rates. Ditto reports that an artist receives $0.003 – $0.005 per stream on average, with 30 per cent of those royalties going to Spotify.
In a new video posted on his socials, Spotify CEO Daniel Ek has addressed the company’s low royalty rates. Ek explains that, despite beliefs that Spotify isn’t paying up, the company is indeed putting its hand into its pockets. “Spotify has paid out more than $9 billion to the music industry in 2023,” he states. “In the entire history of Spotify, we have now paid out more than $48 billion.”
While artists claim to generate next to no revenue from streams, Ek says that isn’t Spotify’s fault. “Spotify does not pay out to artists individually… when we pay out, we pay out to record companies, to publishers, and to collecting societies,” he explains. “It can depend on the contracts that the artist or composer [has] with their publisher or with the record company.”
As Ek goes on to explain, Spotify is putting “more and more [money] back into the music industry, and the music industry is growing” as result. Yet the paradox remains – how can Spotify be paying out billions every year, yet artists are claiming to be making no money from streaming?
“The best analogy that I would have is that the music industry… is like professional sports,” he explains. “If you take football, it’s played by hundreds of millions of people around the world. But there’s a very, very small number of people that can live off of playing soccer full time. FIFA tells us that there’s about 100,000 people that can make it in football or soccer. [And there are also] hundreds of millions of people that are trying to make it in the music industry.”
Ek’s analogy asserts that, like football, there are only a select few who will rake in the big bucks through streaming. “As more and more people can make music in an affordable way with their laptops, more and more people are trying it,” he says. “Out of the $9 billion that we paid out to the music industry last year, around $4.5 billion went to the independent sector.”
If Ek’s calculations are right, that would mean around half of Spotify’s payout went to independent artists. And, while that does allow for certain independent artists to make a living wage off of their music, the huge influx of independent talent means that number split between hundreds of thousands of different artists.
“We are striving each and every day to make Spotify better for more and more artists and to make the system work for more and more people,” Ek concludes.
While Ek’s video sounds logical, the LinkedIn comments aren ’t too pleased. One user remarks that Spotify “unequivocally has the ability to pay artists more, yet, you just refuse.”
According to Spotify, 2023 saw a 16% increase in revenue from 2022. Despite the $9 billion payout last year, Spotify is currently the lowest paying streaming platform, next only to YouTube Music.
