Spotify answers artists' complaints with $500m in royalties
By Nicole Kobie
Posted on 7 Dec 2012 at 09:46
Spotify has five million paying subscribers and has paid out $500m in royalties to musicians - a number that may surprise musicians complaining they don't earn enough from the music streaming site.
Spotify has grown steadily over the past four years, now claiming 20m active users - of which 20% are paying a monthly subscription fee. Of the total, 1m users are in the US, where Spotify expanded to last year.
While the service is winning listeners, musicians have consistently complained that they recieve little money when their music is played. One band highlighted the issue by revealing each song play earns less than a cent, and another complained that 10,000 streams earned a miserly $10.
We know that our fundamental model is sound. Now it’s just a perception problem
Now, Spotify's CEO Daniel Ek has said that half a billion dollars in royalties has been paid to labels over the past four years - with half of that in the past nine months. He claimed it takes 200 plays on Spotify to equal the profit from one download, according to the Financial Times.
Ek also revealed that Spotify pays 70% of its revenue to labels - a ratio on a par with Apple's digital content sales. However, he admitted such margins don't leave much for the company. Spotify is yet to post a profit; while its revenue has climbed, so have its licensing, staffing and other costs.
Ek acknowledged the "controversy" around the royalty split between labels and musicians. However, he suggested a bigger issue was simply delays to payments - it takes up to 18 months to receive Spotify royalties, meaning many artists haven't been paid yet.
"We know that our fundamental model is sound," he told All Things Digital. "Now it’s just a perception problem. But more and more people are coming around."
Metallica signs up
One band that has come around and joined Spotify is Metallica, who famously sued digital music service Napster in 2000. At an event in New York, Metallica's drummer was joined on stage by Napster founder Sean Parker, now a Spotify board member and investor.
Speaking about the case against Napster, Lars Ulrich said his band was "maybe somewhat ignorant to what was going on in the real world", saying Metallica "got caught up in a lot of things that were going on in that moment," according to The Guardian.
"The control option had been taken away from us, and then it turned into as far as we were concerned a street fight," he said, adding of the reconciliation: "we felt that we had much more in common than we realised at that time."
Spotify also unveiled a new feature allowing users to "follow" friends and celebrities, and a system to make it easier to discover new music.
"Now on Spotify, you can follow all the people who turn you on to the music you care about," Spotify said in a blog post. "Find out what friends and artists are listening to in real time, and check out the music that matters to the trendsetters in your life."
The "Discover" tab alerts users to new releases from musicians they like, and makes suggestions of other bands that might appeal, based on music they listen to.
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