Criticism of music streaming service
Spotify, a music streaming company, has attracted significant criticism since its 2008 launch, mainly over artist compensation. Unlike physical sales or downloads, which pay artists a fixed price per song or album sold, Spotify pays royalties based on the artist's "market share"—the number of streams for their songs as a proportion of total songs streamed on the service. Spotify distributes approximately 70% of its total revenue to rights holders, who then pay artists based on their individual agreements. Multiple artists have criticised the policy, including Taylor Swift and Thom Yorke, who temporarily withdrew their music from the service.
Spotify faces particular scrutiny due to its free service tier, which allows users to listen free with advertisements between tracks. The tier has led to a variety of major album releases being delayed or withdrawn from the service. Spotify claims it benefits the industry by migrating users away from piracy and less monetized platforms and encouraging them to upgrade to paid accounts. Record labels keep a large amount of Spotify earnings.
Spotify has also attracted media attention for several security breaches, as well as for controversial moves including a significant change to its privacy policy, "pay-for-play" practices based on receiving money from labels for putting specific songs on popular playlists, and allegedly creating "fake artists" for prominent playlist placement, which Spotify denies.
Spotify CEO Daniel Ek was also criticized for making donations through his investment company to military research of artificial intelligence.
Business practices.
Allegations of unfair artist compensation.
Spotify, together with the music streaming industry in general, faces criticism from some artists and producers, claiming they are being unfairly compensated for their work as music sales decline and music streaming increases. Unlike physical sales or legal downloads, which pay artists a fixed price per song or album sold, Spotify pays royalties based on their "market share"—the number of streams for their songs as a proportion of total songs streamed on the service. Spotify distributes approximately 70% of its total revenue to rights-holders, who will then pay artists based on their individual agreements.
The variable (and some say unsustainable) nature of this compensation, has led to criticism. In a 2009 "Guardian" article, Helienne Lindvall wrote about why "major labels love Spotify", writing that the labels receive 18% of shares from the streaming company—something that artists themselves never actually receive. She further wrote that "On Spotify, it seems, artists are not equal. There are indie labels that, as opposed to the majors and Merlin members, receive no advance, receive no minimum per stream, and only get a 50% share of ad revenue on a pro-rata basis (which so far has amounted to next to nothing)." In 2009, Swedish musician Magnus Uggla pulled his music from the service, stating that after six months he had earned "what a mediocre busker could earn in a day".
Norwegian newspaper "Dagbladet" reported in 2009 that the record label Racing Junior earned only NOK 19 (US$3.00) after their artists had been streamed over 55,100 times. According to an infographic by David McCandless, an artist on Spotify would need over four million streams per month to earn the U.S. minimum monthly wage of $1,160. In October 2011, U.S. independent label Projekt Records stated: "In the world I want to live in, I envision artists fairly compensated for their creations, because we (the audience) believe in the value of what artists create. The artist's passion, dedication, and expression is respected and rewarded. Spotify is NOT a service that does this. Projekt will not be part of this unprincipled concept."
In March 2012, Patrick Carney of The Black Keys said that "Spotify isn't fair to artists", and further commented that streaming services "are becoming more popular, but it still isn't at a point where you're able to replace royalties from record sales with the royalties from streams. For a band that makes a living selling music, it's not at a point where it's feasible for us." Replying to Spotify board member Sean Parker's claim that Spotify would make more money for the music industry than iTunes, Carney said: "That guy has $2 billion that he made from figuring out ways to steal royalties from artists, and that's the bottom line. You can't really trust anybody like that." In May 2012, British Theatre vocalist and Biffy Clyro touring guitarist Mike Vennart stated: "I'd sooner people stole my work than stream it from [Spotify]. They pay the artists virtually nothing. Literally pennies per month. Yet they make a killing. They've forced the sales way down in certain territories, which wouldn't be so bad if the bands actually got paid."
Singer David Byrne of Talking Heads criticized streaming services such as Spotify in October 2013, writing: "If artists have to rely almost exclusively on the income from these services, they'll be out of work within a year." Byrne concluded his piece by admitting "I don't have an answer." In March 2014, American funk band Vulfpeck exposed a loophole in Spotify's royalty calculation model. The band created an album titled "Sleepify", which consisted solely of silence. The band asked users to stream the album on a loop while they slept to increase the amount of money earned. The album was pulled by Spotify in April 2014, citing unspecified service violation. Vulfpeck had accumulated enough streams to result in around $20,000 in royalties before the album was pulled. In July 2015, Neil Young removed almost all of his music from Spotify and other streaming services, citing low sound quality as the primary reason. He stated that he did not think his fans deserved the low quality they were receiving, and said it was bad for his music. Young's music later returned to Spotify and other streaming services.
Worldwide, 30,000 musicians have joined the organization UnionOfMusicians (UMAW). UMAW organized protests in 31 cities in March 2021 and its campaign #JusticeAtSpotify is demanding a compensation of one cent per stream. Moreover, they are asking for a fairer redistribution system, as smaller artists are disproportionately disadvantaged on Spotify.
On 29 June 2021, Digital Music News released an article titled "Spotify Executive Calls Artist 'Entitled' for Requesting Payment of One Penny Per Stream". The article covers the story of a Spotify Inventor Jim Anderson, who on 14 June 2019 responded in front of a live audience to the general allegation of unfair compensation when confronted about it by Ashley Jana, a producer/singer/songwriter who happened to be recording the event. Anderson was described on the Sync Summit June 2019 Agenda as "The man who built out the system architecture of Spotify". Ashley Jana released excerpts from his response in the form of an audio recording on YouTube on 26 November 2020. Some of the comments that Anderson made were the following: "So, maybe I should go down the entitlement road now? Or should I wait a few minutes?", "The problem is this. Spotify was created to solve a problem. The problem was this - piracy and music distribution. The problem was to get artists' music out there to solve a problem. The problem was not to pay people money", and "I think that Taylor Swift doesn't need .000001 cent more a stream". Following the release of the Digital Music News article, "Business Insider" also released their own take on the story with their article titled "Taylor Swift 'doesn't need' to earn streaming royalties according to a former Spotify boss who said the company is a distribution platform that wasn't built to pay artists money." "Business Insider" reported that "Spotify declined Business Insider's request for comment".
As of today, Spotify pays artists between $0.003 – $0.005 per stream on average, and there are multiple online tools to calculate how much an artist can make on royalties based on their streams.
Support to Spotify.
In June 2012, Charles Caldas, CEO of the Merlin Network (a representative body for over 10,000 independent labels), clarified that Spotify pays royalties to the music labels, and not the artists. According to Caldas, the payments Merlin's labels received from Spotify rose 250 percent from the year ending March 2011 to the year ending March 2012, while at the time, the revenue per user was "the highest it has been since the launch of the service". Caldas said that Merlin had observed "consistent, ongoing growth on revenue per user, revenue per stream, and the total revenue" that Spotify generates for the labels it represents. "The thing about 'Spotify doesn't pay artists enough'—Spotify doesn't pay artists... They pay labels", said Caldas.
Caldas also highlighted the issue of time lag for artists, as they are not gaining an impression of Spotify's status at the time they receive their payments. They are "getting reporting quarterly, or six-monthly, on sales that happened six months ago." Caldas explained that "royalty statements could be a year old".
In February 2015, "Music Business Worldwide" reported on a French study between music trade body SNEP and EY that concluded that major labels kept 73% of Spotify Premium payouts, while writers/publishers received 16%, and artists received 11%. Mike Masnick of Techdirt wrote: "Sure, in the past, it may have been reasonable for the labels to take on large fees for distribution, but that's when it meant manufacturing tons of plastic and vinyl, and then shipping it to thousands of record stores around the globe. In this case, there's no manufacturing, and distribution is an "upload" button."
Spotify's "artist-in-residence" aid.
In February 2012, "Forbes" reported on "Spotify's secret weapon": musician D. A. Wallach, member of the band Chester French and former Harvard classmate of Mark Zuckerberg. He acts as Spotify's "artist-in-residence" and helps Spotify "brainstorm artist-friendly applications that can be carved from the gusher of data it collects". One such application includes geographical data of which cities listen to artists' music the most as suitable tour locations. He told "Forbes":
We're working very carefully to make Spotify the most artist-friendly company that has ever existed. ... We're very interested in a high level of letting artists directly connect to their fans and manage that relationship and deliver value to their fans, and vice versa. We want to do that really elegantly, at a scale that's never existed before.
In a June interview with Hypebot, Wallach reported that $180 million of royalties was paid out in 2011 and 70% of Spotify's revenue consisted of royalty payments. Spotify's growth meant that the per-stream royalty rate doubled between the service's inception and mid-2012. He said that, at the time, compared to iTunes, the average listener spends $60 annually on music, whereas Spotify Premium users spend twice that amount. According to Wallach in 2012: "The growth of the platform is proportional to the royalty pay out, and since inception, we've already doubled the effective per play rate."
Artist withdrawals.
Thom Yorke.
In July 2013, the Radiohead singer Thom Yorke and the producer Nigel Godrich removed their band Atoms for Peace and Yorke's solo music from Spotify. In a tweet, Yorke stated: "Make no mistake—new artists you discover on #Spotify will not get paid. Meanwhile, shareholders will shortly be rolling in it. Simples." Godrich stated: "[Streaming] cannot work as a way of supporting new artists' work. Spotify and the like either have to address that fact and change the model for new releases, or else all new music producers should be bold and vote with their feet."
In an October 2013 interview with Mexican website "Sopitas", Yorke said: "I feel like as musicians, we need to fight the Spotify thing. I feel that, in some ways, what's happening in the mainstream is the last gasp of the old industry. Once that does finally die, which it will, something else will happen." He described Spotify as "the last desperate fart of a dying corpse". Spotify responded in a statement that it was "still in the early stages of a long-term project that's already having a hugely positive effect on artists and new music", and that it is "100% committed to making Spotify the most artist-friendly music service possible, and are constantly talking to artists and managers about how Spotify can help build their career". In 2015, Brian Message, a partner at Radiohead's management company Courtyard Management, said he disagreed with Yorke, noting that Spotify pays 70 percent of its revenue back to the music industry. He said that "Thom's issue was that the pipe has become so jammed ... We encourage all of our artists to take a long-term approach ... Plan for the long term,