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Record Sales At All Time Low, Spotify Comes To Rescue

The question of fair compensation to artists has been hashed out since the beginning of the digital age. Record sales continue to decline, hitting a new all-time low last week with under four million weekly albums sold. Copyright infringements of sound recordings and net neutrality have resulted in a devastating effect on artist income. In addition, record labels are no longer promoting and discovering artists as heavily as they once did in the past.

Despite the industry’s misfortune, online streaming is where dollars are headed. In the foreseeable future, streaming may be an alternative method to adequate income for artists and the industry. 

One of the largest brands in subscription-based streaming music, Spotify, aims to be a leading innovator in this new wave. In a recent interview with CNN Money, Spotify CEO Daniel Ek explained he is confident that artists will be able to make a decent living off streaming in just a few years.”

What’s going to happen is the more people that come online, the more people that are listening; it just means that the base of people is going to expand. And as that happens, even more revenue will come back to the music industry.”

Spotify intends to be an ongoing and growing source of revenue, and Ek proposes an ideal, equitable business to artists and industry professionals as a whole. With over 10 million paid subscribers, nearly 70% of all revenue Spotify receives goes back directly to the rights owners. Ek believes that these growing numbers will soon become a sustainable means of income for any artist using the platform.

"[Spotify] still in its infancy when it comes to streaming, however just last week we announced that if there were 40 million total active users on a streaming platform like Spotify, it would be more than anything else in the entire music industry, including iTunes. We are not too far away from that number, and I am sure that artists will not only make a decent living, but the industry will become bigger than it ever has before."

To better understand the system Spotify uses to determine payouts for artists, Time reports that "Spotify doesn’t pay on a 'per song stream' model, exactly: the total royalty pie is split among all rights holders based on the percentage of total Spotify streams their songs garner. But the company estimates that the average song generates between $0.006 and $0.0084 per stream in royalties."

Concurrent with Spotify’s revenue adjustments, the Fair Digital Deals Declaration launched in July to promote fair digital revenue. The campaign encourages better standards for information from online services and ensures that an artist’s share of download and streaming revenue is clearly explained. Spotify’s unique approach allows artists to view all the facts about their artist royalty program online through their self-developed artist website.

In addition to its streaming revenue, Spotify and its customers also reap the benefits from another music startup called BandPage. Bandpage serves as an application for artists to sell merchandise like vinyl, shirts, posters, and concert tickets. Artists may also add fan experiences, including private online concerts and song collaborations, enhancing user-connection while solidifying additional revenue.

As I see it, music fans around the world need to consider paying for music again, and returning to a healthier industry where artists can thrive based on the work they provide. By purchasing a Premium Spotify subscription for a mere $10 per month, you are contributing to the re-growth of the music industry. Although advertisers pay Spotify if you’re a "free tier" member, the paid premium option is truly more beneficial in the long run for both the consumer and the artists. We’ve all been spoiled with free and easily-available music for an extended time now, and equitability of the system needs to be controlled to ensure its survival.

Streaming services will continue to develop and grow in the future, giving consumers more choices and greater flexibility in how they listen to their music. If other services like SoundCloud, Pandora, and YouTube evolved their paid subscriptions like Spotify, the result would be a complete turn around for the way artists receive royalties. Unlike most music platforms, Spotify is the world’s preeminent streaming service because of its massive amount of paid subscribers.

The key here is growth, and as the number of people using the Internet expands, the growth of Spotify users will inevitably follow. In order for the music industry to continue to thrive and enhance our culture, artists must be able to make a living to pursue their creative endeavors. We applaud Spotify for becoming a leader in this pivotal movement, and encourage other music platforms to continue developing ways to benefit artists and fans alike.

[H/T: CNN Money]

Cover Photo Credit: Mashable

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Tags Artist Compensation Online Music Royalties Spotify Streaming Service

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