Spotify hits back: says it has made labels US$2bn and Taylor Swift a cool US$6m

11 Nov 2014

Pictured: musician Taylor Swift

Responding to musician Taylor Swift’s decision to ditch Spotify, CEO Daniel Ek has defended the service and has claimed that some US$2bn has gone into the coffers of the music industry, of which US$6m has gone to Swift.

Taylor Swift’s decision to remove her entire discography from Spotify has been headline news over the past week.

Swift said that she left the platform chiefly because of low payments to the artists themselves and how she was not willing to contribute “her life’s work to an experiment.”

Swift and her entire back catalogue’s departure from Spotify has prompted furious debate about the future of music and how artists should be properly rewarded.

In a blog post Ek said: “Taylor Swift is absolutely right: music is art, art has real value and artists deserve to be paid for it.”

He said that Spotify was started out of a motivation to prevent piracy killing music and that he was upset about talk that Spotify was making money on the back of artists. He paraphrased Quincy Jones: “Spotify is not the enemy, piracy is the enemy.”

The new music economy

Ek said: “Spotify has paid more than US$2bn to labels, publishers and collecting societies for distribution to songwriters and recording artists. A billion dollars from the time we started Spotify in 2008 to last year and another billion dollars since then. And that’s two billion dollars’ worth of listening that would have happened with zero or little compensation to artists and songwriters through piracy or practically equivalent services if there was no Spotify – we’re working day and night to recover money for artists and the music business that piracy was stealing away.”

He said Spotify is trying to build a new music economy and is pushing for greater transparency.

“And it is working – Spotify is the single biggest driver of growth in the music industry, the number one source of increasing revenue, and the first or second biggest source of overall music revenue in many places. Those are facts. But there are at least three big misconceptions out there about how we work, how much we pay, and what we mean for the future of music and the artists who create it.”

Debating the freemium model, which he says is next to piracy, and the subscription model that Spotify champions Ek said:

“Here’s the overwhelming, undeniable, inescapable bottom line: the vast majority of music listening is unpaid. If we want to drive people to pay for music, we have to compete with free to get their attention in the first place.”

Spotify set out to fix this by offering a free tier supported by advertising as a starting point. “And unlike other free music options – from piracy to YouTube to SoundCloud – we pay artists and rights holders every time a song is played on our free service. But it’s not as flexible or uninterrupted as Premium.”

Ek said that Spotify has more than 50m active users of whom 12.5m are paying subscribers, each paying US$120 per year.

“That’s three times more than the average paying music consumer spent in the past. What’s more, the majority of these paying users are under the age of 27, fans who grew up with piracy and never expected to pay for music.”

Take me to the bank

But there is the unavoidable reality that the economics of being played a lot doesn’t add up for struggling artists, unlike big names.

Ek pointed out that a song being listened to 500,000 times is the same as having it played one time on a US radio station.

“But the equivalent of that one play and its 500 thousand listens on Spotify would pay out between three and four thousand dollars. The Spotify equivalent of ten plays on that radio station – once a day for a week and a half – would be worth thirty to forty thousand dollars.”

He cited Irish artist Hozier’s song Take Me To Church and said that the song has been listened to enough times on Spotify to generate hundreds of thousands of dollars for his label and publisher.

“At our current size, payouts for a top artist like Taylor Swift (before she pulled her catalogue) are on track to exceed $6 million a year, and that’s only growing – we expect that number to double again in a year.

“Any way you cut it, one thing is clear – we’re paying an enormous amount of money to labels and publishers for distribution to artists and songwriters, and significantly more than any other streaming service.”

While much of what Ek makes sense for big names from Swift to Hozier, for struggling artists it’s still little comfort as a lot of listens will only guarantee a living wage.

Taylor Swift image via Shutterstock

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years