Three years ago I wrote a short blog post “Is Spotify Evil?”. Given the ethics of Spotify is a hot topic right now, and there’s some misconceptions floating around, I decided to write this updated and much more in-depth version. Along the way I’ll cover the two big criticisms – the $ and the drones. Let’s dive in.
How Spotify Pays Artists
A common misperception is that Spotify directly decides a per-stream rate they pay artists. What actually happens is Spotify negotiates with the music rights holders to share a percentage of revenue. The rights holders include the PROs, the major labels and Merlin – the body representing smaller labels and distributors (and therefore indirectly most independent artists). What artists receive depends on whether they have agreed to any of these intermediaries taking a cut.
The current negotiations have rights holders receiving about 70%* of revenue, with Spotify retaining 30% to run the platform, and for profit. That 70% is split based on number of streams (with a few caveats and complications), so yes you can calculate approximate per-stream amounts, but it’s the result of the process, not the start. The other major streaming platforms have similar arrangements.
But Don’t the Other Platforms Pay More?
It’s true Apple Music, Amazon Music and YouTube Music all have higher per-stream amounts, but that’s primarily because subscribers to these platforms listen to less music. If the same amount of revenue is divided by a smaller number of streams, this equals a higher per-stream amount.
One study found US Spotify users listened to twice as much music per user than users of Apple/Amazon Music combined. This is likely explained by the three tech giants bundling music with other services, resulting in many subscribers who have music as a “bonus” rather than their prime reason for subscribing. If these three platforms draw “more serious” music fans away from Spotify, then their per-stream rates will drop.
However, there are some music-only streaming services, such as Tidal and Qobuz, that also have higher per-stream rates. So there’s potential to pay more, and how exactly could Spotify do this?
Price Hikes
One option is to increase revenue through price increases. Spotify has started raising subscription prices in the last couple of years, and it’s probably overdue. Music streaming is incredible value if you compare to movie/TV streaming e.g. Spotify has a much greater % of the world’s music, than Netflix does of the world’s movies and TV.
One reason Spotify kept prices low for so long is blitzscaling – the practice of using venture capital money, especially in a new “disruptive technology” space, to prioritise aggressive growth, postponing any profit until a market has been dominated. Spotify invested heavily in marketing and partnerships, e.g. bundles with telecommunications partners, and kept prices low to quickly gain users. They only turned a yearly profit for the first time in 2024. This model has been followed by many tech companies, with Uber and Amazon being obvious examples.
The fairness of blitzscaling can certainly be questioned, but the other side of the coin is what music listeners are willing to pay. The initial prices set for streaming successfully curtailed the exploding piracy in the 2000s. There will be limits to how much they can now be raised before the gains are offset by lost subscribers.
Adjusting the Split
Another way to pay artists more is for Spotify to agree to taking less than 30% (i.e. paying rights holders more than 70%). They could certainly spend less on the blitzscaling just described, but also less on:
- Joe Rogan – Spotify has given hundreds of millions of dollars to a single podcaster who has spread dangerous misinformation.
- Donald Trump – Spotify gave $150,000 for an inauguration brunch. Sadly, it’s common for corporations to donate to the inaugurations of incoming US presidents, regardless of political party. Apple and Amazon donated $1 million USD each to Trump’s inauguration.
- Executive salaries – are silly high of course, as they are in most corporations.
However, there are limits to what such costs savings would mean for artists. Even if Spotify managed to halve their costs/profits (taking 15% of revenue, like BandCamp does for example), that would only result in music rights holders getting 21% above what they currently get.
The Billionaires
But hang on, aren’t the founders billionaires? Yes, Daniel Ek and Martin Lorentzon have made obscene amounts of money, but that is not through Spotify operational revenue, it’s through selling shares in the company.
Since its float in 2018, Spotify’s stock value has risen on the potential of eventual profits, and the Ponzi-like snowball effect of people buying into a rising stock to try to profit off the next person trying to buy into a rising stock etc. In the last two years, Ek has cashed out $800 million USD of his shares.
The work of artists is obviously a key pillar of the stock value, but if there was some kind of artists-as-shareholder model, would artists want to take on the speculative volatility and potential losses of joining the “owner” side of the equation? It would be nice if Ek and ilk simply passed on some of the capital gains to artists, but I’m not holding my breath.
There’s a broader issue here of our economic systems making the mega rich even richer. The growing income inequality is leading us on a path to societal collapse. I’m not an economics expert, but it seems an obvious step is taxing the mega rich more, including higher taxes on large capital gains and the closure of tax loopholes.
Killer Drones
A current controversy is what Daniel Ek is spending his aforementioned capital gains on. He’s invested heavily in German military tech company Helsing.
Helsing was founded in 2021 with a stated motivation of defending Europe against an aggressive Russia, following the Russian invasion of Crimea in 2014. They pledge to only sell their technology to democracies, and to always have a “human-in-the-loop”, so while their drones make use of AI for navigation and recognising targets, they require a human to fire.
So far the only delivery of Helsing drones for operational use has been to Ukraine, though they have contracts, related to other tech, with the governments of Estonia (which Russia “wants back”), UK, France, Sweden and Germany. Yesterday, as I’m writing this, almost 600 Russian drones struck Kyiv, killing at least 23 civilians.
So is Helsing providing an important contribution to protecting Europe from a heavily-armed murderous dictatorship wanting to expand their territory? Or is it primarily contributing to an arms race with dangerous technology that will inevitably end up in the “wrong hands” despite any pledges made? Will the profit motive override ethical considerations?
I don’t know the answers. I hate the thought of AI drones, but I also understand the nervousness in Europe in a time where US support is no longer clear.
The companies behind several other music streaming platforms also have ties to the military industrial complex.
Let’s return to the way Spotify pays artists, and how it could be made fairer.
User-centric Payments
When calculating payments, the major streaming services only count total streams in each market, regardless of which users made them. Therefore, a heavy listener has a bigger “say” than a light user, even if they pay the same subscription.
For example, imagine you have a $16 Spotify subscription, and you only use it to listen to your favourite band. It would seem fair if that band received all your subscription, minus Spotify’s cut, i.e. ~$11. However, your streams and money actually get thrown into a bigger pool, so parts of your subscription are going to artists you don’t even listen to.
Fairer “user-centric payments” have been implemented in new streaming platform Hio, though I’m wary of their token/blockchain technology. Deezer have trialed alternative payment methods too, but only in a limited capacity. Spotify seems uninterested in changing models though, probably because it’s unlikely to benefit the major labels, who are significant shareholders in Spotify.
Seconds and Minutes
A stream on Spotify is counted as soon as a song is played past the 30 second mark. This unfairly favours shorter songs. For example, an album of 20 one-minute songs is paid twice as much as 10 four-minute songs, even though it’s half the total play time. Actual playtime would be the fairest metric, though if this is too data-intensive, another option is to count completion ie. songs streamed to their end are paid more than those skipped part way through.
Payola-like Practices
Artists can promote their music within Spotify either through paying for “Marquee” or “Showcase” advertisements, or through “Discovery Mode” whereby a track is given preferential algorithmic treatment in exchange for a lower royalty payment.
This is arguably payola and a symptom of enshitification. It’s similar to what Facebook did – encourage businesses, including artists, to get followers, but then limit the reach of their posts unless the businesses pay to “boost” them.
Spotify’s counter argument is they are providing effective low-cost marketing tools to artists (no up-front cost in the case of Discovery Mode).
Crossing 1,000 Streams
Spotify does not pay “master royalties” (to the owner of the recording) on a song until it has more than 1,000 streams in a year, and instead puts this revenue into the pool for songs that do go over that threshold. Spotify still pays “publishing royalties” (to the owner of the song) on all streams.
In 2024, half the songs uploaded to Spotify got less than ten streams, and it’s estimated that a quarter of songs on streaming platforms get no streams at all. There would be some good songs amongst these, where the artist is simply not interested or skilled in promotion, but primarily it’s a flood of low-quality content that few people wish to listen to.
Spotify’s stated rationale is it’s better to avoid making huge quantities of tiny payments (1,000 streams is about $4) to distributors, some of which does not reach artists due to distributor’s own payment thresholds, and instead give that money to the “more serious” above-1,000-stream artists. This, not surprisingly, benefits the major labels.
It goes against a fairness principle that every stream should be of equal value, but Spotify is not the only platform to take this approach. Deezer goes a step further and permanently removes songs from their system that don’t get enough streams. YouTube has had monetisation thresholds for a long time – you can’t get any $ until you have 500 subscribers, a certain number of views and have earned more than the $100 payment threshold. Yet most musicians still choose to put their music on YouTube, because of its discovery potential.
Perfect Fit Content
Spotify has contributed their own low-quality content through their “Perfect Fit Content” program. This involved commissioning stock music companies to create music for Spotify’s popular chillout/ambient/lo-fi/relax/study/concentration/wellness etc. playlists. Spotify realised they could save money by putting their “own” music on these “mood” playlists, rather than having to pay royalties to as many “real” artists in these genres.
Liz Pelly documents this in her book “Mood Machine: The Rise of Spotify and the Costs of the Perfect Playlist”.
In video streaming, it’s common for companies like Netflix and Apple to create their own TV shows and movies, and to proudly proclaim their involvement. Spotify however has failed to label their commissioned music. Real musicians are (or at least were….) paid to make it, but it’s released under “ghost” artist names that don’t represent an ongoing real-world musical project beyond these commissioned songs.
That brings us to AI-generated music. Spotify claims they are not involved it making any, but they also don’t seem to be doing much about the AI “bands” now misrepresenting “themselves” as real artists. “AI Slop” is now flooding all online platforms.
Has Spotify contributed to music becoming an endless, passive, generic, background experience? Just vibes curated by robots?
More broadly is the streaming model symptomatic of, or fuelling, our insatiable desire for convenience at all costs. We have nearly all the world’s music at our fingertips, but is it really connecting us? Maybe it’s shortening our attention spans, distracting and distancing us from the present moment, from the real world and our real selves… and therefore maybe contributing to societal and environmental collapse….
Streaming’s Not All Bad
Never before have artists had access to such low-cost distribution and marketing. Algorithms work for artists for free while they sleep, finding listeners and potential fans (with the caveat there must be sufficient initial promotion to give the algorithms enough listening data to get kick-started, and the songs are compelling (or bland?) enough to not get skipped).
There’s still significant money in recorded music, as this inflation-adjusted graph shows. Apart from the unsustainable CD boom (1990-2006) and a couple of years in the 70s, there is now more revenue in recorded music than ever in human history. Yes, the major labels do their best to grab the lion’s share, but they sadly always have. The music business has never been easy as this insider post details.
Some believe Spotify killed the CD, but it’s probably more accurate to say the death of the CD led to Spotify. Spotify formed in 2006-2008 when CD sales were already well into free-fall. If you wanted to blame individual companies you could point at Napster, Limewire, Kazaa, Apple and maybe even Radiohead, but the over-riding forces were really technological change, human behaviour and capitalism.
I love the art form of recorded music, as both a musician and studio engineer, but this competitive business is not the only music-related industry. There’s still an ongoing desire for music in its more participatory forms: music teaching and live music. There’s markets related to dance and social interaction (clubs, drinking, drugs, flirting, fitness etc.). There are still music fans who want to support their favourite artists directly through patronage and merchandise etc.
Where to?
As it stands, I’m not removing my music from Spotify.
It’s similar to the way I feel about Meta/Facebook – they’re companies with too much power (Technofeudalism is on my reading list) and plenty of flaws. However they’re also significant channels of communication, and I desire to have my voice heard. I have lots to say and contribute.
Some of the flaws I feel are overstated, and some understated, some apply equally to the other music streamers, and some are broader societal challenges.
It’s a close call, and I acknowledge boycotts have a role. I’m certainly not going to join the social media platform that’s changed its name to a symbol suspiciously similar to a Swaztika. Maybe I’ll end up retreating from the entire “technological-cultural matrix enveloping all of us” (Against the Machine is also on my reading list).
I am going to be less Spotify-centric, reminding people of the many other ways they can enjoy music, including by helping me empty all the boxes of CDs in my cupboard.
This is a complex topic, and I welcome other’s thoughts. If you feel my musings have been valuable, you may sign up for my newsletter here (averages about one email a month) or tip me here.
* 70% is a widely reported figure. However, in 2024 Spotify reported paying rights holders $10 billion out of $15.62 billion revenue, which is only about 64%. The difference may be associated with the money Spotify takes through their “Discovery Mode” and “Perfect Fit Content” programs.