Have We Been Evaluating Music Streaming Payments The Wrong Way?

One question that ofter comes up when discussing music streaming services, is: “How much are they paying artists per stream?" And there are many blog posts, like this one, that have tried to figure it out. It quotes some numbers, that I’ve seen several places, for Average Payout per 1000 Streams:

• Tidal: €11.64
• Apple Music: €7.25
• Spotify: €2.88

And this was the number that made me change from Spotify to Tidal last year — even though I don’t care about the increased audio quality, and I like Spotify’s app better. Comment sections are also often filled with things like “Spotify don’t pay artists”, etc.

But we might be thinking about it all wrong because here’s the thing: No¹ streaming services actually pay per stream. Instead, all the major ones pile up the revenue, and then divide it to artists² based on the percentage of total streams. So, even if I only listen to Blur, that doesn’t mean my payments only go to that artist.³

An interesting side effect of this is that, if every user streamed the same artists next month, but doubled their streaming amount, the payouts would be the same. But the blog posts above would have to halve the estimate for Payout per Stream.

So while it’s not totally irrelevant, I simply think payout per stream is the wrong number to look at. The more relevant number, is:

The percentage of revenue that goes to artists.

Allow me to explain:

To keep it simple, let’s assume all regular streaming plans are €10/Month. But, when I switched to Tidal, I went for the Hi-Fi plan, which was, let’s say, €20/Month. However, this March, they actually removed this distinction, and are now instead giving everyone Hi-Fi and the €10 price! 🙌🏻

This is of course great for me — but it got me thinking:

• How much of the fact that Tidal pays artists more, was due to the generosity of their heart, and better deals for artists? How much was simply the fact that the average Tidal user incurred more revenue than the cheaper competition?
• And how will this new, reduced price affect the artist payments?

Tidal pays⁴ about 50% more per stream than Apple Music. But if Tidal users, on average, generate 50% more revenue, is Tidal really more generous than Apple? Because how does this impact the number of users who pay every month?

This is especially relevant when it comes to Spotify

Because Spotify has something few others have: A free, ad-supported, tier. These users generate far less money than premium users — so their streams give less money per stream. And I think this is what really hurts Spotify’s position when it comes to this metric.

• But how much blame should Spotify get for this?
• Would artists get more money, in total, if they shut down that plan, and do like all the others?

I’m not so sure — because I absolutely don’t think all of them would turn around and sign up for a paid plan… Like, I could turn it around and say, which is true, that “Spotify pays the best” because my band gets more money from them than all the other services combined. To me, that’s almost as unfair, though.

About 75% of Spotify’s revenue goes to artists — and I think that’s the number they really should be judged by.

It’s easier to understand, and much more realistic and relevant to how the model actually works, compared to payments per stream. And if Spotify wants to waste chunks of their 25% of Joe Rogan, that’s annoying — but it affects artists less.⁵ It also sheds light on the fact that artists and Spotify are aligned when it comes to whether having a free tier is worth it.

• Is Spotify really more stingy towards artists, or is their “problem” simply that their service, on average, is much cheaper for consumers than the others?
• If so, is Tidal’s price-drop “hostile to artists”? Would a price-hike be equally generous to artists?

I don’t know the numbers for Tidal, Apple Music, or the others (would love to know, though!) — but if someone wants to claim that they pay more, I’d say the number they have to beat is not $3.18 per 1000 streams — but €7.5 per €10 in revenue.⁶

Like did it matter much that I switched from a €10 plan on Spotify to a €10 plan on Tidal, if about €7.5 goes to artists anyway?

Let me be clear, I’m not absolving Spotify from the fact that they should pay artists more. And I’m not saying that Tidal and Apple Music isn’t actually paying better - but I am saying that I would like to see a different metric to be totally convinced of it.

As always, when I feel like the whole world is seeing something differently than me, I feel like I must be missing something… Do you agree, or not? Do you know of others who’s tried to champion this as the more important metric?