Spotify are notoriously clandestine about their formula for payments to artists. Back in 2012 I published an article about the lack of transparency within Spotify.
Here's a short extract:
'Spotify and their refusal to become transparent (we can all make an educated guess on why that won’t be soon) is tantamount to an admission of guilt. On May 22nd 2012, Radio reporter Sophie McNeill published an interview with Spotify Managing director Kate Vale. The interview was astounding in that the secrecy and lack of transparency displayed by Vale was almost comical:
McNeill: Is Spotify going to make public its finances when it comes to contracts with the labels and how much they receive per play of the songs that they own?
Vale: I don’t think so at this stage.
McNeill: Why?
Vale: I’m not sure.
McNeill: Well, can you understand then why music lovers, bands, people involved in the industry are worried about something like this that could so dramatically change the way we consume music? And then when I ask you about disclosing it, and you say, ‘no, I don’t have a reason,’ I mean-
Vale: Well, I just don’t know to be honest.
Fast forward a few years and it seems nothing much has changed
Digital Music News published an article showing that the money paid out to artists per stream was almost inversely proportional to the growth of the company.
In 2014, as Spotify’s Gross Revenue, subscribers and music royalty pool went up, the amount artists, songwriters, publishers and labels were paid went DOWN!
That's not all. At the end of 2015 The Verge posted an article showing that they had obtained a leaked copy of Sony's contract with Spotify. They concluded "that Spotify uses a complex formula to determine the royalties artists earn from streams. Major labels likely receive a sizable sum from Spotify, but not all of that money is going to artists. And not all artists get the same cut of Spotify revenue either: depending on their contracts with the label, some musicians might only recoup 15 to 20 percent of the streaming revenue they brought in".
So artists signed to labels are getting a much smaller cut per track from Spotify than independent artists, due to the fact that the label themselves can (according to this article) be taking up to 85% of the split.
It should always be remembered that the major labels own substantial shares in Spotify. Does this represent a conflict of interest? After all Spotify are paying the major's substantial licensing fees on top of the royalty payments intended for the artists. Is this the way the major's have regained control of music industry money flows?
Does anybody care? Spotify continues to grow but is it to the detriment of the industry and the artists?