One of the biggest factors missing from the conversation about Spotify “devaluing” music and not paying artists enough is the role of record labels. Record labels, for the most part, are the copyright holders for the music their artists make. So Spotify pays the labels first, and then the labels pay that money out to artists. When artists say Spotify doesn’t pay them enough, they might not realize it’s actually the record labels that are withholding dough.
A new study conducted by Ernst & Young on the French record label trade group SNEP (which includes the three major labels – Universal, Warner, and Sony, as members) confirms this unfortunate truth. The study looks at the payouts from services like Spotify and Deezer and how each paid subscriber’s 9.99 Euros gets broken down and distributed:
It’s pretty obvious who’s getting a majority of the royalties here. It’s even more blatant when you look at the post-tax payouts:
One thing that seems off in the first graphic, however, is the percentage that Spotify gets. It’s widely known the streaming service retains 30% of revenue for themselves and pays 70% to copyright holders. It’s on their website, after all. Why, then, is their share in the first graphic reduced to 21%? It might be that that 21% figure reflects Spotify’s income after credit card fees are registered, but we aren’t sure.
It’s also worth noting that SNEP paid for the study to be done. The way they justify the high discrepancy in payouts is by claiming that 95% of their cut goes towards expenses – marketing, pressing, distribution, recording, etc. It sounds a little fishy, especially when the cost of making and distributing music digitally today is as low as it’s ever been.
What do you think about the study? Let us know in the comments below.