Are Spotify and other streaming platforms hurting artists?

The digital age of music distribution has taken the music industry completely by storm. In the last decade, streaming services have become one of the most popular ways that consumers can affordably and conveniently access their favorite artists’ music. 

That’s why Taylor Swift made headlines when she took her entire discography off Spotify and other platforms last year. The move was made just before Swift’s 1989 was released exclusively in stores. Music consumers have gotten used to immediate and unlimited access to our favorite artists through streaming services, so Swift’s decision shocked.

Swift has since chosen to release 1989 on a different streaming service, Apple Music (although not without publicly shaming the company into paying artists, record labels and publishers for streams during its three-month trial). But her opposition to Spotify and other streaming sites that offer free music isn’t just a publicity stunt. It’s also a bold statement of opposition to a business model that may not benefit artists as much as it promises, whether multi-million-dollar mega-stars or the bandmates in the garage next door.

Streaming models

There are two types of streaming services that consumers take the most advantage of: customizable, streaming radio and subscription-based, on-demand streaming services.

Pandora, and similar platforms including Slacker Radio, 8Tracks and Songza, provide a customizable streaming-radio experience. Most streaming radio sites, including Pandora, allow listeners to select genres and artists they like. The provider then supplies complementary music based on that choice, shuffling in new or different bands that may pique interest. 

Online streaming radio platforms generally don’t offer users the option to download songs from their site, steering listeners to retailers like Amazon or iTunes if they want to purchase single tracks or albums. These services also tend to be ad-supported, offering free sign-up but only removing audio and video ads after users purchase a subscription.

On-demand platforms allow listeners to play music from their staggeringly large libraries anytime, anywhere and as many times as they like. Spotify features 20 million songs, and while other services have much smaller catalogues, there’s still more music there than you could ever conceivably listen to. 

Spotify offers a free version, and premium perks come with the monthly fee of $9.99. Premium access eliminates ad interruptions between songs, allows for offline downloading of songs and playlists and plays tracks at the highest possible audio quality. 

Of the two methods, streaming radio has proven to be more profitable for artists. Since Pandora users can’t access any song or album at a given time, they’re far more likely to invest in the artists they discover by going elsewhere and purchasing albums at full price. Royalties are then generated in real-time unit sales and feed back into the artist’s business.

If artists’ collected works and new releases are available in full for a small fee to an on-demand streaming service however, users will simply listen to music there, without purchasing the record. It’s a distinction that has repercussions for artists. 

Crunching the numbers

The earnings for artists are miniscule in both the customizable radio and on-demand streaming models, but on-demand streaming more seriously jeopardizes their ability to earn a fair profit from their work because its goal is to overtake the current business model, not supplement it. 

Customizable radio services are engines for discovering new music or listening to personalized radio streams. At best, Pandora pays out a mere $0.0024 per stream, but because users can’t choose to listen to any particular song whenever they please, that small profit is added to sales elsewhere, not replacing them. Pandora and other streaming radio options thus become opportunities for artists to gain exposure without losing much of anything. 

Users of on-demand streaming platforms are led to believe that their monthly payment somehow makes its way back to the artists they stream in the same way album and individual track sales immediately pay an artist, but the reality is more complicated.

Take the data Spotify provides on its information page “Spotify Explained.” Spotify uses a complicated formula to determine how much money to pay artists, but those variables currently add up to an average payout of between $0.006 and $0.0084 per stream. Admittedly, it’s a rate higher than that on Pandora, but only if you don’t take into account the fact that Spotify users may never purchase the songs or albums they add to their digital collection. 

And it’s impossible for all but the biggest artists to make the same amount as they would in direct sales. In order for a listener to stream an artist’s song enough to equal an iTunes or Amazon pricetag of $0.99, the listener would have to play one track 120 and 167 times — an unlikely scenario for even the most popular new tune. 

If payments are so low, why do artists sign on? The answer comes down to one seemingly insurmountable threat: piracy. Spotify argues that because of piracy, musicians are losing money that is rightfully theirs and signing up for their service is the best way to get anything for their music.

For Grammy award-winning composer and Los Angeles-based artist Christopher Tin, both sides of the streaming coin are worth acknowledging. “The streaming model is wonderful for consumers, no doubt about that, but the problem is, it really undervalues the product,” he said. “When a streaming service tells its customers they can listen to any music they want to that has ever been recorded, anywhere, (and) all they have to do is pay $10 a month for access, that’s a great value for the customer, but it isn’t sustainable for the artists.”

Spotify’s CEO, Swedish entrepreneur Daniel Ek, has maintained that his company’s major initiative has always been to bring the value of music as great art back to life by seeking to circumvent Internet piracy. He said his service is designed to bring those marauders back into the fold as paying music consumers. 

In an interview with USA Today, Ek said, “We’re getting fans to pay for music again. We’re connecting artists to fans they would never have otherwise found, and we’re paying them for every single listen. We’re not just streaming, we’re mainstreaming now, and that’s good for music makers and music lovers around the world.”

Tin said there are a few hang-ups with that argument. But the most important is that Spotify changes the dynamic of the music industry, from one where users pay artists to one where users pay streaming services. 

“If users can subscribe to a service like Spotify for only $10 a month and listen to everything that’s out there, there’s no need for the consumer to purchase music anymore,” Tin said. “It cuts into artists’ album sales, and that’s something that smaller artists really still rely on. When that is replaced by only streaming revenue, which is fractions of pennies, then that artist or band won’t make enough money to be able to record their next album.”

Analysis: Valuing music

Artists have taken many different stances in response to the popularity of streaming services. Some artists in the Taylor Swift camp have chosen to keep their albums off of services such as Spotify. 

Swift’s move away from the streaming giants directly affected the outcome of 1989’s success in unit sales. Her followers on Spotify — numbering in the multiple-millions — would have had immediate and unlimited access to her album for a $10 payment to Spotify. Her decision re-routed the revenue, with her fans’ $13.99 payment for 1989 going directly to her and her team. 

Other musicians choose to temporarily keep their new albums off of streaming platforms for a short period after their release — Coldplay held its last two albums off Spotify for four months, for example. Others, such as Tin, never release their collections in full, which allows for fans who purchase his full albums to enjoy a level of exclusivity those on streaming services don’t get. 

For artists like Swift or Coldplay, who are already successful, marketing new projects and reaching fans is easy and profitable. Local and emerging artists, however, effectively have to get lucky, because they can’t make enough from digital distribution to become successful otherwise.

If streaming is going to succeed, it needs to find a way to make this new and largely still experimental market work in everyone’s favor. It’s a sad economic system that pits the consumer and artists against each other. It should be about the symbiosis in music commerce between the consumer and their favorite artists. 

The bottom line, offered by Tin, is a question of balance and economy: “The question is, How do you use the (streaming) services such that you get the exposure element but you don’t cannibalize your own sales?” 

This is a time when anyone with a desire to produce music can jump in and get creative. This also is a time of live musicianship where niche genres like jazz, classical, roots, blues, world music, among others, are still alive and being developed. While streaming platforms may be valuable for some performers, smaller artists still need the opportunity to recoup costs or they won’t be able to keep making music. 

“My albums are expensive — I go to great lengths to record them,” said Tin. “If I can’t recoup at least some of that on sales, then I have to cut corners on the production or I just have to stop making albums. Artistry is sacred and you don’t want things like economic factors to shape the music that’s created.”

Artists can get coveted exposure through all of the different streaming services, but eventually, that exposure needs to earn artists a living.

Milwaukee jazz artist Chris Newlin recognizes these circumstances. “I’m from the standpoint that all of the hard work you put into a product has value,” he said. “And you deserve an amount of compensation for that which is not accurately represented in what Spotify pays at all. Exposure, however much that’s worth, it does not even come close to making up for the amount that a product is actually worth.”

Music has always been considered a cultural cornerstone, a commodity of the highest value. If the value of music is going to be maintained in this digital age, consumers can help by becoming more aware of how they acquire it, and how artists are — or are not — compensated.