Spotify opens up analytics in effort to prove its worth to doubting musicians

Streaming music firm opens Spotify Artists website and claims when it reaches 40m subscribers, even 'niche indie albums' will earn $17k a month

Streaming music service Spotify is hoping to win over its musician critics by launching a new Spotify Artists website explaining how its business model works.

The company is also launching free analytics for artists to get data on streams of their music; announcing plans to help them sell merchandise from their Spotify profiles; and publishing figures on how much musicians can expect to earn as it grows.

The various announcements are a response to trenchant criticism from some musicians in 2013. Thom Yorke described Spotify as "the last desperate fart of a dying corpse", while David Byrne criticised streaming as "unsustainable as a means of supporting creative work of any kind".

The Spotify Artists website aims to answer musicians' questions about how Spotify calculates its payouts for streams of their music, and convince them that as the company grows, their streaming earnings will make up for any fall in sales of CDs and downloads.

"The position we take is look, we know Spotify is not perfect for all artists yet, but this is the theory behind it, this is where we are, and this is where we're going," Mark Williamson, director of artist services at Spotify, told The Guardian ahead of the launch.

"With any format change in music – CD and iTunes included – there's a lot of confusion around how these different models work, and quite often some serious scepticism. We understand that's out there, so we want to be as clear and transparent as we possibly can explaining how Spotify fits in."

Spotify pays out nearly 70% of its total revenues to music industry rightsholders – labels, publishers and collecting societies – who are then responsible for paying musicians and songwriters their share.

Spotify is publishing its royalties formula for payouts to rightsholders.
Spotify is publishing its royalties formula for payouts to rightsholders. Photograph: Spotify

The site also aims to dissuade artists from judging Spotify by "per-stream" payouts by explaining how it calculates each artist's gross revenue by their share of total monthly streams, with the resulting payout varying according to country, the ratio of free to paying users, and the overall volume of music being streamed.

"Per-stream is a really flawed way of thinking about it – it's not the way we pay or the way our model is built, and it's not the way people should be measuring it – but we appreciate people do talk about per-stream payments and want to ask the question," said Williamson.

For all its protestations, Spotify has answered that question on its new site, saying that the average payout to rightsholders for a single play of a track is between $0.006 and $0.0084.

The site also gives "actual, but anonymised" figures made in July 2013 for a month's streams of five specific albums, ranging from $3,300 for a "niche indie album" to $425,000 for a "global hit album".

Spotify also predicts how much these albums would receive in a single month when the service has 40m paying subscribers, rather than its current total (6m according to Spotify's last public announcement on that score from March, but closer to 10m according to music industry sources).

"We want to put the figures in context of what these payments will be when we launch in new countries and get to 40m paid subscribers," said Williamson. "That small indie band whose album made $3k a month in July will now be looking at $17k a month from Spotify alone, and the global pop superstar will be looking at over $2m."

Spotify claims that payouts for individual artists will improve drastically when it reaches 40m subscribers.
Spotify claims that payouts for individual artists will improve drastically when it reaches 40m subscribers. Photograph: /PR Photograph: PR

Alongside the website launch, Spotify is announcing today that it has paid out more than $500m to rightsholders in 2013, and more than $1bn in total since its launch in 2008.

It also claims that the average American Spotify user now generates $41 a year in revenue for the company – a figure including advertising revenues for free users and subscription revenues from paying users.

Spotify claims as a comparison that the average US internet user spends $25 a year on music, although it admits that if you strip out the third of them who don't spend anything at all, the figure rises to $55.

Its new site also compares Spotify's average royalties of between $6,000 and $8,400 per million listens to figures of $3,000 for a "video streaming service" (i.e. YouTube) and $1,300 – $1,500 for a "radio streaming service" (i.e. Pandora), in an effort to position Spotify as a better friend to musicians than those rivals.

"A million streams on Spotify is worth at a minimum twice as much as what a video service would pay, and three to four times what an online personal radio station would pay. A fan streaming your music on Spotify is far more valuable than, say, a fan listening to your music on repeat on a music video service," said Williamson.

"And these are the rates we're monetising at now, with 24m users. If Spotify grows to 140m total users and 40m paying subscribers, we will increase our payouts by five times."

Critics will note that this is jam-tomorrow reasoning – not least because as Spotify has grown, so have its losses. Even with a recent $250m funding round, Spotify has yet to prove that it can stay in business long enough to reach those total user numbers.

Spotify analytics will be available to artists through Next Big Sound.
Spotify analytics will be available to artists through Next Big Sound. Photograph: PR

Analytics are the other key part of Spotify's outreach to artists, with the company partnering with US startup Next Big Sound to give artists and managers access to data on Spotify plays of their music, including total streams, track-by-track information and demographic data including gender, location and age.

It mirrors an existing partnership with British firm Musicmetric, which makes this kind of data available to labels. In the case of Next Big Sound, though, the analytics will be free to registered artists and managers, aiming to help them plan tours, singles and other marketing activity.

"They'll be able to see this alongside other metrics like Facebook Likes, Twitter followers and YouTube views, and all of the Spotify data will be free, although only authorised managers and artists are getting access to it," said Williamson. "There'll be a process in place to ensure whoever is asking for the data is really connected to that artist."

Finally, Spotify is announcing plans today to help artists sell merchandise from their profiles in its desktop, web and mobile apps, via a partnership with another music-tech company, Topspin. It follows a similar deal with British startup Songkick to show concert listings in the profiles, with fans able to click through to buy tickets.

"Right now our users are browsing more than 2m concerts within Spotify every month," said Williamson. "We will soon be rolling out merchandise listings too, powered by our friends at Topspin. That will allow any artist to easily upload merchandise details and display it to their fans and followers on Spotify."

Spotify will not take a cut of any sales made through this feature. Williamson says it is intended to complement revenues from artists' recorded music, not replace it.

"We don't believe in saying artists should give their music away for free and make their money elsewhere. But we know that touring and merchandise is a huge part of many artists' careers, and Spotify wants to add value in those ways as well," he said.

Spotify is pitching the feature as a boon for musicians and fans alike, but it will also bolster the company against competitors. Headphones manufacturer Beats is already working with Topspin on a similar merchandise partnership for its Beats Music service, but that has yet to launch.

Spotify may now beat it to the punch, but will today's announcements deflect some of the blows being aimed at the company – and streaming more generally – by artists like David Byrne and Thom Yorke?

"This is a new model, and it does take some time to get used to. By creating clarity around the model, and by discussing and explaining it, we hope we can overcome even some of the most vociferous critics," said. Williamson.

"I hope this gets out to some of the artists who won't engage with us. We can't be accused of hiding behind stuff: this is us being open and explaining our model."

• Is Spotify going to save the music industry … or destroy it?


Stuart Dredge

The GuardianTramp

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