With the release of his latest album “To Pimp A Butterfly” Kendrick Lamar broke the record for Spotify streams in a single day with 10 million streams. There’s been much debate in the media over what Spotify pays artists per stream. Some artists claim to have only made $0.0001 per stream while Spotify claims to pay artists $0.006 per stream on average.
Spotify sought to provide some level of transparency with an article posted to their blog titled “Spotify Explained”. According to that blog post Spotify doesn’t pay artists per stream but instead pays based off of a, somewhat complex, formula where artists receive a percentage of revenue that reflects their percentage of the total number of streams. The formula looks like this: You still with me? When I tried to explain Spotify’s royalty system to a friend his reply was “My head hurts”. Hopefully you got some Advil on deck, I’m about to go in. Using Spotify’s formula I’m going to give a loose estimate of what Kendrick could have earned from his record breaking day if it was his total number of streams for the entire month.
Spotify Revenue = $100Million
$100Million X 70% = Rights Holders Royalty Payout = $70 Million
440 Million Total streams
Kendrick Lamar’s Streams = 10 Million
10 Million streams/ 440 Million streams = 2%
2% / $70 Million = $1.4 Million
Kendrick Lamar made $1.4 Million
How we got here: Spotify has ten-million paying subscribers paying $10 each which generates one hundred million dollars per month in revenue. The platform also has a free ad supported model with over 40 million active users. Because I couldn’t find information regarding the number of streams generated by free users, Ad revenue wasn’t factored into my equation. Keep in mind that ad revenue would only add to the total amount of Spotify revenue which would increase the amount earned by Kendrick Lamar.
The total number of monthly Spotify streams was generated by combining the number of streams for the ten most streamed songs on Spotify during the week of March 15th, 2015 and multiplying it by 4. There is no public data detailing the total number of Spotify streams for any time period nor any list detailing the number of streams for the most streamed artists. That being said, take into consideration that the total number of Spotify streams in this article represents the number of times the top ten singles were streamed combined. It does not represent the total number of streams for each artist. I’m certain there were more streams than counted in my example which would mean Kendrick Lamar had a lower percentage and consequently could have made less money, depending on how much money Spotify made overall.
The point of this piece was to display how the Spotify formula works using real world numbers.
This article first appeared on my site: http://payusnomind.info but I wanted to share it with the Music Think Tank community