Spotify paid $9 billion in royalties in 2023. Here’s what fueled growth

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LOS ANGELES (AP) — Spotify paid $9 billion in streaming royalties last year, the streaming giant said Tuesday in its “Loud and Clear” report.

Spotify’s fourth annual report, launched in 2021 after criticism for its lack of transparency, noted milestones such as the highest annual payout of any retailer in the music industry.

“This is all we know about how much is paid, how many artists achieve different levels of success,” said Charlie Hellman, vice president and global head of music product at Spotify. “So everyone can have access to information and can be somewhat up to date on the state of the industry.”

According to the data, 1,250 artists generated more than $1 million each in recording and publishing royalties in 2023; 11,600 generated more than $100,000 and 66,000 generated more than $10,000, numbers that have almost tripled since 2017.

More than half of those 66,000 artists came from countries where English is not the first language, the report noted, reflecting an increasingly global music landscape.

And “independent” artists — self-distributed bands and those on independent labels, according to Hellman — accounted for $4.5 billion, half the royalties paid by Spotify.

“There are millions of people who have uploaded a song at least once, but that doesn’t really tell you if they are artists or if they do it more as a hobby,” Hellman said.

Spotify focuses on artists who have uploaded “the equivalent of at least one album once they appear to have some indication that they are trying to build a fan base,” and estimates that there are “about 225,000 artists with career aspirations” on the platform.

“They have some followers. They may have concerts announced on Spotify or things like that,” said the manager.

Spotify announced in December that it would lay off 17% of its global workforce, the service’s third round of staff cuts in 2023, as part of an effort to reduce costs and focus on achieving profitability.

The previous month, Spotify announced that it would eliminate payments for songs with fewer than 1,000 annual streams starting in 2024.

“Songs that generate less than a thousand streams in a year would generate a few cents in royalties,” Hellman explains. “What we were seeing is that there was a growing number of people who had $0.03, $0.08, $0.46 sitting there.”

These amateur artists find a minimum threshold to withdraw money from a distributor, $5.35 on DistroKid and one dollar on TuneCore, two platforms that provide that service, and Hellman said the withdrawal fees would exceed the sum of the copyright. .

Spotify—and most other streaming services—pay royalties to rights holders for music on their platform, an amount determined by their “streaming fee.” That number is reached by adding how many times a specific headline’s music was played and dividing it by the total number of plays in that market.

This means that the largest rights holders have a higher percentage of quota. And just because a user listens to an artist 25% of the time does not mean that that material receives 25% of the user’s subscription fee.

“All those pennies sitting in bank accounts everywhere were siphoning money away from artists who were actually doing this, with career aspirations,” Hellman said of the decision. “And therefore, those royalties are now put in the bag so that they can be redirected to artists who have over a thousand streams a year.”