Each time Spotify plays a song, your favourite singer or band gets as little as 0.6 cents, the company said.
At that rate, a song would need to be played 166 times for the artist to earn $US1 in royalties (100 cents divided by 0.6 = 166).
The info comes from a fascinating — and hugely welcome — article Spotify published on its revenue model. In a single post, Spotify has done more to demystify artist royalties in streaming music than Pandora and Apple have ever done, combined.
But before you get angry at the fantastically tiny amount of cash that bands get for each song, remember that those fractions of pennies add up.
This is Spotify’s revenue picture (below). The company says it has 6 million users paying $US9.99 (or £9.99 or €9.99) in 2013: That would imply its gross revenues from users are somewhere north of $US720 million annually:
The company also said it will pay out $US500 million in royalties this year:
Spotify says it pays 70% of its gross revenue in royalties to artists. Again, that would put Spotify’s annual revenue from users at around $US720 million. (Spotify didn’t talk about advertising revenue, which it generates on top of that.)
In terms of per-song fees, Spotify said: “Recently, these variables have led to an average ‘per stream’ payout to rights holders of between $US0.006 and $US0.0084.”
Here is how that breaks down for artists over time (below). Spotify has also projected future revenue for artists if the service grows to 40 million paid subscribers:
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