Spotify finally published the specifics of its revenue model. Also, Jared Leto and his band 30 Seconds to Mars revealed lessons behind the documentary about their experiences with the music industry. And several indie artists talked about whether or not crowdfunding is helping them advance their careers in the modern music business.
The Spotify Revenue Model
Spotify published its business model last week in a lengthy article in the Spotify Artists section of its website, finally officially demystifying how artists earn money through the platform. The information Spotify posted is more transparent than anything Pandora and Apple have revealed, combined, reported Business Insider.
Spotify stated that each time a user plays a song, an artist gets as little as 0.6 cents, which means a song would need to be played 166 times for that artist to earn $1 in royalties. But according to the company, “Spotify’s model aims to regenerate this lost value by converting music fans from these poorly monetized formats to our paid streaming format, which produces far more value per listener. The chart below shows the money a Spotify Premium customer spends per year compared to the average spend of a U.S. music consumer who buys music (not including those who spend $0 on music).”
And pennies can add up fast: The company said it has 6 million users paying $9.99 in 2013, which would add up to more than $720 million annually. Spotify also said it will pay out $500 million in royalties to artists by the end of the year and that 70% of its gross revenue goes directly to artists. Spotify did not discuss its advertising revenue, which provides additional income.
Spotify also made projections on future artist revenue based on predictions that the service will grow to 40 million paid subscribers.
The publication of Spotify’s revenue model comes alongside the announcement that the company will be teaming up with analytics company Next Big Sound to create an artist portal that makes Spotify listening data available to artists and their managers for free. However, these features have been available for almost a year through analytics company Musicmetric. Spotify also used Musicmetric data to support a piracy study released in July.
30 Seconds to Mars Offering Advice to Artists via Artifact
Jared Leto and his band 30 Seconds to Mars released Artifact in 2012, a documentary about the music industry and the events leading up to their contentious $30 million dollar breach-of-contract lawsuit with former label Virgin/EMI in 2008. Now Leto is using the documentary as a way to offer aspiring musicians some advice about navigating the modern music industry, said Forbes.
Leto’s band, which also includes Tomo Miličević and older brother Shannon Leto has recorded four albums and sold over 10 million copies worldwide as well as set the Guinness World Record for most shows by a band on a single album cycle. Still, Virgin claimed that Jared Leto and his brother Shannon did not record three of five albums promised by a 1999 contract, while the two argued their agreement was nullified by California labor law, which nullifies contracts after seven years.
While researching the band’s defense, Leto stated, “We were blown away by what we discovered: a convoluted contractual quagmire that was impossible to remove ourselves from.”
Instead of filming a “making-of” video for their self-funded third album This is War, the band decided to film the documentary Artifact, which explores the complicated relationship between major labels and artists and how signing to labels can lead to the accumulation of debt for bands caused by promotional costs, recording studio bills and album advances.
The 2008 lawsuit was ultimately dropped and 30 Seconds to Mars released their third album through EMI. Leto admitted, “Record companies aren’t all bad … The idea of having a group of people bring a vision to life is awesome – the problem is greed.” He added that he is not against labels or the music business: “We’re a global band, we’re on an arena tour right now, and in each market you need people that understand local customs and culture to help you do what you need to do.”
And he shared some advice for young musicians: “… Read some good books, get a great lawyer and don’t sign a record deal until you absolutely have to. Gain as big an audience and community as you can, work on your craft and art, get on the road and tour and then find a partner. You need a record company and if you don’t have one you’re going to have to hire a bunch of independent companies to do what you need to do. There’s no global success that hasn’t had a record company of some kind, a distribution deal, or a publishing deal. You have to have something in place, and that’s not always a bad thing, to have people working really hard for you.”
Leto concluded, “I hope artists and other musicians [that watch the documentary] get to see how nobody is impenetrable. I hope people are inspired that if they feel they’re in a situation where they believe they’re treated unfairly, to fight for what they believe.”
Is Crowdfunding Helping the Modern Artist?
New York-based crowdfunding company Kickstarter finally opened up shop in Australia in November, joining Indiegogo, Pledge and several other specialized companies offering artists the chance to raise money with their fans for creative projects.
Crowdfunding first came into fashion in 2009 as a way to help up-and-coming acts raise money for small projects. But recently, high-profile artists like Amanda Palmer and others have run enormously successful campaigns that have raised hundreds of thousands and even millions of dollars.
Australian website The Vine asked several DIY and indie artists about how crowdfunding has helped their careers, what they think it means for record labels and whether or not they believe it is the future of the music industry.
Popular Australian artist Eskimo Joe said, “I think it’s one very viable future option. Labels have got less and less money to spend, so it makes more and more sense to be independent these days. But bands still need to be able to justify going into a studio and spending $60,000 or whatever making an album, and working with a producer and so on. And that can be hard to do in the current environment of streaming and illegal downloads, when you’re not sure if people are going to buy your music … So it does become trickier to justify going and spending a bit of money, but by the same token you don’t want everyone making records in their bedrooms without a producer or without an engineer or whatever, because the records just aren’t going to be as good without these expert people who bring so much to the table.”
He added, “I think crowdfunding is a really direct way to go straight to your fans.”
Tim DeLaughter of The Polyphonic Spree admitted he definitely feels it will be a major player in the future of music: “… Everyone’s been looking at the internet and how it basically deconstructed the music industry as we knew it. But there’s also a lot of positive things that are happening with the Internet. It’s giving us tools and one of those tools is crowdfunding … It gives the artists this opportunity to raise funds, make the recordings, and not lose the ownership of the songs. That’s always been the real struggle for the artists. And the record companies own it for a lone that you ultimately pay back through success. So that’s what Kickstarter’s done and that’s all from the Internet. I just look at it as all going through a change and there are some tools along the way to make that change happen … You’re talking to a dude who’s been on eight labels – dropped and signed and that’s not including the labels I was on with Tripping Daisy [DeLaughter’s band prior to TPS]. I’ve done it all and labels are great – they’re really, really great at helping you out at the beginning – but that tour support runs out really quick and then you lose ownership of your songs … I think bands are becoming savvier on how they do their deals. That business has to change, because the artist getting smarter has everything to do with the Internet.”
Helmet’s Page Hamilton admitted, “We’ve batted it around a little bit because we don’t have a label at the moment. It’s becoming increasingly difficult as an indie band to pull money out of your pocket and not make it back. Album sales don’t exist in the way they did ten years ago … You’re asking the fans to buy tickets and t-shirts and stuff, but really the most important thing is the music. So I guess asking them to help you to pay for your recording makes sense … It’s so hard to make ends meet and get out there and tour. Most bands have other jobs. I supplement my income by scoring movies and producing … I look back to the days of jazz musicians – guys who were barely selling enough to get by and do shows. It’s kinda similar now, and the band you’re investing in is honestly trying to make a great record and not trying to compete with radio music.”