Spotify CEO Daniel Ek took to the Spotify yesterday to publish a highly transparent article that clears the air about the integrity of the music streaming website, its services, and most important, about how the service actually does pay music artists.
Ek began his open ended article by stating, “we started Spotify because we love music and piracy was killing it. So all the talk swirling around lately about how Spotify is making money on the backs of artists upsets me big time. Our whole reason for existence is to help fans find music and help artists connect with fans through a platform that protects them from piracy and pays them for their amazing work.” He continued to explain that Spotify is in fact not the enemy, but that piracy is due to the fact that “piracy doesn’t pay artists a penny – nothing, zilch, zero” whereas, “Spotify has paid more than two billion dollars to labels, publishers and collecting societies for distribution to songwriters and recording artists” from the time it in 2008, to last year, and another billion dollars in royalties since then. Ek concludes that Spotify has provided “two billion dollars’ worth of listening that would have happened with zero or little compensation to artists and songwriters through piracy or practically equivalent services if there was no Spotify”
Due to the fact that Spotify is the single biggest driver of growth in the music industry, the number one source of increasing revenue, and the first or second biggest source of overall music revenue in many places, it has a lot of responsibility “to increase transparency, improve speed of payments, and give artists the opportunity to promote themselves and connect with fans”
After his opening sets of statements, Ek brings up and clearly addresses three big misconceptions about how Spotify works, how much Spotify pays, and what the streaming service will to do the future of music and the artists who create it.
Ek draws out and dispels myth number one: free music for fans means artists don’t get paid by explaining how Spotify uses a blended model of “freemium” that allows vast majority of music listeners to listen for free, knowing that users would eventually want and be willing to pay for the full freedom offered by Spotify’s premium tier. This blended “freemium” doctrine upheld by Spotify has resulted in a  12.5 million subscribers each paying $120 per year. That’s three times more than the average paying music consumer spent in the past.
Myth number two states that since Spotify pays, it pays so little per play that nobody could ever earn a living from it. Ek defends Spotify under this myth by saying, “if a song has been listened to 500 thousand times on Spotify, that’s the same as it having been played one time on a U.S. radio station with a moderate sized audience of 500 thousand people. Which would pay the recording artist precisely … nothing at all. But the equivalent of that one play and its 500 thousand listens on Spotify would pay out between three and four thousand dollars.”
The last myth Ek brings forward is the myth that Spotify hurts sales, both in downloads and physical. Ek insists that artists like Ed Sheeran, Ariana Grande, Lana Del Rey, and alt-J have promoted their new releases on Spotify and had terrific sales and lots of streaming, too. Also, artists like Daft Punk, Calvin Harris and Eminem have had number ones and were on Spotify at the same time as well.
Ek drives the point home that Spotify is a genuine and legitimate music streaming service by remarking that Spotify’s interests are totally aligned with artists and listeners. He invites those who don’t believe that that is their goal, to look at Spotify’s business of maximizing the value of music. Spotify uses music to get people to pay for music, and pays nearly 70% of all the revenue back to the listener. Ek excitedly admits, “we’re getting fans to pay for music again. We’re connecting artists to fans they would never have otherwise found, and we’re paying them for every single listen. We’re not just streaming, we’re mainstreaming now, and that’s good for music makers and music lovers around the world.”
Free drives Paid on Spotify 50m Users 12.5m Premium 80% of Premium come from Free http://t.co/YVuqxv76Lk pic.twitter.com/cgQLRxW8st
— Spotify Artists (@SpotifyArtists) November 12, 2014
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$2bn in royalties & growing rapidly. 2008-13 > $500m 2013 > $500m 2014 > $1bn http://t.co/Xt64UVSD6R pic.twitter.com/nDiVlOVvuX — Spotify Artists (@SpotifyArtists) November 11, 2014
 Read Daniel Ek’s full article here.Â
