Spotify CEO and co-founder Daniel Ek told a crowd at Founders Forum on Tuesday that the online streaming service will pay out $500 million to artists and rights holders in 2013, as much as it has paid in all the years combined since it was founded.
Billboard notes, “by comparison, Pandora Media paid $230.2 million to rights holders [over its last fiscal last year], and VEVO paid out $200 million since it launched in 2009.”
Since Spotify started exploding in Europe and made its way stateside in 2011, it’s been the subject of plenty of criticism about how it compensates artists. An enlightening infographic published in 2010 showed how many plays an artist would need to rack up on Spotify in order to earn the equivalent of minimum wage versus an artist selling self-published CDs (143 CDs per month vs. 4,053,110 plays on Spotify per month). The infographic cited a payout figure of $.0.00029 per play going to the artist.
So it would seem like good news that Spotify plans to pay out an unprecedented $500 million to rights holders and artists this year. But it’s unclear whether they’ve negotiated higher rates for rights holders and if so whether that includes artists, or whether we’re all just using Spotify way more and therefore flooding it with more plays.
Back in 2009 the Guardian ran a pretty damning piece about Spotify’s deals with major labels, alleging that Spotify convinced them to accept a super-low payment rate for artists and rights holders in exchange for taking equity in the company. That way the cash might not roll in, but, as Spotify made money, the labels would benefit in the event of an eventual IPO.
Nonetheless, Universal Music does say Spotify is now a “substantial” source of revenue for the company. How that translates to artists is still unclear, but it sounds like an improvement.