Junk Explained: Why Is Spotify Demanding Some Artists Give Money Back To The Platform?

Spotify is using a ruling demanding that they pay artists *more* money to get some of their cash back from users of their service.

Spotify Artist festival

Want more Junkee in your life? Sign up to our newsletter, and follow us on Instagram, Twitter and Facebook so you always know where to find us.

Spotify, like most other streaming services, is not exactly well-known for showering artists who use the service in cash.

Sure, the streaming giant is better than some — the worst is YouTube Music, which dishes out a lousy USD$0.00074 per stream. But Spotify still has a long way to go before it reaches real renumeration, paying out musicians a miniscule USD$0.00437 per single stream.

As Digital Music News notes, that means that it would take almost a third of a million streams in order for a musician to make just over AUD$2,000. And that’s not factoring in how the costs would have to be split if your band has more than one member.

Of course, streaming does serve other purposes rather than just financial renumeration — streams count as purchases on most modern Top 100 Charts, meaning that you can game the system in order to make sure your record hits the number one spot. But still, there’s a reason that so many artists are increasingly upset with the cut-throat world of streaming, and why some are withholding their music from Spotify altogether.

That furore shows no sign of slowing down either, thanks in no small part to Spotify’s recent claim that they have actually been overpaying their artists, and are now gearing up to demand repayment.

Why Do Spotify Think They’ve Been Overpaying Artists?

Back in 2018, musicians won a major case against streaming services, with the US Copyright Royalty Board, also known as CRB, broadly ruling in favour of a 44 percent increase to streaming royalties. The ruling is actually quite complicated, because it works on a three-tiered system.

Basically, the ruling states that streaming services must pay their artists sums of money decided by one of three renumeration models — a percentage of that streaming company’s total annual revenue; a percentage of the revenue that the streaming service pays to record labels; or a simple per subscriber fee for every subscriber in the US. Which model is used depends on which model pays out the most.

When the news of the ruling first dropped, it was covered favourably by the media, who saw it as a real opportunity for artists to make proper bank. Less pleased with the decision, unsurprisingly, was many of the streaming services themselves — Spotify, Amazon, Google, and Pandora have all appealed the decision.

But because Spotify is pretty, uh, let’s say, bold, the company is currently enforcing the ruling even as they are appealing it.

And that’s why they’re asking for their money back: according to them, the ruling means that they’re actually overpaying artists. See, Spotify reckon that the per subscriber fee model — the one they have been using — is complicated by their family and their student subscriber deals.

According to the CRB, family subscriber plans count as 1.5 of a subscriber, and student plans count as 0.5 of a subscriber. That, Spotify says, completely changes how they’ve been paying artists in the past. In 2018, they were paying out to artists using different stats on how many subscribers they actually have; now, after working out what this change in how subscribers are counted means, they reckon they’ve been been overpaying musicians for at least a year.

How Is Spotify Going To Get Their Money Back?

Whether or not Spotify is within its rights to actually start demanding money from the artists is one thing. Another issue altogether is exactly how they plan to get that money back.

Well, always eager to make receiving money as painless and easy as possible, Spotify have already announced how they plan to seize “their” assets back from artists.

“Rather than collect the 2018 overpayment immediately, we have offered to extend the recoupment period through the end of 2019 in order to minimise the impact of the adjustment on publishing companies,” a spokesperson for Spotify told Music Business News.

That basically means the company is treating the “owed” money as a negative balance, and will hold royalties back until artists hit zero.

Which is, you know, pretty not great.