How Spotify’s New Royalty Model Could Affect Australian Indie Artists
Remember when we would all have to watch those “you wouldn’t steal a car” piracy ads before every movie? It feels like decades ago. But, at the time, piracy was costing the music industry millions, because listeners weren’t paying to listen to artists’ music.
When Spotify was first founded in 2006, the idea for the then-start-up stemmed from the growing piracy problem within the music industry. “I realised that you can never legislate away from piracy,” Spotify co-founder Daniel Ek told The Telegraph in 2010. “The only way to solve the problem was to create a service that was better than piracy and at the same time compensates the music industry.”
And so, Spotify was born. Now over 10 years later, they have 574 million users, including 226 million subscribers in over 180 markets. However the streaming service has made significant changes for both internal staff and musicians. Internally, the company recently laid off 17 per cent of their workforce, cutting more than 1500 jobs. This is on top of the 600 employees they let go in January. Ek said the cuts were due to slow economic growth and “capital has become more expensive”.
Spotify has also decided to implement changes to its royalty model. One of these changes means tracks must reach a minimum streaming threshold of 1000 streams within 12 months in order for artists to receive any streaming royalties for that song.
While this might not affect Taylor Swift, Drake or Coldplay, what about up-and-coming or independent musicians who are trying to make their mark on the music world? How will this proposed change affect the Australian music scene? Junkee spoke with a few Australian artists to find out how these changes might impact them.
How Does Spotify’s Streaming Model Work?
Streaming audio off a platform like Spotify, Apple Music or Amazon Music works like a digital library where listeners can pay a subscription fee to have full access to their features and/or ad-free listening. Streaming platforms earn money and pay money to their artists through subscription models and advertising.
Spotify’s change to their royalty model follows the ranks of creator platforms like YouTube and SoundCloud, where artists can only make money once they’ve hit certain viewing hours or streaming numbers. As of 2023, Spotify has continued to hold the number one position as the most used streaming service based on user base, global reach and market reach.
South Adelaide-born rock band Bad//Dreems formed in 2011, and they’ve been making music and performing ever since. They’ve shared stages with Midnight Oil, DMA’s, and The Chats, and they’ve toured internationally, playing shows in America and the UK.
The band’s backing vocalist and lead guitarist, Alex Cameron, tells Junkee that he feels platforms like Spotify and Apple Music don’t tend to rely on smaller musicians, nor do they necessarily serve their best interests. “These streaming models wouldn’t work unless they had the top 100 artists in the world,” he says. “Obviously those top 100 artists are integral to a thing like Spotify being able to function whereas the other, you know, 100 million are not. And so they are the ones getting the raw end of the stick.”
At the time of writing, Bad//Dreems have over 44,000 monthly listeners on Spotify, and their top three most listened to songs have cumulatively clocked over four million streams. Despite these huge numbers, Alex says it’s still not enough. “There’s not even a thought of earning any money from streaming,” he says. Alex adds that any little money they do make from streaming goes back into paying off a previous record deal. “I really have no bargaining power at all because if Bad//Dreems drops off Spotify, I’m sure their [Spotify] share price is not going to drop,” Alex explains. In contrast, when singer-songwriter Neil Young announced he would be pulling his music off Spotify in protest to the platform’s distribution of Joe Rogan’s podcast, his decision made international news and prompted singer Joni Mitchell to pull her music off the platform.
Is There Any (Reliable) Income In Streaming?
According to their website, Spotify claims that they do not pay artist royalties based on a per-play or per-stream rate. Instead, “the royalty payments that artists receive might vary according to differences in how their music is streamed or the agreements they have with labels or distributors.” However in 2020, a Business Insider report found that Spotify artists were receiving approximately $0.0033 to $0.0054 USD per stream. (That would give Bad//Dreems about $13,200 to $21,600 USD.)
Melbourne-based up-and-coming rapper Gradi has been making music since he was in Year 5. He’s been sharing his music on Spotify for five years, clocking approximately 160 monthly listeners and 2000+ streams on some of his tracks. However, he doesn’t see any reliable income from the platform. “I don’t see anything, I can tell you that. I feel like the last time I received money it was probably two years ago,” he says.
Although it may seem like streaming platforms aren’t a reliable source of income for most artists, some of the biggest artists in the world make a fortune from streaming. Drake, the most streamed artist in the US, was estimated to have earned $52.5 million in royalties from 21.5 billion streams in 2022. In 2023, he became the first artist to surpass 75 billion streams on Spotify.
But based on Business Insider’s findings, if artists are only being paid $0.0033-$0.0054 per stream, artists need to clock around 250 streams in order just to make $1. Eli Parker, the bass player and vocalist of Sydney band Local Correspondents, says that as a fairly new band, he knows there is very little chance for them to make money off the platform. “Even before this [proposed] change, Spotify has a reputation for astronomically low royalty rates. I think most artists, including me, viewed the platform as more of a way to display our music rather than a way to make money,” he explains.
“I pay more money to keep my music up than I receive from royalties. I pay around $50USD a year [for a distributor]…”
Music distributors act as the ‘middle-man’ for musicians to upload their music onto digital service providers (DSP), like Spotify and Apple Music. Direct artist platforms like Bandcamp, don’t require a distributor, and anyone can upload their music. However DSP’s require all artists (even independent ones) to pay a distributor to upload their music. Spotify beta tested a feature to let independent artists upload their music directly on the platform in 2018, but closed the program a year later. As a result, artists have to pay a distributor in order to upload any of their music onto a DSP.
How Does This Impact The Wider Culture?
But it’s not just about making money. It’s also about the loss of culture and of ideas. Alex explains how society’s listening patterns are shifting towards “a monoculture where most people are only listening to a very small range of things. So their ways of thinking are challenged, so they’re not inspired to do new things, so they’re not inspired to learn new things.”
If independent artists and musicians aren’t able to break through to the “mainstream” cycle, then there’s a constant dichotomy within the industry. Artists in the top 100 on Spotify will continue to be listened to (and get richer) while other artists are going to have to work harder and harder.
Whether we like it or not, as music listeners we need to face the fact that there’s a barrier between top, mainstream artists and the rest of musicians. “These platforms don’t work for indie artists and like they never did…” Gradi says. “I don’t think that this [change] will affect me because I’ve already been affected, and that’s how it’s always going to be unfortunately.”
So what should other independent artists do to beat the system? “We need to put it back on the consumers, on the fans, the listeners…” Gradi adds, “because where I’m putting this music, I’m putting it out for people to listen [to]. So obviously when no one listens, the platform [Spotify] that I’m using is not going to give me the benefits because they’re trying to attract more people as well.”
As a listener, the onus does fall slightly on us to keep engaging and listening to our favourite independent artists. It’s not just about attending gigs, as a listener you can also buy merch, records and CDs directly from the artist. We’re also in the middle of a cost of living crisis, so if you can’t afford to financially support your favourite local artist, you can spread the love on social media or join their email list, if they have one. The rising cost of living also likely affects some of your favourite independent musicians who might not be able to put all their time into a full-time career in music. As Gradi puts it, it’s hard for independent artists to win against the machine.
“At the end of the day, Drake is Drake.”
Emma Ruben is a writer based in Perth. When not writing she’s watching reality TV. You can follow her on Instagram.