Spotify Royalties: More Expectations and Numbers in Digital Music

Spotify has released some very helpful information about what it expects to pay music owners for albums in different parts of the sales curve over a typical month. It’s being widely discussed. Less than helpfully, while we have a fair idea about the top end (what they call a ‘Global Hit Album’), it is far less clear what they mean by ‘Niche Indie’.

Yet, to my mind the layer of the market that is just bubbling under the viability level is critical to the health and diversity of the music industry in the future. It does not take much imagination to see why – music at the top of the market is driven by large teams of producers and product managers, trying to take as much of the risk away as possible. (This was pretty much the conclusion of some great research done by Tijl de Bie at Bristol University looking at chart music over the years and finding that measures of diversity have been shrinking.) The new, the young, and the marginal are sources of innovation and regeneration in music as in so many other cultural fields.

To try to understand better what Spotify meant by ‘Niche Indie Album’ we made some assumptions and did a bit of math. Take the following with more than a pinch of salt!

Inspired by Will Page & Eric Garland’s paper of a few years back, when Page was at PRS, we had previously compared our own streaming service data and found similar patterns. A tiny minority of the inventory generates a large amount of the revenue, and when plotted shows the typical tall head / skinny tail curve. Page is now at Spotify; we have been given a few numbers to work with, and can fit them on a curve that we hope is not too far from the one he looks at every day, we suspect.

Here’s how it pans out on the monthly sales chart. A ‘Breakthrough Indie Album’ ($76,000) would be number 10; a ‘Classic Rock Album’ ($17,000) at number 42; a ‘Niche Indie Album’ ($3300) would be at number 220.

There’s no need to go into great detail about all the problems with extrapolating from what isn’t really data in the first place (Spotify streams tracks not albums, they don’t tell us whether this is peak revenue or ‘just passing through’, and nor do they tell us the provenance of ‘Indie’). We will just have to hope that we get more and better data in the future.

For an extra bit of fun we extended our investigation down the tail until we got to what we might call a ‘Spotify Pays My DIY Distribution Fees Album’ at $3 per month. It hits the sales curve at approximately number 240,000. This, if you think about it is an amazing achievement; a decade ago it was pretty much impossible to get 100,000 albums on sale, let alone generating enough revenue to cover the cost of shipping them to the stores.

It would be interesting to see some typical album sales curves over time, and to understand better what an album means to Spotify, and to other digital music services. Revenue patterns as well as amounts are changing dramatically, and artists and labels need good information about how to approach their time, effort, investment and careers. The public clearly loves good recorded music; better information can help the music industry create more of it, and better, especially in the vital but risky zone just outside the top 200 hits.

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