Spotify vs. iTunes: Explaining the Difference in Money

Old Boots, New DirtOver the past couple of weeks multiple high profile country artists have made the decision to remove parts of their music catalogs from the streaming service Spotify. The first to do so, Taylor Swift, set the precedent. Shortly after, Jason Aldean pulled his most recent record Old Boots, New Dirt and this week both Brantley Gilbert and Justin Moore pulled their most recent releases from the streaming service. So why are popular artists choosing to remove their most recent releases from the popular service?

In order to fully understand why artists are choosing to pull their music it’s important to understand both sides of the story. There’s a common misconception that Spotify doesn’t pay artists, songwriters, or corresponding labels. That’s not true. Nor is it fair to say that it’s impossible for these parties to make money off of Spotify streams of their music. For example, Taylor Swift’s decision to pull her entire Taylor_Swift_-_1989catalog lost her an estimated twelve million dollars over the next year, six million of that from streams of 1989 alone (via Rolling Stone)That number is significantly higher than the likes of Moore, Aldean, and Gilbert would have seen for two reasons. First, Swift has a hand in writing the vast majority of her songs. This gives her a cut of the songwriting dues as well as the money she’d make as an artist. Secondly, Swift is significantly more popular than the other artists. Spotify pays on a scale of streams, the more streams the more money the artist makes. This favors Swift heavily.

Spotify argues that it’s service is good for increasing an artists popularity. Pointing out that fans of a particular genre are more likely to discover other artists within the genre when they don’t have to pay to hear newest releases. While that is likely the case for a portion of Spotify users, the same argument could be made for listening to music via YouTube. There fans have the ability to type in a particular song, listen to it, and receive suggestions of other songs they may find enjoyable. It’s not that simple on Spotify’s platform.

Back to the question of why artist’s have been pulling their music, a number of factors play a role. First and foremost, artists hate making their music available for free. Their is a belief across the music industry that once you receive a record deal you should no longer be doing anything for free. It’s a right of passage. You’ve gained enough popularity by playing shows and offering your music for free to earn a record deal – now it’s time to cash in. Whether or not you agree with that sentiment, doesn’t mean it’s not held by many. There’s always going to be artists, label heads, and songwriters who want to get paid and they have every right.

Spotify does pay the artist, but not nearly the same amount as an artist makes via a paid download service. In comparing Spotify with iTunes you’ll notice a stark difference.

Apple takes 30% of every song downloaded on iTunes, for most artists this leaves about ninety cents to be divided among artist, songwriter, and label. Every label pays differently, but for the most part the artist will receive about 15% of the original song download price ($1.29) or about 19 cents. The label will receive about 40% or about 51 cents, and the songwriter will receive about 10% or about 13 cents. Occasionally, the producer will get a small cut (less than 5%) and in other instances the producer receives a cut of the record labels share.

The breakdown is different on Spotify. Instead of distributing a percentage and taking a percentage for themselves Spotify simply sends a set amount to the rights holders. From there it is up to the rights holder to distribute accordingly. The most popular songs on Spotify earn 0.0084 cents per stream and the least popular receive 0.006 per stream. In order to make sense of these numbers it’s best to base per 100 streams. Without Spotify taking a cut of these figures the breakdown differs from iTunes. The label takes all 0.84 cents per 100 streams and distributes it based on contracts with artists, producers, and songwriters. Rarely will a label keep less than 50% of this revenue, and it’s usually in the 60-65% range. That leaves the artist with about 25%, the songwriter with their 15% (the producer is not accounted for in this scenario).

Now that there’s an understanding of how artists, songwriters, and labels are paid while using Spotify and iTunes let’s compare the numbers.

In order to make sense of the numbers for all four artists mentioned in the opening let’s compare a Gold (500,000 downloads/streams) single. On iTunes a song of this popularity would earn the artist $96,750 compared to $1,050 if the song was streamed 500,000 times on Spotify. The difference is glaring. As for songwriters they’d earn $64,500 for writing a Gold single compared to only $630. The difference there is even more shocking. Finally, let’s look at how it effects record labels. If one of their artists records a Gold single the label brings in $258,000 on iTunes, whereas they only receive $2,730 if it streams 500,00 times on Spotify. Again a massive difference is observed.

If that data doesn’t explain why artists are beginning to pull their music from Spotify nothing will. The numbers are glaring. As always it’s the songwriters who are most effected. Artists make the majority of their money while touring and labels generate revenue from a number of sources. For songwriters the vast majority of their income is coming directly from sales of the songs they write. So if it’s inconvenient for you that Jason Aldean, Brantley Gilbert, and Justin Moore to have pulled their most recent records from Spotify remember it’s not just the artist trying to make a living.

The figures used for compiling payment were found here and here.