Why Spotify’s Business Model Is Not The Best Focus For An Emerging Artist

Spotify is one of the most popular music streaming services in the world. It has transformed the way people consume music by providing access to millions of songs on-demand. While the service has been a boon for listeners, there has been much debate about whether Spotify’s
business model benefits most artists, and especially emerging artists.

On the surface, Spotify seems like a great way for artists to reach a wider audience. However, a closer look at Spotify’s business model reveals that it may not be as beneficial to artists as it seems.

First and foremost, Spotify pays artists very little per stream. In fact, the average payout per stream is around $0.004, which means that an artist would need to have millions of streams to earn a decent income. This is because Spotify pays out a percentage of its revenue to artists, but the amount each artist receives depends on how many streams they get relative to other artists on the platform.

To put this into perspective, an artist would need to have around 250,000 streams per month to earn the US federal minimum wage of $7.25 per hour. This is an unrealistic number of streams for most artists, especially those who are just starting out. As a result, most artists on Spotify are not making a significant amount of money from their streams.

Secondly, Spotify’s revenue model is based on advertising and subscription revenue. This means that the company’s primary focus is on attracting and retaining users, rather than paying artists. In fact, Spotify only pays out around 70% of its revenue to rights holders, which includes record labels, publishers, and distributors, as well as the artists themselves. This means that even if an artist is receiving a decent amount of streams, they are still only receiving a fraction of the revenue that Spotify is generating.

Furthermore, Spotify’s payment structure is not transparent, which makes it difficult for artists to understand how they are being paid. For example, Spotify uses a “pro-rata” model to distribute revenue, which means that the amount an artist is paid is based on the total number of streams on the platform. This means that if a popular artist receives a large number of streams, it can decrease the amount of money that other artists receive per stream. This can create an
unequal distribution of revenue that favors popular artists and makes it difficult for smaller artists to earn a fair share.

Finally, Spotify’s business model may actually be harming artists’ ability to make a living from their music. This is because Spotify’s emphasis on streaming has devalued the concept of buying music outright. Many consumers are now more inclined to stream music rather than purchase it, which means that artists are missing out on a significant source of revenue from album sales and downloads.

In addition, Spotify’s emphasis on playlists and algorithmic recommendations means that it is more difficult for artists to build a dedicated fan base. This is because listeners are often discovering new music based on algorithms and curated playlists, rather than actively seeking out new artists. As a result, it can be more difficult for smaller artists to build a loyal following and earn a living from their music.

While Spotify has certainly revolutionized the way people consume music, its business model may not be beneficial to artists. With low payouts per stream, a revenue model that favors the
company over individual artists, and a lack of transparency, it can be difficult for artists to earn a fair share of revenue from the platform. Additionally, the emphasis on streaming and algorithmic recommendations may be devaluing music as a product and making it more difficult for artists to build a sustainable career.

While Spotify may be a great way for artists to reach a wider audience, it is important to consider whether the platform’s business model is truly benefiting the artists themselves. Emerging artists should focus on the basics- make great music, but also find venues that you can perform live and look to generate other forms of revenue.  These can be shows, merchandise sales, sponsorships, and music placements. All of these will help boost visibility, which will drive fans to Spotify.


Post Author: BackSpin Chief Editor

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