The erudite Harley Brown reported in Billboard about Spotify’s artist relations charm offensive in New York that:
[Blake Morgan’s] main complaints were manifold, but two were based on the meeting’s central tenets: that the per-stream rate is never going to go up (70 percent of revenue goes to royalties) and 100 song streams equals a sale on the Billboard charts and the U.K.’s Official Charts Company. With regard to the former, both [Mark] Williamson [of Spotify] and [Paul] Pacifico [of the Featured Artist Coalition] stress that Morgan (and a few other malcontents) didn’t pipe down long enough to let Spotify help the uninitiated artists in the room understand their position.
“What I was trying to explain,” Williamson says, exasperation emanating from his voice over the phone, “Is that we’re a revenue share model. How do we increase the amount of revenue — the pot of royalties — which increases the amount we pay out?”
While the insiders may have wanted Blake to “pipe down,” they seem to have overlooked how Blake is in an economically different position from an artist signed to a major label. While signed artists may have a legitimate beef that they should get a bigger share of Spotify revenue from their respective labels, Blake owns his own recordings so he gets 100% of the Spotify revenue.
Which still sucks.
But what is also interesting about this is the chart formula. If 100 streams equals 1 permanent download for chart purposes, why doesn’t the same ratio hold for royalty purposes? Hmmmm?
So how would that work? Let’s rely on high school algebra.
What’s the value of a download in pennies? Usually a wholesale price of $0.70. So 100x = $0.70.
Solving for x, we find that it is equal to $0.007. Not rounded, not estimated, exactly $0.007–gross revenue.
Does Spotify pay $0.007 per stream? Not even close. Now you can say that the Spotify sound recording revenue is net of publishing, so let’s deduct the minimum U.S. statutory rate of $0.091 from that $0.70 and solve for x again: $0.609/100 = $0.00609.
Does Spotify pay $0.00609? Not even close. (See Part 2 of this post for more detail.)
So why do 100 streams equal one download for chart purposes? I’m sure there’s an answer for this, but I wonder what it is and why the royalties are so far off.