If a song is 100 million streams and Spotify paid a small percentage of that, the total price at time of upload would likely be more than $1 million. But we’re talking about about a percentage: if you’re at around 100 million streams and a percentage of that 100 million are paid, that’s a $20,000 a day for the whole year!
Now, that’s expensive in a lot of ways and we’re going to talk about those. But before we get to that, let’s talk about other aspects of the stream: the cost of maintaining a music streaming service. A lot of it comes down to advertising.
According to a 2015 study conducted by Music Metrics and Nielsen, the average song in the top 1,000 Spotify playlists paid $1.3 across the top 50,000, and the amount of money each ad paid varied hugely depending on the song.
According to the study, ad revenue fell across Spotify’s top 50,000 playlists by around 75% from 2013 (before Spotify acquired Beats Music) to 2015; for the top 1,000 playlists, the fall was around 60% (compared to around 75% the previous year). That’s good news for songwriters, because if you don’t get paid for your work you lose the source of revenue for your songs.
On the other hand, Songkick, a platform that aims to bring up-and-coming musicians closer to their fans, found that ads dropped an average 20% across Spotify’s top 50,000 playlists in 2016, compared to 2013. There were small decreases across Spotify’s top 50% playlists, but overall a 50% decrease across them.
Finally, Spotify’s own numbers show that it earned revenue from ads on each and every song for every day the user streamed music while they were using the service, down from an average revenue of $4.1m per day in 2012, to the bottom of 2016, when it earned $3.6m per day on every song streamed. The figures will obviously vary depending on the artists playing what is streamed. The fact is, you need someone willing to pay to play your songs – and that can be a challenge especially if you’re a musician – or the only source of income, if you were a solo artist.
So yeah, it’s expensive. But does it make up for that with higher quality, exclusive playlists?
There’s not much information about how Spotify pays for top quality
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