I have a normal routine when I get to work. I come in, change out of my walking clothes, drink some coffee, turn on the radio, and then I can start preparing for the day. Usually I stream either our local NPR news station or something on Spotify.
In case you were interested, today I’m listening to Mariachi El Bronx. I’d highly recommend, both for the music and the back story.
To me, Spotify is a strange animal. For those of us around for the beginning of internet music, namely spotify’s completely illegal cousins Napster, Limewire and illegal torrent sites like Piratebay, completely legal internet streaming sites seems strange. So, I decided it might be fun to look into exactly how these free streaming sites work.
First, Spotify is legal because it pays artists for their music. There is no thievery going on here! Record labels, and occasionally independent artists, provide Spotify with copies of their music. Spotify then streams the music to users via their website, downloadable platform, or application. Then, artists receive money based on the number of times users play their songs. How much money you ask? Well, that’s the tricky part.
Spotify’s “artists” page says they pay different rates based on country of the user, type of user listening (free vs. subscription), subscription pricing, exchange rates, and the artists individual royalty rate. Spotify states that they end up paying between $0.006 and $0.0084 to rights holders (artists). While this might seem like a small amount of money, Spotify recently reported that a real-life artist was earning $425,000 per month in royalties for a “global hit album.” This doesn’t give a lot of hope to smaller acts, but it does show that someone is making a lot of money from the service.
And where does all this money come from? The answer is advertising and subscriptions. Spotify’s free service uses ads to pay artists for music, while it’s subscription service charges users to listen without ads. It then passes this money on to artists and stockholders alike. In its free form, Spotify runs on a similar model to Google products like Gmail and Google Drive, which provide free services with advertisements.
So what’s the difference between Spotify and the illegal alternatives of my youth? Not much, honestly. Spotify is reliable and carries almost any music you could ask for. Admittedly, some superstars like Taylor Swift and Prince (prince rules) have taken their music off the site. However, generally speaking, the site works well and allows users to listen to almost anything they want without the threat of attorney letters and lawsuits.