Justice at Spotify Penny Per Stream
Illustration courtesy of the Union of Musicians and Allied Workers and Justice at Spotify

More Than 18,000 Musicians Are Demanding a Penny Per Stream from Spotify

Damon Krukowski of Galaxie 500 and the Union of Musicians and Allied Workers explains the 'Justice at Spotify' campaign.
JT
Chicago, United States
November 13, 2020, 12:00pm

On October 26, the Union of Musicians and Allied Workers launched an initiative called Justice at Spotify, publishing a detailed list of demands with the goal of making streaming fairer for artists, labels, and rights holders. The main points can be boiled down to three. First, they're asking the streaming giant to pay out at least a penny per stream, which is about three times the $.0038 payout artists receive on average for their music. Second, they are demanding greater financial transparency from the company, including around its contracts with major labels, distributors, and management companies. Lastly, they want Spotify to put an end to its legal battles over royalty rates, which the union describes as being "intended to further impoverish artists." Justice at Spotify follows 2020 initiatives in the U.K. like the #KeepMusicAlive and the #BrokenRecord campaign, which looks at inequities in record label and licensing deals on top of streaming. 

So far, over 18,000 musicians have signed the U.M.A.W's letter, which arrives as artists continue to struggle with the economic fallout of COVID-19. But as grassroots support for U.M.A.W.'s initiative soars, Spotify has yet to address or respond to the union's concerns. Since U.M.A.W. posted its demands, the company sparked criticism when it announced a new feature enabling musicians to promote their songs on algorithmically generated personalized playlists; in exchange for the service, rights holders would be paid at a lower royalty rate. And just this week, amid revelations that Spotify had lost over $500 million since the start of the year, it announced that it was purchasing podcast ad-tech company Megaphone for a whopping $235 million. VICE reached out to Spotify but did not get an on-record comment about the union's demands.

Probably the biggest ask the union is making is that Spotify switch to a new payment system. Right now, Spotify pays out royalties on the industry standard "pro-rata" basis, meaning that it takes the total pool of payments from subscriptions and ad revenue and divides it up by the total share of streams each artist receives. As Rolling Stone has reported, this system has produced a situation where the top 10 percent of artists receive 99.4 percent of total streaming payouts; it also means that even if you don't stream an artist, your subscription money could still be going to them. The U.M.A.W. wants Spotify to introduce a user-centric payment system, where artists, labels, and rights holders are compensated on a per-stream basis. 

To U.M.A.W., a penny-per-stream and a user-centric payment system would mean a drastically fairer streaming landscape for artists. But even some commentators sympathetic to the union's cause have questioned the feasibility of the idea. For one, a user-centric system hasn't been tested at scale; in Europe, streaming service Deezer has been unable to launch a user-centric pilot project because one or more major labels have yet to commit. Spotify's former economics director Will Page warned in a 2018 paper that figuring out how to tie millions of listener accounts to millions of artists could mean "increased administration costs" that would "exceed the benefits" of a user-centric system for both rights holders and Spotify. 

Even if Spotify did find a way to make such a system work, there's no guarantee that it would produce a significantly different result. A 2017 study based on Finnish Spotify Premium subscribers found under a pro-rata system, 10 percent of royalty revenue went to the top 0.4 percent of artists where a user-centric policy would find 5.6 percent of revenues going to those same artists with the difference going to the bottom 99.6%. While that would be a significant shift towards smaller artists, Page argues user-centric would mean that “the value of a stream would be more volatile, and less predictable." In other words, a paid subscriber who streams music constantly would have less value than someone who only casually streams music as their portion of the subscription payment is further divided. 

It's also possible that the idea is incompatible with Spotify's existing business model: In 2016, Paul Vogel, Head of Global Financial Planning and Analysis and Investor Relations at Spotify, admitted that “lower royalty rates are critical to Spotify’s future.” Spotify already has to pay out 70% of its total revenue to rights holders and tripling its current payout to a penny-per-stream could be financially untenable for the company, especially as it continues to hemorrhage money. That won't deter the U.M.A.W., who say they are merely fighting for marginally better compensation and fairer treatment from streaming companies. VICE talked to union co-founder and Galaxie 500 drummer Damon Krukowski about why getting paid a penny per stream is a reasonable and moral goal, and why he thinks streaming services shouldn't be in business if they can't pay artists fairly. 

How did the Justice at Spotify initiative come together?

Ever since we formed U.M.A.W., the group has been really focused on musicians as workers and reminding others and ourselves that we have labor issues like every other industry. As workers, one of the things we have to deal with right now that's really in crisis is the use of our recorded work. According to the RIAA, streaming is 85 percent of all revenue from recorded music in the US. It's swallowing up all other possible avenues of revenue for us, especially as COVID has stripped us of our live music income. Streaming hasn't risen to the level that musicians [can survive on it], or produce recorded work and survive on that. It's at the point where no one can defend the system. 

A lot of pushback I've seen to this initiative has been about how "a penny per stream" wouldn't work given Spotify's existing business model, rather than defending how streaming services operate. 

It's incredible. Some people ask, What would we want them to do? Well, that's their problem. They need to figure out how to make their system better for artists. We chose Spotify because they're the biggest player in the US and increasingly around the world. Also, they pay the worst. On average, they pay half of what Apple pays and a third of what Tidal [does]. The other reason is that they're such an easy target for protest, because they're asking for it. [Spotify CEO] Daniel Ek's statements on musicians have been outrageous, and artists have to push back.

Why these specific demands? How did you narrow it down to a penny-per-stream, increased transparency, and telling Spotify to stop legal fights? 

We consulted a lot of organized groups around the industry and a lot of experts who've written on these topics. That was a long process—figuring out the issues that matter to everyone. A penny per stream is the driving force for me—just the bottom line of they don't pay us enough. It's a classic labor struggle. Capital is keeping the money and not paying labor. 

One of the biggest misconceptions people seem to have is that Spotify pays by the stream. Instead, it's a "pro-rata" system where they take all of the money generated from users and divide it up based on the percentage of total streams an artist receives. 

That's why we're asking for a user-centric model; that way, what you pay goes to the artists you listen to. There's a moral argument that the money that goes in should go to what people are using it for. One of the reasons we launched the Justice at Spotify initiative is to educate people on how the system really works. We don't benefit from the pro-rata system, and [artists in underappreciated] genres like jazz and classical get left out from this system. 

This relates to U.M.A.W.'s transparency demand. The transparency demand is to ask how are you operating? What is the real pot of money here? If they're going to go through these arguments that they're already paying too much in royalties or that they couldn't afford it, then they should show us. 

I read that Spotify is paying $2.77 million per month in rent for its New York One World Trade office until 2034. 

That's true. In Boston, they moved into the former FBI headquarters. The symbolism is so absurd. For me, this all became clear after reading this wonderful book called The Age of Surveillance Capitalism by Shosana Zuboff. When you think about it, they are gathering all this data on our fans. As artists, we have no access to it, and God knows what they're doing with it. They're only getting this data because of us, because of our music, and because of who wants to hear our music. They just inserted themselves between musicians and listeners and are scraping up all this data and profiting from it. 

What would it mean for artists to get paid one cent per stream? 

Even though it would raise the amount of money we get from Spotify, it would still be a tall order to make a living just off streaming. Even at a penny a stream, to make the equivalent of [a] $15-an-hour living wage, you still need 250,000 streams a month. Those numbers are per band member, and not counting a label's cut or a manager's cut. While you'd need that many streams to make $2500, at least it's not the absurd per-band member figure of around 660,000 to make that kind of money. It would be a huge improvement over what we got. My God, it would help an awful lot. 

What they're paying now—which is up to them, and we have to calculate backwards to figure out what they pay—is only fractions of a penny and not a fixed rate. A penny per stream would at the very least put things in some frame of reality and give people some measurement of the system. 

What would need to happen for Spotify to be able to do that? 

If you get them to answer, Spotify will say they couldn't possibly be in business at that rate. Our feeling is if Ford or any other hypothetical company says they can't be in business and pay their workers a decent wage for making their cars, they shouldn't be in business. It's not up to the auto workers to balance Ford's books and excuse them from paying labor. But that's what Spotify seems to want musicians to do.

Do you believe that they would go out of business if they paid a penny per stream? 
I don't believe that for a second. This is why we want them to be transparent, because they aren't disclosing their real income. How do you pay Joe Rogan $100 million for a podcast? It's absurd. If they're really hurting for money, what's all that capital doing? When Daniel Ek talks about Spotify, he doesn't talk about music; he talks about podcasts and how Spotify can grow. He wants your ears and attention, however they can fill that time and keep you on their platform. Whatever he fills that platform with, be it podcasts or what have you, I think makes no difference to him. 

We're not expecting Spotify to be like, "Oh, poor musicians," because they really don't care about us. So what we're trying to [do is] get through to our listeners, our fans who we know do care. But the other part of initiative is just to make it clear to people using these services that they don't care about us.