Last July, as the local economy scrambled to survive the third month of the coronavirus pandemic, Spotify CEO Daniel Ek took to Twitter with some economic figures of his own.
“Excited to announce our Q2 numbers showing strong growth across the board,” Ek tweeted on July 29.
Linked in the tweet was an infographic touting the company’s 299 million monthly listeners, recent expansion to Russia, and exclusive podcasts with former First Lady Michelle Obama and bro-losopher Joe Rogan.
Published elsewhere were the company’s staggering earnings for the second quarter of 2020: roughly $2.22 billion.
That same day, in an interview with UK-based Music Ally, Ek, fresh from his financial fluffing, set about addressing a certain “narrative fallacy” he claimed to have observed in musicians: “You can’t record music once every three or four years and think that’s going to be enough,” the billionaire decreed.
The same month, a company right here in the Bay Area issued a very different message to its users. In an article titled, “Support Musicians Impacted by the Covid-19 Pandemic,” Bandcamp co-founder Ethan Diamond touted some of his company’s recent accomplishments.
“On March 20, 2020, we waived our revenue share in order to help artists and labels impacted by the pandemic,” Diamond wrote. The amount paid out to musicians on that day alone: $4.3 million. “On May 1, 2020, we did it again,” he continued, “and fans paid artists $7.1 million—amazing!”
Throughout 2020, Bandcamp held nine of these Bandcamp Days, in which for 24 hours they waived their standard cut of 15% on all music sales, and 10% on all merch. In just nine days, the company paid their musician users a reported $40 million.
For listeners and investors, Spotify offers that eternal promise of capitalism: infinite growth for one low, low price. For musicians, it offers something else entirely: a gamed system that favors that already successful. Thankfully, in 2020 Bandcamp was there to funnel some money back into musicians’ pockets. But in the face of an increasingly dominant streaming industry, is it enough?
Rich Band, Poor Band
When discussing Spotify, there is always an elephant in the room: the company’s royalty rate. As famously low as it is famously hard to pin down, Spotify’s payouts have provoked public complaints not just from indie artists, but huge industry players as well. In 2014, Taylor Swift pulled her music from the service over the issue, stating in an op-ed that “valuable things should be paid for.” When she came back three years later, it was the result of a years-long pressure campaign from Ek himself—the CEO personally traveled to Nashville several times to convince Swift to return.
Each year, David Lowery of Santa Cruz’s pioneering indie rock band Camper Van Beethoven, and later the alt-hitmaker Cracker, publishes his annual Streaming Price Bible, which uses his band’s streaming data to help break down royalty rates across the industry’s top 30 streaming services. By his estimation, Spotify’s current rate equates to roughly $0.00348 per song.
“In other words, Spotify is paying out about $3,300 – $3,500 per million plays,” Lowery wrote.
However, that number isn’t entirely accurate. The reason why everyone seems to disagree on what exactly Spotify’s royalty rate is, is because the company doesn’t actually pay musicians per stream at all.
“What Spotify does is decide the total sum overall that they’re paying out in royalties, then your payment as an artist depends on the percentage of the total streams you are in all of Spotify,” says entertainment lawyer Cameron Collins.
Collins regularly teaches a course on the music industry at Seattle University, and is an adjunct professor at Seattle University School of Law. He makes the point that 10,000 streams on Spotify doesn’t actually equate to 10,000 royalty payments.
“If there are one billion plays and you only get 10,000, you actually only get a very small percentage of the whole. So the large artists, the Macklemores of the world, are going to get paid a ton of money, and your local indie band is not going to get very much,” Collins says.
Worse still, as reported by Rolling Stone in September, the top 1% of artists on Spotify make up for 90% of the platform’s streams. A blue badge affixed to Macklemore’s Spotify page shows he is currently the No. 291 artist in the world. Collins, then, is likely correct: The system is working comparatively well for Macklemore (and, it must be said, even better for Taylor Swift, the platform’s No. 10 artist).
In 2015, Lowery filed a class action lawsuit against Spotify, alleging at least $150 million in unpaid mechanical royalties to artists. Twice, the streaming behemoth made moves to dismiss, but Lowery’s suit was soon combined with three similar, concurrent lawsuits against the company (including one from the estate of Weather Report bassist Jaco Pastorius), and, in 2017, Spotify agreed to allocate $43.5 million to the creation of a new fund for artists and publishers “whose compositions the service used without paying mechanical royalties,” a functional admission of the charge Lowery and others had levied against them.
Tired of the system not working for him, Lowery has been developing a new model for releasing his music. On New Years Eve, he released his fourth solo album Leaving Key Member Clause via his label Pitch-a-Tent Records, which also released Camper’s first albums in the ’80s. Though the album is currently for sale on Bandcamp, Lowery says that under his new model, that platform would normally come second.
“I modeled it on the movie business, how they treat demand,” he tells me. “First I have the theatrical window, which is to sell the album at shows—we didn’t have that this time. Then, we have the DVD or video on-demand window, which is Bandcamp or direct website sales and shipping them through the mail.”
Only at the very end, after the tour is done and the Bandcamp orders have been shipped, does Lowery put his music onto the major streaming services like Spotify, Pandora, or YouTube—the latter two of which actually pay even lower royalties (Pandora: $0.00203; YouTube: $0.00154).
“It’s not that there isn’t a place for streaming, it just needs to be farther down the road after a record is out,” Lowery says. “They’re basically just designed to suck all the value out of everything.”
In 2018, the Music Modernization Act (MMA) was passed and signed into law. Though the MMA made some strides towards addressing long-festering music industry problems (such as the fact that virtually every song written before the year 1972 was out of copyright) and even created a government body to manage the distribution of royalties, it had no effect on Spotify’s pool royalty system.
Busting The Stream Syndicate
It’s worth noting that Spotify had one intended goal upon founding, and it was not to bring people music (or, for that matter, podcasts). It was to combat piracy.
“I realized that you can never legislate away from piracy,” Ek told the Daily Telegraph in 2010. “The only way to solve the problem was to create a service that was better than piracy, and at the same time compensates the music industry. That gave us Spotify.”
In Ek’s words, compensating the music industry was somewhat incidental to Spotify’s primary goal of combating piracy—the former, apparently, an effect of the latter. (Importantly, Ek doesn’t even mention the musicians themselves.)
Bandcamp, on the other hand, set out with a very different goal in mind. In a 2016 interview with Marketplace’s Kai Ryssdal, Bandcamp founder Ethan Diamond described the landscape of online music hosting in the MySpace era as akin to “sharecropping:”
“You gave them your content and then it was their logos, their advertising—it was their URL, it was their traffic. It was their entire identity,” Diamond said.
Inspired by the simplicity of blogging platforms like WordPress and Blogger, Diamond set out to correct what he saw as a lack in the available online resources for musicians.
“We built Bandcamp to address that problem,” he told Marketplace.
Since premiering in 2008, Bandcamp has been steadily growing, and has evolved into a robust nexus for music lovers of all stripes.
The company’s true strength, however, has been its resistance to the Silicon Valley myth of scaling. Still privately owned, Bandcamp has managed to turn a profit while giving 80-90% of their revenue to artists every year since 2012.
Bandcamp appears to be the rare music industry player informed first and foremost by the musicians. In interviews, Diamond regularly uses words like responsibility, and insists that the company’s “core metric” is the money it pays out to its musicians.
“It can’t be that music is a commodity, or content to use to sell advertising or a subscription plan. Artists have to come first,” he told the Guardian in June.
One lesson the company seems to have learned from musicians is that there is power in staying small. Bandcamp’s 37 million visitors in December 2020 (according to analytics website SimilarWeb) may be a speck next to Spotify’s reported 286 million monthly users, but the company has managed to grow on its own terms—and entirely through the sale of music—every year since 2008.
While Spotify has found market success with its “good, predictive algorithms,” according to CFO Barry MacCarthy, and is currently making an aggressive push to become the top dog in podcasts, Bandcamp hinges on the bet that maybe, just maybe, you actually care about music.
Lost in the Algorithm
The song that originally exposed Spotify’s paltry royalty rate was far from a smash hit. “Tugboat,” by the Boston shoegaze band Galaxie 500 is a dreamy little dinghy of a song, a sassy snippet of a melody floating in a sea of reverb, and hinging on the lyric “I don’t want to vote for your president / I just want to be your tugboat captain.”
Galaxie 500 only existed for 3 years, but their dour, ramshackle earnestness had a palpable influence on the shape of ’90s indie rock. Originally released as a 7” in 1988, “Tugboat” became an indie rock flashpoint by passing through the underground via word of mouth and mixtape. Uploaded to Spotify in the 2010s, it became more fodder for the endless churn of the algorithm.
In an article published by Pitchfork in 2012, Damon Krukowski, the band’s drummer, broke down the royalties “Tugboat” had earned in the first quarter of the year. Streamed 5,960 times, the song had earned the band $1.05. By his calculations, in order to make the same money as one physical album sale to one fan, the band would need 47,690 plays on Spotify.
“Here’s yet another way to look at it,” Krukowski wrote. “Pressing 1,000 singles in 1988 gave us the earning potential of more than 13 million streams in 2012. (And people say the internet is a bonanza for young bands …).”
On the one hand, Krukowski’s anecdote about “Tugboat” plays right into Daniel Ek’s narrative about musicians’ unrealistic expectations: Surely, no one can expect to live in 2020 on the profits of a single indie rock song from 1988, right? But even for active bands with sizable fan bases and critical acclaim, the algorithm manages to turn thousands into pennies.
Last summer, San Jose hardcore band Gulch ran a wall of death on heavy music fans with the release of the punishing Impenetrable Cerebral Fortress, the “hardest album of this shit year 2020,” according to one Bandcamp reviewer.
Closed Casket Activities, the band’s record label, owns the digital rights to Impenetrable Cerebral Fortress, so the band only gets a portion of that album’s streams. But ever since releasing that album in July, their earlier, self-released EP Burning Desire to Draw Last Breath has also experienced a significant bump in listens. According to Gulch guitarist Cole Kakimoto, in the last three months Burning Desire has been streamed on Spotify more than more than 150,000 times. The revenue for those hundreds of thousands of streams?
“Around $700,” he says. “The amount that we make in three months streaming we probably make in a couple days of face-to-face interactions.”
Santa Cruz hardcore band Drain is in a similar situation. Though their label, Revelation Records, owns the digital rights to 2020’s thrash-y and exhilarating California Cursed, the band still owns their back catalog, including 2016 EP Over Thinking. Looking back through the figures, singer Sam Ciaramitaro says that after four years and hundreds of thousands of streams, that album has brought in roughly $3,200 through Spotify—divided up, $200 per band member per year.
“Not a ton of money haha,” he texts me.
As for Gulch, Kakimoto says that they’re lucky: They all have full-time jobs. Gulch play hardcore for the love of it, not because they’re trying to survive on it.
Days later, it dawns on me how messed up the streaming era has to be for a musician to feel lucky to have a full-time job.
The Swindle Continues
When UCSC History of Consciousness professor Eric Porter was researching his book What Is This Thing Called Jazz? he had the opportunity to examine bassist Charles Mingus’s papers at the Library of Congress.
“I was blown away looking at them to see how little money he actually made from some of these classic recordings,” Porter says.
If there was ever a counterexample to Ek’s chimerical musician-who-only-works-once-every-three-or-four-years, it was Charles Mingus. Between the years 1956 and 1966, Mingus recorded almost 30 albums, virtually all of which have made vital, transformative contributions to the sound of American music. Yet, for almost his entire life, Mingus struggled. The deck was stacked against him.
“History is rich with examples where working-class musicians, Black musicians, were cheated out of what is owed them,” Porter says.
Notoriously, the contract drawn up for Little Richard’s “Tutti Frutti” netted him only $50; long before the Kingsmen covered it, Richard Berry got paid only $175 for writing what is arguably the most famous rock song of all time: “Louie, Louie.” Like Mingus, their songs were singular in shaping the sound and tenor of American music. Yet, for decades, they received next to nothing for their contributions. The deck was stacked against them, too.
“Because of their lack of power in the industry and their needs to survive, musicians end up selling their songs at less than market value, through a transaction that seems open—and the terms are followed through on—but there still isn’t fair compensation given the amount of money that’s made on their labor,” Porter says.
In the chaos of 2020, when musicians were most in need, Bandcamp proved itself an anchor for the workers who are its lifeblood. But the harsh truth is that in the era of (approximately) $0.00348 royalties, Bandcamp alone isn’t enough to support working musicians.
“As far as sales go, Bandcamp is really not that significant yet,” Lowery says. “But I like the model, so I’m supporting it.”
Kakimoto similarly says that Gulch’s sales on Bandcamp are nothing like the band’s true bread and butter: selling merch in person at shows.
“It’s not even comparable,” he says.
Certainly, musicians have expressed their frustration even with the comparatively artist-friendly Bandcamp. This December, the exuberant ska musician JER of We Are the Union and Ska Tune Network raised some hackles when they tweeted: “I deadass make more money from streaming revenue than people buying my music…”
They went on to post a receipt from Bandcamp showing a $2.00 sale. After revenue share (-$0.20), payment processing fee (-$0.15), and an “applied to your revenue share balance” deduction (-$1.60), the total amount JER earned from the sale of their song: $0.05.
As for Spotify—currently valued at $60.8 billion—in November, the corporation announced a new service, soon to be unveiled, and summed up in a Guardian headline: “Spotify to Let Artists Promote Music for Cut in Royalty Rate.”