The Industry

The Spotify Effect

The streaming era has transformed the way music—and money from music—is made, and cemented who holds most of the power.

Photo illustration: The logos for various streaming services, including Spotify and SoundCloud, and quarters, with the background stylized in the If Then color scheme.
Photo illustration by Slate. Images by Thinkstock, Pandora, Spotify, Apple, SoundCloud, and Tidal.

Music fans aren’t buying too many albums anymore, instead subscribing to steaming services like Spotify and Apple Music, which pay artists fractions of pennies per stream. Formats have always influenced how music is made, and the streaming era is no different: Artists are changing how they make songs and assemble albums to optimize for streaming, and they’ve also become more reliant on touring and selling merchandise instead of selling their music.

To catch up with the ways this landscape has changed, we recently spoke with music and tech journalist David Turner on Slate’s tech podcast If Then. Turner writes a weekly newsletter on the economics of music streaming called Penny Fractions. In our interview, which has been edited for length and clarity, we discussed how new technologies have always impacted artists, how power has shifted in the streaming era, and what artists who don’t want to depend on Spotify and Apple Music are doing to regain a measure of power.

Read or listen to our conversation below, or get the show via Apple Podcasts, Overcast, Spotify, Stitcher, or Google Play.

April Glaser: So I want to start out with some definitions. I feel like I know how streaming works from the consumer perspective, which is I pay Spotify and Apple between $10 and $15 a month and then I have complete access to their expansive and growing music libraries. But from the artist perspective, it’s a little gray, and I was wondering if you could start by walking us through what streaming means for artists because it seems like it means people aren’t buying albums anymore, they’re just waiting until they show up on Spotify.

David Turner: Most music fans, at this point, are not buying albums anymore, and the way that artists end up getting paid through this system is that with the $10 subscription that you might have to Apple Music or Spotify, around 30 percent of that goes to either company. Then 70 percent of that ends up being directed toward the music labels. This is where things get fairly complicated fairly quickly, because depending on the record-label deal that you sign, whether it was an independent label or a major label, you’ll end up getting a smaller or maybe a bigger chunk of the overall money that you potentially make per stream.

So if you’re signed to a major label, for every stream you get you’re probably getting maybe 12 or 15 percent from that if you’re an artist. For a lot of indie acts they can usually get 50 percent royalties, which is a significantly better deal than what you would get on a major. Obviously, the trade-offs are sort of the traditional trade-off between indies and major promotion—[better] marketing and all that kind of stuff. This is for artists, we are not talking about producers or engineers or people like that who end up getting even smaller chunks of that pie.

Glaser: When we say “per stream,” what do you mean? How much is paid per stream?

Turner: That ends up varying per service. A platform like Apple Music I think right now pays $0.0007 per individual stream. Spotify, I think it’s reported to be about half of that. Tidal, Jay-Z’s own streaming service, pays out significantly more than either one of those, but it’s still essentially fractions of pennies, which sort of begot the name of my newsletter, Penny Fractions. And in something like YouTube, which is one of the biggest music streaming services even though it’s not one of the more traditionally defined ones, pays even less, because all of the money that ends up being revenue that ends up being generated from YouTube comes from the overall advertising pull of YouTube, and not simply just the music side of it.

Will Oremus: So if I heard your math correctly, that means that if I’m an artist on Spotify somebody has to stream my song 10,000 times for me to make like a dollar?

Turner: Around that. It’s not … it’s probably a little bit less than 10,000, but it requires thousands upon thousands or millions of streams to start making a decent income, which is one of the reasons why this particular model is beneficial toward labels. Not because they don’t wish they could make more per stream, but because they have massive catalogs of music that are constantly getting streamed—be it in record stores and coffee shops or even in your own work places. They have such a large catalog of music that’s constantly being streamed that the individual streams are not a concern for them, because they have so much catalog.

Glaser: So this means that instead of somebody buying an album and that money going to an artist, they depend on the streams. But it seems that the music itself as a commodity has become less valuable with streaming?

Turner: Instead of there being a physical product that you can buy, there’s essentially nothing that you can buy for some artists. Most recently the example that I’ve been going back to is the Atlanta rapper Future, who put out an album called Beast Mode 2. There was no physical version of the album, and there was no digital version. It was only for streaming. So for myself as a person who still likes to have MP3s, I ended up having to find through illicit means a version of the album that just didn’t exist in any other form.

Glaser: And so artists are touring more and more now, and that’s kind of how they’re making money rather than kind of making this beautiful product and resting on that as they used to.

Turner: Instead of just going through the traditional two-year album cycle of putting out an album, touring for a little bit, and then just sort of taking a little bit of a break, and then getting back in the studio and then sort of performing that for 10 to 20 years, now that artist will put out an album and they’ll just keep touring, constantly touring. So for a rapper like Lil Baby, who is another rapper from Atlanta, over the last year and a half he has put out I think four or five mixtapes, which is a pretty high clip to be consistently putting out music. And then you’ll get an artist like Drake, who’s one of the biggest pop artists in the world, and he’s put out albums consistently year after year after year. And it’s like he has to sort of keep doing that to remain in the conversation and also to sort of buttress the giant, massive tours he’s going be on, where he’s going stadium to stadium to stadium.

Glaser: Bringing up Drake is a good segue because the albums that artists are putting out are different now. It’s not just that people aren’t buying albums and that they’re streaming them, but the albums are being kind of refashioned to optimize for streaming services, right? I think Migos’ Culture II is a good example of this; Drake’s recent album, Scorpion, I think has 25 tracks. Can you speak to how streaming services are actually morphing the way artists are trying to adapt to how their music is getting out?

Turner: Those are two great examples of a more recent phenomenon from the last couple of years. Now that streaming has become the main way of revenue for the music industry overall, albums are becoming longer. On one end they’re becoming longer purely by the number of songs on it: As you mentioned, Drake’s album had 25 songs, Migos’ Culture II had almost 30 songs. And then another album from late last year that was from Migos’ same label had 30 songs on it, which is less so an album than it’s sort of a playlist or collection of tracks. Even if you were to talk to those artists—I don’t think they would say that you are meant to listen to it all the way through. It’s just sort of a collection of songs that can get the most streams eventually.

But on the other hand: Last year there was a Florida-based rapper named Lil Pump who had a really big song called “Gucci Gang,” which was under two minutes long. That two-minute song fits in with a trend across SoundCloud, where a lot of rappers are coming up nowadays, and a lot of their songs are like minute and a half, two minutes, two and a half minutes of just hook, verse, hook. That ends up being the way that people are producing music now, where the idea is you are constantly just clicking play on a new song because you aren’t buying it. And the only way they get money is for each additional play that you give to a song.

Oremus: So in the ’50s and ’60s you had bands putting out artists all the time and you had to craft this perfect little pop gem that people would buy as a single record, and then in the ’70s and ’80s you got LPs and bands stretching out with these concept albums that are meant to be listened to from front to back in one sitting. It sounds like from what you’re saying is that the idea of the cohesive album is eroding. Maybe there’s some renewed emphasis on singles. How else has streaming changed the structure of songs and the focus of artists in terms of what type of song or what type of album gets rewarded?

Turner: I think you made a very good point, which is that as technology changes music also always changes alongside it. Which I think is something that sometimes gets lost when talking about the sort of impact of streaming on music right now, which is, as you said earlier, that singles in the ’50s and ’60s were actually around this sort of incredibly short two-and-a half-minute, three-minute length and then as albums came up, which was not because artists … I mean certain artists want to make longer albums and make more thoughtful albums, but for a lot of them it’s just sort of an economic reason that labels made more money when they sold albums rather than when they sold singles. And that is also why during that time period they also tried to reduce the number of singles that were being produced so you could have more albums being sold.

So what’s happening in today’s marketplace, one of the things you see are longer albums. You see shorter songs, but I also think it depends on genre. A genre that I follow a lot is indie rock. Indie rock is one of the ones that has not done as well in the streaming era, but still produces solid 10-, 12-song albums because their audience actually still wants to buy vinyl and buy CDs and even buy MP3s on sites like Bandcamp. So streaming is affecting different artists in different ways.

Oremus: Now that you mention it, it makes sense that hip-hop artists seem to be on the forefront of gaming the algorithm so to speak because streaming is more important to their business than maybe other genres. But there’s another thing that I’ve read about recently in terms of an artifact of the way these platforms work, which is this idea of fake artists.
Can you tell us what’s a fake artist?

Turner: Last year, there ended up being a sort of a humorous controversy that ended up happening with Spotify, where the website Music Business Worldwide reported that there was a number of artists on particular Spotify playlists, particularly their mood playlist … if you were to go to the Spotify app and open up playlists like “Sleep,” “Deep Chill,” and …
most of the ones that had chill in the name, where—

Glaser: Deep chill is fake, isn’t it?

Turner: Yeah.

Glaser: There’s no such thing.

Turner: What ended up happening was they ended up reporting that all these “fake” artists, which essentially ended up being revealed through reporting at Music Business Worldwide and a number of other outlets, that these were artists that were essentially musicians, most of them based in Sweden, that were just sort of producing music for Spotify’s playlists that was never exactly … the reporting never bore out the exact connection between Spotify and the company making the music, but it ended up having this sort of unnerving effect in the industry that there was a concern that Spotify was just filling their playlists with all of these artists that essentially weren’t artists you could ever go see live in concert, you couldn’t buy their music, you couldn’t become a fan of these artists, but you could just sort of hear their midi tunes, or a better phrase would be muzak, on their playlist.

Which is something I trend ended up happening across dozens, maybe even 50 different Spotify playlists that have these kinds of acts sitting on them, even in 2018. Where if you actually look up an artist like Figgy Malone, you’ll be like, “Oh, there’s no Figgy Malone or Jeff Bright Jr.” None of these artists are real, but you can still hear their music on Spotify and they’re getting millions of plays on all these top playlists.

Glaser: I worry that the power of these platforms is kind of depreciating the value of fandom here—right? Because the idea is just to consume more music or just to give people what they want when they demand it. And that kind of brings into question the power of these platforms, because what we’re really talking about here are two platforms, maybe three if you want to count Tidal, and I subscribe to Tidal so I would. But they just have a tremendous amount of power to strongarm artists to kind of do whatever they want, right? Because if you’re not on Spotify and you’re not on Apple Music, then it’s really kind of hard to exist unless you’re a big enough name like Beyoncé.

Turner: I think that’s an interesting issue that extends beyond music and to platforms overall. It depends on who the audience you’re trying to reach is and how are you trying to reach that audience. There are tons of artists that I follow that exclusively only put out their music on Bandcamp or SoundCloud that I could go to a concert and they sell out 500- to 600-seat venues. Their music might be on Spotify, might be on Apple Music, but the primary form of engagement is through Bandcamp or SoundCloud.

And I think that’s something that should be encouraged and is actually kind of exciting about this moment is that while these other platforms are so massive, if you don’t want to work in those places you do have the option to not work in them. It’s just that when you don’t work in them you are correct that you lose massive audiences. You lose so many potential people that could hear your music. I think one of the things for like an Apple Music or a Spotify is that the issue with those platforms isn’t that Apple or Spotify have all the power, it’s that the major labels have all the power in this dynamic.

Because the early investors in Spotify are the major labels, which is why almost all Spotify playlists have an allotted amount of space that is dedicated only to major labels. So if you’re a truly independent artist your chance of getting on some of the top Spotify playlists are essentially the same as your chances of getting on radio. It’s not going to happen.

Glaser: These platforms also have the power to kick people off. And we saw after Charlottesville that Spotify in particular took action to remove a number of bands that kind of affiliated with white nationalists or white supremacist thinking from its platform. Was R.
Kelly removed as well?

Turner: R. Kelly was not removed from Spotify’s platform, but he was removed from their playlists so he would not be promoted on the platform.

Glaser: Right. And so these platforms also have the ability to take people off who are perhaps promoting a bad message or to censor them. Do you have any thoughts on that?

Turner: I think this is sort of a double-edged sword. While I do think that platforms should exercise some amount of control—to look outside of music, there’s example of Alex Jones, I feel like platforms should have acted years ago and removed him. But I do think that in the context of music, there’s just been such a long history of censorship. And throughout the last century of American recorded music that censorship usually ends up skewing toward black artists far more than it happens to other races and other genres. And so the question ends up being: Who are the people who end up getting targeted?

Earlier this summer it was R. Kelly and the rapper XXXTentacion, who was recently killed, and the rapper Tay-K, who is right now being accused of murder, were removed from Spotify’s official playlists. And on paper I have no issue with those artists being removed: The acts that they are accused of doing are reprehensible. But, I don’t want to say it’s a slippery slope, but who’s deciding what is allowed on the platform and who’s deciding what isn’t allowed? And why is it when we start removing things, the people that we start removing are the people that are already traditionally going to be the least advantaged of those? Not to say that R. Kelly has not benefited from the music industry in the last 30 years, but just traditionally going after exclusively black men in that kind of campaign sort of leaves a bad taste in my mouth when I start to think about it.

Glaser: Thinking about the history of radio, we used to have a constellation of owners all over the country, where every city had different radio station owners and they would decide who was and was not appropriate on their station, which is still a large lever of power. But then, when a lot of consolidation happened under Clear Channel, it became one company, or with Cumulus, two companies that could kind of pull those levers.

And we’re seeing that type of consolidation here. I’m curious what musicians are doing though to push back against these platforms. We’ve been talking about how powerful they are, how they work, how little money is made—is there any effort now between artists to make it work better for them?

Turner: That’s a great question. There are different ways that artists are going about it. Some do what I said earlier where they focus primarily on platforms like Bandcamp. There’s a platform called Resonate, which is a music cooperative that does music streaming and also some form of digital music ownership that I’ve seen some artists gravitating toward, which I think is very interesting in terms of finding a new way to understand and think about this phase. And I think one of the ways that artists are trying to buck the system is just trying to find other ways to monetize their content.

One of my favorite anecdotes about this is Lil Yachty, when his manager was profiled in the New Yorker he mentioned that [Lil Yachty] when he was just on Twitch one day and some kid paid him $1,000 to fart. Which is hilarious, but it’s not like it’s sustainable for a revenue model. But $1,000 that he got on Twitch that day is significantly more than the number of streams that one person could ever try to produce. So I think one of the ways artists can start trying to fight back is similar to how people can sort of fight back on social media is to disengage a little bit and start finding other platforms and other ways to connect with their audience that isn’t just through these particular platforms.

I just read a book that’s from 1953 that was about the history of the American Federation of Music, where they ended up talking about some of the solutions that they found to issues of artists not getting paid or artists trying to struggle through these issues. The reason I mention that is because what happened in the ’40s was the musicians all striked. They went on a more than a yearlong strike in 1942, and one of the things they ended up winning in that strike was that they were able to collect a percentage of the overall music industry’s revenue. So by collecting a percentage of the revenue they were able to feed that back into not only into an overall strike fund for the artists, but ways to help artists through unemployment, through public works, through public concerts. And honestly, that seems like the best solution to me, is that as the music industry is seeing all these record profits again, that 10 percent, 5 percent of that just goes directly back into the artists. So even if they aren’t getting paid a great amount, at least they have health care, and they can have all the other basics that they actually could use.

Oremus: David Turner, thank you so much for joining us. And I hope that everybody who listened and enjoyed it will go out and subscribe to your newsletter Penny Fractions.

Glaser: And be weird on Twitch to make money.

Turner: Please be weird on Twitch. Thank you guys for having me on today.