Based on the standard Spotify contract, I've done my best to explain how royalties are calculated and an estimate of what labels can be expected to be paid per stream.
Fees - 50% of net advertising revenue multiplied by pro rata share
- 50% of subscription fee revenue multiplied by pro rata share
Net Advertising revenuePro rata share is aggregate number of plays of authorized recordings in the applicable month divided by aggregate number of plays of all audio in such month. Only plays over 30 seconds count.
ExampleArtist gets 1,000 plays in a month, Spotify has 5,000,000 streams in same month (conservative guess, based on
each user playing 10 songs a month)
1,000 / 5,000,000 = 0.0002
0.0002 is this artist’s
Pro Rata ShareAdvertiser monthly revenue = £6,833.33 (based on
£82,000 a year)
£6,833.33 x 0.0002 = £1.37
Fee payable is 50% (according Spotify Standard Contract):
£1.37 / 2 = £0.68
Same example for subscriber income
£170,000 income (based on annual rate of
£2,040,000) X Pro Rata Rate (0.0002) = £34
£34 / 2 = £17
Total = £17.68 per month for 1,000 plays over 30 seconds
ConsiderationsThis number may be inflated due to the fact that in the standard contract a subscriber is defined as “€3 per month” much less than the actual £10 customers pay. The figure of £82,000 per annum from The Guardian article may be taking this into account however.
The figure of 5,000,000 plays per month is most likely very low, considering the most popular videos on YouTube get something in the region of 2,000,000 plays each per month. One source quotes 10,000,000 plays per month (http://www.techcrunch.com/2009/08/07/spotify-napster-and-the-quest-for-premium-music-dollars/) however I remain sceptical at this reviewers facts and sources however!
