Major labels keep 73% of Spotify premium payouts – report

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New record company figures out of France suggest that artists receive just 68 cents from every €9.99 monthly music streaming subscription – as major labels keep hold of 73% of payouts from the likes of Spotify.

French recorded music trade body SNEP, whose members include Universal Music, Sony Music and Warner Music,  ran a recent study with Ernst & Young to discover where money paid by a subscriber to the likes of Spotify or Deezer ultimately ends up.

As you can see below, in terms of the turnover that these platforms generate, the major labels (‘producteurs’) take home the lion’s share, pulling in an average of €4.56-per-subscriber every month after tax.

In terms of the total subscription payment, that’s a 46% share of the spoils.

However, further analysis from MBW gives a more interesting split: who takes home what from the revenues paid out by streaming companies to music rights-holders.

If SNEP’s figures are correct, €6.24 of every €9.99 subscription is paid to music rights-holders – that’s what’s left after tax and the digital platforms’ fee.

That would means the labels keep 73% of payouts from Spotify/Deezer etc.

They’re followed by writers/publishers with a 16% share, and then artists – mostly paid by their labels – who get 11%.

Screen shot 2015-02-03 at 16.24.46

Here’s how that €9.99 turnover payout share looks when you divide it up by percentage – both in terms of total revenue, and the recipients of the €6.24 payout by Spotify/Deezer etc.

Majors1 Majors2

How can the majors justify taking home such a huge chunk? Well, SNEP and E&Y’s research doesn’t stop there: they also estimate how much each party brings home in net pre-tax profit.

That means scoping how much major labels, publishers and digital platforms spend on costs – including marketing, making and/or distributing the music in the first place.

Here things get debatable: the net income of labels and digital platforms is, in SNEP/E&Y’s eyes, estimated at just 5% of total revenue.

That, in itself, will be a highly contested figure; many managers would argue that a 95% margin of cost doesn’t ring true on digital platforms devoid of packaging, breakages and returns.

Applying the 5% profit margin to SNEP’s figures changes the percentages of ‘take home’ money quite dramatically, as you can see below.

SNEP and E&Y calculate that labels earn €0.26 net profit for each subscription, while digital platforms earn just €0.10 per €9.99.

These tiny profit margins – if at all accurate – go some way to explaining why even the biggest streaming services find turning a profit no easy task.

It’s also the exact reason why managers want more streaming cash for their artists… and why major labels say they can’t pay it.

Profit streaming

[Pictured: the cover image from French superstar Johnny Hallyday’s latest album, Rester Vivant – the fourth biggest-selling LP in the market last year]Music Business Worldwide

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  • Zimmerman

    Allegedly the Artists 11% share may , subject to contract, also suffer a 25% Packaging Deduction, a breakage fee, a returns fee, an import Royalty Rate ( because the Spotify servers are based in Sweden),and a further 50% TV advertising reduction where applicable. Leaving some artists with approx 3%, a similar margin to that enjoyed by Elvis Presley in the 1950’s. Whether these allegations are true will not be revealed until the Non-Disclosure Agreements that surround Major Label Catalogue Access Deals can be audited ,confidentially, by those whose catalogue is traded.

  • Zimmerman

    And , of course, that the artist does not receive the 3% share until he/she has recouped any cash advances, recording, a proportion of tour support, a share of video costs and some promotion costs : from that 3%.

  • John Doe

    I can’t believe anyone is actually surprised by this to be honest. The labels have pretty much always screwed the artist when you look at what percentage of a sale goes where. The studios have always grabbed the lions share of the profits on basically everything but touring. It’s been long know by musicians that you make albums to get your name and music out but you tour to make your money.

    • Pedro Borges

      Definitely. I can’t quite understand why a service as big as spotify can’t ease up the direct connection to musicians… I’m thinking label retaliation.

  • William

    The biggest thing is the labels charge the artists so much for everything they cheat them blind! If they label pays 1000 for something they charge the artist 10,000 for it and make a huge profit that way there are never any profit to share with the performers. Old trick from theaters pay a percentage of profits but never make any!

  • William

    Oh and I used services like Spotify to help me decide what to buy, so if I have to pay to listen then I won’t and then I won’t be buying either. And the way I look at it if you ain’t good enough to be on Spotify then your music isn’t worth having. (Take note T.S.)