Spotify paid out $9 billion to music rightsholders in 2023 – equivalent to 63% of its annual revenues

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“Right now the CEO of TikTok is probably sitting at home watching this show, eating an ice-cream, crying, seeing all of his exes in one room. And you know what, TikTok? Shame on you. Shame on you for ripping off all of these artists. How dare you do that? [Pause] That’s Spotify‘s job.”

Daniel Ek probably enjoyed Trevor Noah’s TikTok-focused opening monologue at The Grammys on Sunday more than most… until Spotify became the punchline.

In what we’re sure is a coincidental announcement, Spotify confirmed today (February 8) the amount of money it paid out to music rightsholders in 2023 – and it’s a whopper.

The company says it delivered USD $9 billion last year to recipients across record companies and music publishers, plus independent distributors, performance rights organizations, and collecting societies.

According to Spotify, the $9 billion figure means that its annual payouts to music rightsholders have “nearly tripled in the past six years”.

As of the close of 2023, says Spotify, it had paid out over $48 billion in recording and publishing royalties since being founded in 2008.

Spotify’s $9 billion payout figure means that it paid music rightsholders approximately $750 million on average every month in 2023 – around $173 million every week.

Earlier this week, Spotify published its annual revenue results for 2023, revealing that it generated EUR €13.247 billion in the 12 months to the end of December. That converts to USD $14.336 billion at the annual average EUR-USD exchange rate as per the IRS.

With that revenue figure in mind, a payout of $9 billion in 2023 means that Spotify paid out approximately 62.8% of its annual revenues to the music industry last year.

Now, TikTok is not a music streaming service in the same style as Spotify. For one thing – currently – TikTok users can only play music on the video platform in increments of up to 60 seconds.

(TikTok does run a separate dedicated subscription streaming music service, TikTok Music, but it’s currently only available in five territories.)

Yet, with Trevor Noah’s comments still ringing in the ears of the music business, it’s probably worth noting that we do now have an approximate idea of how much money TikTok delivered to music rightsholders in 2023.

Last week, as you well know, Universal Music Group publicly announced that it hadn’t reached an agreement to renew licensing terms with TikTok, citing policies around AI, safety on the platform, and TikTok’s compensation to artists as reasons behind the spat.

In making that announcement – which has since led to the takedown of UMG’s recorded music from TikTok’s library – Universal stated in an open letter that “TikTok accounts for only about 1% of our total revenue”.

As MBW calculated in this analysis, UMG’s “1%” comment suggests that TikTok paid Universal Music Group somewhere around USD $110 million last year. (UMG’s total revenue in 2023 – with Q4 yet to be confirmed – will likely land at around USD $11.5 billion, according to MBW’s forecasts.)

That, in turn, implies an annual payment to the total music industry from TikTok last year of around $350 million-$400 million, judging by UMG’s typical global market share across recorded music and music publishing.

However, we reiterate: TikTok (as in, the main TikTok platform) is viewed as a social media platform (albeit a music-led one) by rightsholders like Universal Music Group, rather than a music streaming service – so a straight apples-to-apples comparison with Spotify here doesn’t seem fair.

That said, we’re sure it won’t stop Daniel Ek from reminding people that his firm paid music rightsholders around 24 times more than TikTok did in 2023. (Ek’s first text today: Trevor Noah?)

A fairer comparison for Spotify to make? How much it pays music rightsholders vs. what YouTube/YouTube Music pays them.

The last figure we have from YouTube on that score is the “over $6 billion” that the Alphabet platform says it paid music rightsholders in the 12 months between July 2021 and June 2022.

Spotify CEO Daniel Ek was asked on Spotify’s earnings call on Tuesday by Reif Ehrlich of BofA Securities about the implications of UMG’s dispute with TikTok from a competitive standpoint.

Ek said: “I’m not going to comment on any sort of competitive dynamic, but what I can say is we feel really good about our relationship with our music partners. It’s probably at the best it’s been.”

Credit: Sipa US / Alamy

“I feel really good about where we are with our music partners. I feel great about the value we’re bringing to the music industry.”

Daniel Ek, speaking with Analysts on SPOT’s Q4 earnings call

He added: “I feel really good about where we are with our music partners. I feel great about the value we’re bringing to the music industry. And I think that’s being widely recognized.

Spotify said today that it will reveal more about its 2023 royalty payments in the company’s annual Loud & Clear report, which it says will be updated in the coming weeks.Music Business Worldwide

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