Spotify’s Business Model Is Screwing Over Musicians and Ruining Music

Neil Young’s recent decision to pull his music from Spotify, the world’s largest streaming service, has shaken up the music industry and sparked broader questions about how streaming services operate. Young demanded that the company choose between his music or Joe Rogan’s misinformation-laden podcast. Spotify chose Rogan.

This ought not to surprise anyone. In 2020, the company entered into an exclusive and lucrative $100 million contract with Rogan and his library of more than a decade of podcast episodes. Rogan recently interviewed anti-vaccine activist Robert Malone—a man who was banned from Twitter for violating its guidelines on COVID-19 misinformation. The interview was so controversial that even YouTube banned it.

Still, Spotify chose Rogan over Young. And over Joni Mitchell, India Arie, and even Crosby, Stills, and Nash, who followed suit in pulling their music. It did so because the bottom line for the company is preserving its profits, and it appears to see Rogan’s show as more financially valuable than the entire catalogs of legendary musicians.

Further, Spotify, like Amazon, played the long game, absorbing losses as only big companies can, in order to finally start turning a profit years later. In fact, Spotify was projected to become profitable this year.

And, just as Amazon gobbled up its competition in order to become profitable, Spotify dominated the industry by offering a cheap subscription service to listeners, forcing its competitors who were selling downloads to do the same. The result has been disastrous for creators and consumers of music.

“What they’re doing always comes down to profits,” says Zack Nestel-Patt, an organizer with the Union of Musicians and Allied Workers (UMAW).

Unlike Young, Arie, and other major artists, who can rely on other streaming services such as Apple Music to disseminate their work, millions of independent musicians around the world have far less leverage.

While Spotify and Rogan responded to Young’s accusations saying they would try to do better, Nestel-Patt is unimpressed, “because of how little it affects the musicians, especially the working-class musicians struggling at the bottom of the Spotify ecosystem.” While he applauds Young and his allies for taking on Spotify over misinformation and for forcing the company to respond, the real question of the company’s business model—built on the severely underpaid labor of millions of creators—remains unchanged.

To put it more concretely, an independent musician crafting works of art that they put their heart and soul into may find success with a hit that garners millions of plays on Spotify. Users of the service might imagine this translates into a generous payout for their new favorite artist, but in reality, Spotify’s paychecks are peanuts.

One analyst estimated that an artist with a family would need to have more than 24 million plays on Spotify per year in order to earn just enough to meet the federal poverty line.

Additionally, the minuscule royalties may need to be split with a record label, with band members, songwriters, managers, and more. The money that most of Nestel-Patt’s musician friends earn from Spotify is “so negligible that they don’t even account for it.”

Picture a business model built on selling the enjoyment of a product that the creator gets almost no money to produce. It’s akin to theft. “Imagine any other business working that way,” says Nestel-Patt.

He explains, “the people who are making substantial money are having tens of millions, hundreds of millions, or billions of plays on Spotify annually, and that’s a very small percentage” of artists on the platform.

Now Spotify is facing scrutiny from the British Parliament for its paltry pay. Independent musician Nadine Shah, who has had four critically acclaimed albums and won awards for her work, testified to members of Parliament saying she could not even pay her rent anymore.

Nestel-Patt says Spotify’s business model ensures that musicians need to have other sources of revenue or start out as independently wealthy in order to survive. “This reinforces already existing barriers for class and race to get into [music] and be successful as a musician,” he says. In other words, “if you need a huge amount of money” just to break into the industry, that could disproportionately exclude low-income people of color from pursuing music.

There was a time when musicians made money from sales of records, cassette tapes, and CDs—sales that were fueled by their songs being played on radio stations. That started changing in the late 1990s when digital platforms began offering music to the public for little to nothing, paving the way for Spotify. That digital transition forced musicians to rely more and more on live venue performances and ticket sales in order to earn a living.

But in 2020, a global pandemic brought the world to a standstill, and live performances abruptly stopped.

“The rise of streaming as the formal replacement for physical media sales is why musicians became so wholly reliant on touring [in the first place], because no one’s buying records at the same level that they were 10 years ago,” says Nestel-Patt.

When the pandemic struck, he recalls that “it was catastrophic for everyone I know,” and that “it was a wholesale overnight crash of everything we were doing.”

Musicians, seeing their work come to an abrupt stop, and their already meager revenue streams entirely drying up, began to organize online. From the ashes of musical careers rose the UMAW, where artists proclaimed that “[m]usic workers are workers, and it is time we get organized and join the fight.”

The organization goes further in describing itself as “an anti-capitalist, anti-colonialist organization that stands for Medicare for All, a Green New Deal, abolishing ICE, destroying borders, the freeing of incarcerated people, a $15/hour minimum wage, and more.”

The group led multicity protests against Spotify in 2021, and tens of thousands of musicians signed a petition as part of UMAW’s #JusticeAtSpotify campaign. Their demands were simple—pay artists fairly, directly, and transparently, and treat them with dignity.

Spotify responded saying it heard their demands. But Nestel-Patt dismissed it as a reiteration of previous responses that he characterized as, “don’t blame us, blame the labels,” and that the company engaged in “obfuscations and misdirections about what they do and how they work.”

It’s not just musicians who are losing out under Spotify’s business model. Even as Americans are spending increasingly more money on music to the tune of $20 billion a year, and as music industry revenues have risen to $43 billion a year, it turns out that very little of that goes to musicians. Creators get only about $5 billion a year, or 12 percent, with corporate middlemen such as record labels and streaming services like Spotify sucking up a majority of the profits.

Worse, this predatory business model may be ruining music as a whole. Ted Gioia, writing in the Atlantic, recently asks, “Is Old Music Killing New Music?” Pointing out that a majority of music being consumed today is from the catalogs of older or even deceased musicians, he concludes that “record labels… [are losing] interest in new music.”

Although there is plenty of incredible new musical talent, “the music industry has lost its ability to discover and nurture their talents,” writes Gioia. And, Spotify is a big reason why.

“I think this is as much a listener issue as it is a musicians’ issue,” says Nestel-Patt.

He worries that “if the only thing that makes money on Spotify is major pop acts, then… what happens to classical music? What happens to Tejano music? What happens to Appalachian bluegrass music?”

This article was produced by Economy for All, a project of the Independent Media Institute.

Sonali Kolhatkar is the founder, host and executive producer of “Rising Up With Sonali,” a television and radio show that airs on Free Speech TV (Dish Network, DirecTV, Roku) and Pacifica stations KPFK, KPFA, and affiliates.