Spotify is a cool service but I do not agree with how they pay out royalties. In this post, I will propose a different way.
The current royalty calculation is explained by Spotify like this: There is a big chunk of money (the revenue) and each artist is paid according to their global “market share”. The share is calculated by taking the number of artist streams and dividing it by the total number of streams on Spotify. 1
On the surface this looks like a good thing because everyone is paying for everyone. But the problem is that the equation does not account for the usage of each user on Spotify. Sometimes I can go days without using Spotify and every second I am not using the servive, the market shares of the artists I listen to are going down, relative to users that use Spotify more than me. For example, if I stream two Radiohead tracks during one month and another user streams eight tracks from Justin Bieber, the market share for Justin Bieber will be four times higher than Radiohead, simply because Spotify is being used more by the other user.
I think this is an unfair way of distributing royalties and I am not the first one to say this. 2 Instead of calculating a global market share for each artist, I propose to calculate the market share for each artist as the average market share value of that artist for each user.
So instead of:
for each artist: market_share = artist.streams / total_streams
for each artist: market_share_sum = 0 for each user: market_share_sum += user.artist.streams / user.total_streams market_share = market_share_sum / number_of_users
The calculation is probably more complicated than what is explained by Spotify but I do not think the proposed change is unreasonable. Let us see how it fixes the market share calculation bias from the example before.
Old market share calculation:
Radiohead.streams = 2 JustinBieber.streams = 8 total_streams = 10 Radiohead.market_share = Radiohead.streams / total_streams = 2 / 10 = 20% JustinBieber.market_share = JustinBieber.streams / total_streams = 8 / 10 = 80%
New market share calculation:
David.Radiohead.streams = 2 someone.JustinBieber.streams = 8 total_streams = 10 Radiohead.market_share = (David.Radiohead.streams / David.total_streams + someone.Radiohead.streams / someone.total_streams) / number_of_users = (2/2 + 0/8) / 2 = 50% JustinBieber.market_share = (David.JustinBieber.streams / David.total_streams + someone.JustinBieber.streams / someone.total_streams) / number_of_users = (0/2 + 8/8) / 2 = 50%
The two artist now have an equal market share. The reason that I think this is fair is that it values our listening preferences equally, not the time we spend listening.
I love Spotify and have been a happy (paying) customer for almost two years. The 99 SEK per month price means that I have spent more money on music in the last two years than I did in the ten years before that and I am sure I am not alone. Spotify says that about 70% of their revenue is paid to artists and rights holders so to me, it seems like a win for the industry. But I hope they redo their royalty calculation. Until then, my limited usage does not warrant a premium account. I really don’t want to support Justin Bieber while I’m sleeping.
- The problem has also been discussed on Hacker News.