Dispelling Spotify Narratives
Reading between the lines: Spotify responds to ongoing royalties criticism, and the looming war waged against independent artists
In an article published by MusicRadar, Spotify has responded to ongoing criticism regarding its royalty payouts to artists, defending its model by shifting focus to structural issues within the music industry rather than accepting sole responsibility for low per-stream earnings.
Central to this situation are assertions like those of Bjork (“Spotify is probably the worst thing that happened to musicians”) and Dani Filth, Cradle of Filth front man (“Spotify is the biggest criminal in the world”).
Disillusioned with streaming royalties, Dani Filth shared some of his revenue data:
I think we had 25, 26 million plays last year, and I think personally I got about 20 pounds, which is less than an hourly work rate.
To this, Spotify spokesperson responded:
£20!? Spotify has paid out around a million dollars in revenue to Cradle of Filth’s rights holders for fans’ streams of their catalogue. We’re disappointed to hear that Spotify’s payments are not making it through to the band.
Pivotal to Spotify’s defense is the assertion that the problem lies not with its payout rates but with the broader music industry’s revenue-sharing framework. Spotify emphasizes that it allocates approximately 70% of its revenue to rights holders —record labels, publishers, and distributors, while artists’ actual earnings depend on their individual contracts with these intermediaries.
The idea is that many artists, particularly those signed to traditional labels, receive only a small fraction of the royalties passed to rights holders, a dynamic, Spotify claims, which is beyond the company’s direct control.
Interestingly, in the midst of this controversy, several publications echoed an assumption that the industry labels must be the culprit, and naturally, the real money must be saturated in the independent scene. Let’s break down the nature of Spotify’s financial relationship with the labels.
The birth of Streaming
In early 2000s, annoyed with piracy taking away profits from digital music, labels were exploring their own ways of monetizing digital licensing. While some segments of the music industry invested in TV commercials promoting CDs as a way to support artists, others were exploring the launch of all-you-can-eat subscription services — a concept that many artists and managers fiercely opposed from the outset.
In 2001, two of the earliest streaming platforms emerged: PressPlay, a joint venture between Universal and Sony, and MusicNet, created by BMG, EMI, AOL Time Warner, and Real Networks. Both platforms were failures, not only due to their reportedly clunky interfaces and convoluted user terms, but also because of the meager payments they offered musicians. Many artists quickly recognized that these initiatives seemed less about securing fair licensing deals for creators and more about major labels capitalizing on consumer trends to boost their own profits. Attorneys representing musicians defined digital streaming distributions on PressPlay and MusicNet as a breach of contract.
The labels dismissed musicians as “ungrateful” for their efforts to create “legitimate” responses to piracy, while artist representatives foresaw a dangerous precedent being set — one that would lead to future subscription services drastically underpaying artists. Artist teams also accused the major labels of breaching contracts by placing music on their new streaming platforms without permission and then pressuring artists to accept unfavorable terms. Before long, the majors had inserted clauses into record contracts, automatically granting them the right to distribute an artist’s music through subscription services — essentially forcing artists to accept the terms or walk away.
Meanwhile, new streaming services continued to emerge. Rhapsody debuted in 2001, as a streaming offering by Listen.com, a directory for legal MP3 downloads. Another early player was imeem, a venture capital-funded, ad-supported service founded in 2003, which aimed to create a social music platform at a time when Apple and Amazon were launching their own MP3 stores. By 2007, imeem’s press coverage highlighted its licensing deals with the major labels: the labels reportedly received multimillion-dollar advances, equity stakes, and flat rates of up to a penny per stream. Similar terms were reported for other streaming startups throughout the mid-2000s.
By the time Spotify came along, there was already a well-established business model for how to license subscription services. This model, shaped by years of experimentation and negotiation, set the stage for the streaming landscape that followed.
When Spotify CEO Daniel Ek launched his platform, music licensing was an afterthought. One of Ek’s colleagues and early partners Andreas Ehn recalls that:
It wasn’t even clear back then that we were going to do music at all, or that music would be the focus […] the initial conversations were around building a video streaming service. And even after the company had got started, we were still considering a video streaming service. It was only after we had recruited the team and started really building things, that we finally decided that we were going to do music (Andreas Ehn Keynote, Innovation Stage, BDL Accelerate 2016).
Ek knew he wanted to make an advertising platform, and he borrowed Spotify’s implementation of “seamless streaming” from the design of peer-to-peer torrent clients commonly used for piracy. The Spotify team used pirated music to prototype and stress-test the software (legitimate licensing would have taken too long to obtain), with the last “illegal” tracks remaining on the platform up until 2009 (Pelly, 2024).
In the grand vision that was Spotify, licensing and artist fees were not accounted for: “When I started Spotify, I didn’t actually know that I needed licenses from record labels” (Ek, Daniel Ek: A Playlist for Entrepreneurs, 2012). Despite Spotify positioning themselves as hip and disruptionist, initially music labels were not happy with the value proposition that Spotify aimed for. Labels were looking to be paid per stream, which was generally not a profitable business model for ads-based platforms. Spotify would later prove that by not generating profit up until 2024.
It took diplomacy and smart consulting to present Spotify to label clients, and a lot of this was leveraged with the help of Fred Davis, the son of music mogul Clive Davis, and a seasoned entertainment lawyer representing artists like Britney Spears. Having experience consulting for YouTube, MySpace and Last.fm, Davis knew how Spotify needed to position itself to secure negotiations, and his credentials helped convince the biggest names in the music business to give Spotify a chance.
As detailed in the 2021 book The Spotify Play by Swedish journalists, Spotify’s lawyers had to persuade founder Daniel Ek that a paid version of the service would be essential to gaining the support of the major labels. By late 2007, this led to the creation of the freemium business model — a close collaboration between Spotify and the labels. The model featured two tiers: an ad-supported free tier and a subscription-based paid tier, with the aim of converting free users into paying subscribers over time.
In the end, the major labels secured their preferred business model, along with enormous advances, guaranteed minimum payments per stream, and equity stakes. While the specifics of streaming contracts are notoriously enigmatic, a 2015 leak of Spotify’s initial U.S. contract with Sony shed some light on the terms. Sony received a 25 million advance for the first two years, with no clear obligation to share this revenue with artists. Additionally, the label was granted 9 million in free ad space, which it could either use or sell for cash. Sony also negotiated a series of complex guarantees, including minimum per-stream payments for the free tier and minimum per-user payments for the subscription tier.
It’s reasonable to assume that contracts with the other major labels followed a similar structure. Reports indicate that each deal included a “most favored nation” clause, ensuring that no label received terms less favorable than the others (Pelly, 2024). This clause effectively locked in equally advantageous conditions across the board for the majors, further solidifying their dominant position in the streaming ecosystem.
This encapsulates the key difference of views when it comes to the evolving nature of relationship between Spotify and the major labels. Initially, Spotify saw digital music as a free commodity to drive advertising revenue, while the labels viewed it as a valuable asset capable of generating compounding revenue over time. In this clash of visions, the labels’ perspective — treating music as a revenue-generating asset — ultimately prevailed. Over time, Spotify adapted its business model, shifting toward acquiring music catalogs and filling its high-volume playlists with stock music and fake artists to capitalize on passive listening. Importantly, neither Spotify nor major labels are concerned with artist revenues or sustainability of the industry they harvest.
With low profits from streaming and diminishing returns from touring — domain controlled by another monopolistic gatekeeper, Live Nation — artists have begun to actively voice concerns over the increasingly exploitative nature of the music business. In the latest study conducted by sociologists at Goldsmiths, University of London, music is regarded as one of the most hazardous professions, marked by high rates of suicide, the inability to take sick leave, and the immense pressures that come with publicity and performance.
Perhaps uncomfortable with being the focal point of criticism, Spotify subtly shifts the blame onto the music industry, painting it as the true villain. And while the major labels are far from blameless, it was Spotify that eagerly handed them the tools and methods.
Money in the Independent Scene
It’s hard to ignore how pro-Spotify journalism often drops subtle hints and nuggets suggesting that if money aren’t found in royalties paid by labels, they must be in the independent scene. However, this rosy portrayal of the indie scene as a lucrative alternative is constructed on claims taken out of context. For instance, this article presents the perspective of James Blake, a Grammy-winning but not widely known independent artist. While the article implies Blake speaks favorably of Spotify, his actual argument is far more nuanced. Blake suggests that, in theory, streaming could work well if intermediaries like labels were removed from the equation. In order for such a system to function as intended, the algorithmic conditions of streaming would also need to be fair. This would mean artists shouldn’t have to compete with AI-generated tracks, corporate entities, stock music, or major labels. Yet, one has to wonder: are such utopic conditions even possible in the current landscape?
When it comes to Spotify history with indie artists and labels — that’s the first category of clients they unceremoniously tossed under the bus. Even in their early days, Spotify chronically neglected and de-prioritized the indie scene, and indies were the first to criticize the antitrust.
In 2010, Swedish newspaper, Dagens Nyheter (DN), published a report titled “Spotify’s Money Is Distributed Unevenly.” The article highlighted the experience of Naxos, a prominent independent classical label, which was considering pulling its catalog of over 100,000 tracks from the platform. The report revealed that major labels were being paid up to six times more per stream than independent labels. At the time, Universal, EMI, Sony, and Warner — which collectively owned 18 percent of Spotify —were touting streaming as their largest source of income. Meanwhile, independent labels were left questioning when, or if, they would see a fair share of the revenue — a concern that persists to this day.
In early 2011, The Guardian ran a column titled “Spotify Should Give Indies a Fair Deal on Royalties,” written by Helienne Lindvall. The piece detailed how independent labels were increasingly threatening to leave Spotify due to disproportionately low royalty rates. Lindvall criticized the pro rata business model, which remains in place today, where artists are paid not a fixed rate per stream but a share of total revenue based on “usage reports.” She argued that this system was inherently unfair to independents, especially in a landscape where major labels were shareholders, received substantial advances, and operated under non-disclosure agreements (NDAs) that even prevented their own artists from understanding their payment rates.
Over 87% of Spotify’s entire music catalogue is owned by just four major labels: Sony BMG, Universal Music, Warner Music and EMI. But perhaps, 87% seems like not enough.
In the past few years, the listeners preferences started shifting from big labels to more DIY and independent artists. Observing this trend, music historian Ted Gioia notes that the 2025 Grammy Awards reached a record low in viewership. New music backed by major labels struggles to generate consistent attention and revenue, leading labels to defensively cling to their legacy revenue streams.
To protect their future revenue, the major labels launched a campaign to discredit DIY and independent artists by labeling their recordings as unworthy of earning the same royalties as major-label artists. The majors are pressuring digital music services to either withhold or reduce royalty payments to DIY and independent artists, or to remove their music from these platforms entirely. In 2024 Spotify announced it will be reducing payouts to independent artists and labels, requiring a song to have at least 1000 streams to be eligible for streaming revenue.
Major labels are Spotify’s primary clients, and the platform consistently caters to their demands with special signing deals or bids to reduce revenue for DIY artists. Together, they are complicit in cannibalizing revenues of musicians, thus making music careers unsustainable, precarious, and, as recently revealed by Musgrave, dangerous. With neither party showing any willingness to address accountability, the most viable solution lies in regulatory intervention.
Some Spotify Statistics
Spotify generated €15.6 billion revenue in 2024, a 17.9% increase year-on-year
Spotify published its first annual net profit in 2024 of €1.1 billion
626 million people use Spotify once a month, 246 million are subscribers
Spotify has the most subscribers in Europe, followed by North America and then Latin America
100 million songs are available on Spotify and five million podcasts
The world’s biggest four music labels responsible for 87 percent of content available on Spotify.