Fair Play? A Million Spotify Streams Earned Gaga $167

How much money do artists really make from Spotify? According to Swedish paper Expressen, 2009’s standout breakthrough artist Lady Gaga and her songwriter Redone made just SEK1150 (£100.76; $166.56) in songwriting royalties from one million Spotify plays of her hit Poker Face in Sweden in the first five months after Spotify’s launch in October 2008, according to figures from the Swedish Performing Rights Society (STIM).

STIM told paidContent:UK that Universal Music-signed Gaga actually generated SEK 2,300 (£201.53) through plays of Poker Face — she keeps half while the other half goes to STIM, which handles songwriters’ copyright payments in Spotify’s native Sweden. STIM points out to us that Gaga has her own separate deal with her label when it comes to streaming — I asked Universal to tell us what that relationship is, but have yet to receive an answer. Spotify has also yet to answer our questions.

Update: Spotify told us in a statement that any STIM payment “would only represent a fraction” of the money that goes to rights holders from the service. The company stresses that it pays “not only collecting societies, but also publishers and the record company to play their music.” It also argues that the $167 is from “way before we’d established ourselves as a music service and built up a large user base”. Actual payment amounts for individual artists remain confidential but Spotify calls this one “certainly wide of the mark”.

So that’s royalties, but by how much are artists reimbursed in total for plays on streaming sites? As with much of the murky world of on-demand music rights, it all depends…

Mark Mulligan, VP and research director at Forrester, says digital platforms should give artists the same ratio of rights revenue they get for CD sales — for most indie labels it’s a 50/50 split between artist and label, for the majors it’s skewed more towards the company than the performer.

But there’s another problem: “When you start getting into situations where record label has taken a stake in the service — as is the case with MySpace Music and is heavily rumoured to be the case with Spotify (N.B. Spotify categorically denies this) — once you’re in a JV scenario, the label can take another revenue stream.” So the label gets paid twice: once through its revenue share of the JV and once for its rights payments, while the artist gets a reduced share of the overall pie.

Mulligan also doubts that US music chiefs’ reluctance towards Spotify’s freemium model is down to a mistrust of free music and more to do with an industry-wide fear that streaming sites have failed to convert enough users to paid accounts and haven’t yet had a meaningful effect on still-rampant P2P piracy.

But it’s not all bad news for established artists online: Gaga’s Poker Face was earlier this year declared the UK’s most downloaded song ever is now on some 800,000 PCs and mp3 players (her Let’s Just Dance is number three), while Universal says she sells far more digital tracks than physical CDs.

However, for emerging acts waiting for their breakthrough, who have to pay back their recording costs before their contracts allow them to start making any decent money, could find themselves out of pocket for a long time if the audience’s primary mode of listening is services like Spotify.