Spotify Getting $499M Profits After Lowering Artists Royalty

[RAMROD 103,909]

Spotify is finally on track for its first profitable year since going public with a $499 million operating profit for Q3 of 2024.

But these numbers come at a cost, not for Spotify, but for its artists.

The company’s new bundling strategy has cut millions in royalty payments, and the music industry isn’t happy.

Spotify’s Q3 2024 financial report shows how the company changed from a streaming service that burns cash into a profit-making machine.

Let’s look at the numbers:

- The company made €454 million in operating income (about $499 million or nearly half a billion dollars).

- Their total revenue jumped 19% from last year and reached €4 billion ($4.4 billion).

- They’ve earned €888 million ($975 million) in operating income in 2024 so far.

These numbers come from two sources.

First, Premium subscriptions grew by 12% compared to last year, while advertising revenue rose by 7%. Second, the company cut costs by laying off some employees and reducing its marketing and operating costs.

They did have one cost they didn’t expect, though.

The money they set aside for worker benefits and stock options went up by €54 million, more than the €39 million they planned for. This happened because Spotify’s stock price kept going up during the quarter, so it’s not really much of a problem.

Spotify’s bundling strategy has contributed a lot to its increase in revenue.

This strategy is basically all about bundling different types of content together to pay less for each piece.

When you subscribe to Spotify Premium, whether Individual, Duo, or Family plan, you now get music, podcasts, and 15 hours of audiobooks all in one package.

But, this isn’t just convenient for users. It’s also a money-saving strategy for Spotify.

This comes from a 2022 agreement called Phonorecords IV (CRB IV). According to this, if a service only offers music or podcasts, it must pay higher royalties every year. But, if it bundles music with other things, it can pay less. So, Spotify now uses this ‘loophole’ to save money.

The music industry isn’t staying quiet about Spotify’s money-saving tricks.

The National Music Publishers’ Association (NMPA), for one, sees the bundling strategy as more than just creative accounting.

“Spotify’s attempt to radically reduce songwriter payments by reclassifying their music service as an audiobook bundle is a cynical, and potentially unlawful, move that ends our period of relative peace,” NMPA President David Israelite said.

The NMPA’s main concern? This bundling could undo progress from the 2022 settlement, which was supposed to raise standalone music royalties to 15.35% by 2027. Instead, Spotify’s bundled plans let them pay much less.

Spotify’s strategy can also start a trend, leading other services to use similar tactics to cut creator payments. And, since platforms only pay around $0.003 to $0.01 per stream, many are worried about how low this can go in the future.

Spotify, however, stands firm on its position.

They point out that bundling isn’t new to their business model. They’ve done it before with services like Hulu, and those bundles also qualified for lower royalty rates and no one bat an eye.

This forced transition, combined with the complex process of downgrading to basic plans, suggests the bundling strategy might be more about boosting profits than offering user choice.

 

https://www.headphonesty.com/2024/11/spotify-reports-499m-operating-profit/

https://s29.q4cdn.com/175625835/files/doc_financials/2024/q3/Q3-2024-Shareholder-Deck-FINAL.pdf

[bionic 41,613]

Congrats to them!  Survival of the fittest!  Only the best for the 1% in Trump's America :maga: 

[JoeMo 3,716]

Oh god. I should really consider switching to Apple Music.

[GAGASEXUAL 3,392]

Apple Music has always been superior

[Catnikko 13,617]

I only have like £60 in my account for a song that has 27k spotify streams 

[SimonBaetens 6,544]

1 minute ago, Catnikko said:

I only have like £60 in my account for a song that has 27k spotify streams 

do share!

[Lucas 23,836]

2 minutes ago, Catnikko said:

I only have like £60 in my account for a song that has 27k spotify streams 

That's tragic but it's hard to fairly evaluate how much listening to a song once should cost.

Edited 2 hours ago by Lucas

[Catnikko 13,617]

2 minutes ago, SimonBaetens said:

do share!

1 minute ago, Lucas said:

That's tragic but it's hard to fairly evaluate how much playing as song once should cost.

True, if it were Tidal streams it'd be over £200 though 

[River 104,515]

1 hour ago, RAMROD said:

$0.003 to $0.01

wait, so like for Beyonce's American Requiem that has 13 writers and 7 producers, all of them needs to share from $0.01 royalties???

[Sunny 12,703]

27 minutes ago, River said:

wait, so like for Beyonce's American Requiem that has 13 writers and 7 producers, all of them needs to share from $0.01 royalties???

Basically, yeah. Now, Beyonce probably gets paid way more from Spotify, as big artists have better deals than indie artists. But let's say she gets paid an average of $0.0084 per stream, she needs to share that with her distributor (which she owns I think? Parkwood Records), the person who owns the masters (around 70% of the payout goes to them, which is why it's always better to own your masters), and then all the people who worked on the song get royalties (which can be less than one percent per song credit),
 

Spoiler

The payout per stream depends on a lot of factors, such as location: streams from big Western cities pay a lot more than a city in the mountains in China

At the end of the day it can be lucrative, but the majority of artists' revenue comes from touring. It's not a lot when compared to their other earnings, but I would be pretty content with even $1m from song royalties per year

 

Edited 1 hour ago by Sunny

[Cameltoe Chariot 14,178]

Switched to Apple Music years ago and I've never looked back.

- Superior sound quality
- Centered around albums and bodies of work rather than singles and playlists like Spotify
- Better interface/customization
- Makes it super easy to import mp3s/downloaded media into the app

I swear the main motivator for people to stay with spotify is for the end of year Spotify Wrapped crap and because of the brand recognition. It's actually a terrible platform that is killing the music industry.

[PartySick 144,420]

6 minutes ago, Cameltoe Chariot said:

Switched to Apple Music years ago and I've never looked back.

- Superior sound quality
- Centered around albums and bodies of work rather than singles and playlists like Spotify
- Better interface/customization
- Makes it super easy to import mp3s/downloaded media into the app

I swear the main motivator for people to stay with spotify is for the end of year Spotify Wrapped crap and because of the brand recognition. It's actually a terrible platform that is killing the music industry.

On the other hand...I don't personally notice a difference in music quality (I grew up on mp3s ripped from YouTube videos ), I can't live without my playlists, I like the interface, and I have no trouble adding local files to my liked songs and playlists

And also wrapped is cool

Annnnnd I strongly dislike Apple products and services. Everything from the iPhone to apple music. Barf

Lbr, Spotify isn't killing the music industry. Social media is

[SimonBaetens 6,544]

1 hour ago, Catnikko said:

True, if it were Tidal streams it'd be over £200 though 

Ohhhh this song is goooood

Edited 36 minutes ago by SimonBaetens

[River 104,515]

53 minutes ago, Sunny said:

Basically, yeah. Now, Beyonce probably gets paid way more from Spotify, as big artists have better deals than indie artists. But let's say she gets paid an average of $0.0084 per stream, she needs to share that with her distributor (which she owns I think? Parkwood Records), the person who owns the masters (around 70% of the payout goes to them, which is why it's always better to own your masters), and then all the people who worked on the song get royalties (which can be less than one percent per song credit),
 

  Hide contents

The payout per stream depends on a lot of factors, such as location: streams from big Western cities pay a lot more than a city in the mountains in China

At the end of the day it can be lucrative, but the majority of artists' revenue comes from touring. It's not a lot when compared to their other earnings, but I would be pretty content with even $1m from song royalties per year

 

So in some sense at the end, the people who worked on the song earns the least (except artist), even with touring, because the artist gets the majority of the earning while they get royalties if the song is perform, right?

[Debithius 5,479]

2 hours ago, bionic said:

Congrats to them!  Survival of the fittest!  Only the best for the 1% in Trump's America :maga: 

Spotify is Swedish.