New Artist website from Spotify gives interesting insights into business model

Exciting stuff going on over at Spotify: Today a new website for artists, www.spotifyartists.com, was introduced. On this website, Spotify gives – among other things – some interesting insights into their business model.

Spotify Revenue Model

So basically, Spotify take all the revenue from paid subscription and ads, keep 30% and multiply the rest by the times the relative number of streams of an artist. This is what the label gets. The artist ends up with whatever is left after the label takes their cut as negotiated in the individual contracts.

So Spotify does not pay per stream, but rather pays according to the formula above (i.e., in relation to an artist’s relative popularity on Spotify). Of course it’s possible calculate the per-stream payout ex-post:

Recently, these variables have led to an average “per stream” payout to rights holders of between $0.006 and $0.0084.

Has anybody calculated yet how that compares to CD sales? Taking into account – and I believe that’s crucial – the long-term revenue stream? As far as I can see it one of the key differences is that Spotify will create revenue for every stream, long after the last CD has been sold. I’ll take a closer look at that…