How come? Here's How Come...
http://thecynicalmusician.com/2012/06/the-great-gig-in-the-cloud/ (Faza Wiszniewski, The Cynical Musician. See other posts at his blog to get a fuller understanding of the current situation.)
Above is a link to a blog that analyzes and quite clearly explains the problem with any service like Spotifly, and why they pay so little.
Basically the income needs to be shared, and that depends on
A) the total income per user - *not* total income via expansion of the user base.. (An aggregate increase in subscription fees via expansion of the user base means an increase in the number of plays among which the income needs to be divided; this will not lead to increased revenue per stream for the artist. An increase in each user's subscription fee might increase the pay-per-play, but will restrict expansion of the user-base. Moreover, it is possible that new users joining will be high-volume music consumers. It is possible that higher subscription fees will drive away low-volume music consumers for whom the service is no long a "bargain". This in turn could *lower* the payout per stream. )
B) and the manner in which it is shared. There are two basic models for sharing revenue:
1) Per-user revenue distribution: Each listener's subscription fee is divided among the streams to which that person has listened and no others. Problem:: The more tracks a listener streams, the less each stream earns.
"the involved music fan that lives and breathes music is the worst kind of listener you can have.
How could that possibly be? Let’s stick to our prior assumptions and say that each subscriber pays $10, of which $2 go towards the running of the service. Thus, once again there are $8 to be divided – this time only amongst the songs (and thus artists) that the subscriber listened to.
Starting with the most extreme example, let’s say that our fan listened to but a single song over the whole month. That single play was worth $8 to the artist. Woot!
Obviously, that subscriber doesn’t really care for music very much. What about someone who is deeply passionate about music and has the service running all the time, listening to a large number of songs from a large number of artists? Let’s assume that our passionate music fan has managed to clock up 100 artists whose songs they have listened to over the month and, to make our life simpler, let’s also assume that each artist received roughly equal time on that fan’s playlist. At the end of the month, each of those artists is entitled to the princely sum of 8 cents from our passionate music fan. "
2) Aggregate revenue distribution: All subscription fees are pooled and disbursed according to the percentage of streams each artist enjoyed. Problem: Well this is not as easy to simplify as the first scenario, but roughly, we have to deal with Pareto's Law. I am going to copy-n-paste a few more paragraphs from the url at the head of this comment:
"Under this model, [...] if plays of an artist’s songs have accounted for 1% of all songs played during a given period, that artist is entitled to 1% of the total amount raised.
[...}assume a monthly fee of $10 and to keep things realistic, we’ll set aside 20% of that ($2) to cover the costs of running this operation. Thus, all the artists in the system get to divvy up $8 from that fan, based on how much they are listened to by all the users.
Thus, if Lady Gaga manages to account for 10% of all plays, she gets 80 cents from your $10 subscription. If your, somewhat obscure, favourite artist only accounts for 0.01% of all plays they’ll get 0.08 cents. Do you begin to see the problem? Depends on how you feel about Lady Gaga, I suppose.
In an aggregate distribution scenario, your money will be going primarily towards paying the most popular artists, regardless of your opinion of their music."
In short, this and other posts show that it is extremely improbably that Spotify or any service like it can ever pay enough for an artist to make a living wage.
Notice please that I have not even mentioned the problem that Spotify and other streaming services not only pay a pittance, but that pittance is obtained by cannibalizing other sources of revenue, be they iTunes downloads, CD sales, etc.
(There are various stupid people who think that the cause for artists' dissatisfaction with the net is that they will not earn millions of dollars. Ignore them The *actual* cause is that it becomes impossible to simply earn a living worthy of the name.)
Read http://thecynicalmusician.com/2012/05/cargo-cult-business/ for more information of what Spotify is, and why it will never be anything else.
(Apologies to Faza if I have used too much of his original post here.)
(J.L.)