24
votes
Spotify's strong revenue isn't reflected in its stock market performance – investors fear growth will stall, while artists are voicing frustration over what they consider a miserly compensation system
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- Title
- Spotify in the eye of the storm: Trumpism, denialism and a future under question
- Authors
- Carlos Hidalgo
- Published
- Feb 20 2026
- Word count
- 1129 words
In short: investors are not rational and increasingly buy overhyped meme stocks from companies that don't make money, rather than companies that are profitable but have stable and slow growth. It would be awesome if that didn't also apply to the company I work for, which also is undervalued to AI tulip mania...
Spotify's artist compensation is extremely transparent: 70% of all revenue goes to artists, and it's paid out by a pro rata system that meets or exceeds the royalty rate set by the judges on the Copyright Royalty Board.
The core flaw in fairness is that the pro rata model siphons most of those billions in revenue to the top 0.001% of musicians. If you're not pulling in tens of millions of monthly streams, you're a nobody under the system and all of that money will go to Bad Bunny, Taylor Swift, The Weeknd, Drake, Billie Eilish et al, who pull over 100M streams per month. The biggest artists get the big slices of the pie, and everyone else gets pennies. (But abandoning pro rata for a fixed per-stream rate, scaled to fit into the operating revenue, would still likely have the same result.)
The people who you'll see driving the discourse the hardest about the payouts are likely those top artists (often Swift in the news), who want increases in subscription cost, which they proceed to absorb.
Such is the nature of markets. We have more recording artists active now than any time in history, and while many of us enjoy that variety, there is still a core group that is purely in the orbit of the top 10-20. If we went back to paying $0.99/track for songs, I'd undoubtedly spend less money by only paying once and listening many times (the CRB rate works out to something like 50-100 plays coming out to a purchase...I've done the math before in another thread) but sales would still skew toward those top artists. Potentially, they'd skew harder, because streaming does wonders to lower the barrier of discovering and trying new music.
Those are basically the levers:
Raise prices, and the same proportional take (due to popularity) goes to the same artists. Users may find streaming is no longer a good deal and return to piracy.
Somehow return to the days of iTunes and sell songs for $0.99 and albums for $9.99 (except probably $3.99 and $19.99 nowadays). Income is now one-off with a higher barrier to entry, which harms smaller artists' discoverability, and likely consolidates the lead of the top artists.
People accuse Spotify of being greedy, but their net profit margins are actually quite modest (8~11%), and they've been losing money for forever and after many years of operation only recently achieve profitability in 2024.
Consumers have been conditioned into thinking that $13/mo. for unlimited on-demand access to all music in the world is normal, and people still complain that it's too expensive. People should spend, idk, $25–50/mo. on music, and that would ensure a better allocation of resources toward artists. But that's not possible through normal market mechanisms.
I think that artistic diversity makes our world a more interesting and enjoyable place, and governments should subsidize artists so that artistic diversity can flourish. But in terms of music being a consumable product, there's simply an oversupply of music-as-product: there's only so much music-as-product that consumers can listen/consume and are willing to pay for.
I haven’t done any deep dive into their operations, but I would assume that the reason for the low profits is that the company operates less like a media broker and more like a tech company (with examples such as the Car Thing) who is also constantly trying to build beyond their core selling proposition (with podcasts, audiobooks, etc.). Unless there is some concrete data on the profitability of these ventures, the fact that they are making a profit at all should be a testament to how much of the pie they are actually taking.
I'm still in the days of iTunes. I buy CDs or FLACs online.
Artists can just give me ie. Google Drive link, I will Paypal them money and there we go. It may not.put them in the app with all the big stars, but it can be the way.
Does somebody do it like that? Can they even do that when they are on Spotify (some terms and conditions)? When they already have the audio files, why not distribute them directly (apart of doing so throu Spotify and/or iTunes and/or Youtube music or whatnot)? Yes, piracy would be easy when you hand out audio files. But pirates will rip Spotify or whatever else just as easy.
If they're signed to a label, it would probably violate their contract to sell music on their own. (And labels take more money than the artists gets too.)
If they're an independent, and just send their music to streaming platforms with something like DistroKid, Landr or TuneCore, they can do whatever they want. But at that point, you're basically just looking at a patronage model. Why bother with the pretense of buying/selling a product, and just give them money?
This whole industry is a mess!
...bandcamp's pretty much that, and it's been refreshing to see some high-profile artists embrace the platform in recent years...
I think the biggest variable they can play with it the recommendation algorithm, to make people listen to more diverse music. There's also education (do editor picks, reviews, etc) and social features like diversity score that could push people to get a bit out of their comfort zone.
https://joelgouveia.substack.com/p/the-death-of-spotify-why-streaming?utm_source=www.garbageday.email&utm_medium=newsletter&utm_campaign=sorry-babe-i-m-monitoring-the-situation
This article feels relevant, taking about the decline of Spotify upcoming. I found comparing streaming music as a utility was really interesting