Front Burner - Artists on Spotify are mad about more than Joe Rogan

Episode Date: February 7, 2022

Since Neil Young stepped away from Spotify over allegations that the platform was peddling COVID-19 misinformation, other artists have begun to speak up about their problems with the platform — problems that go right to the heart of the digital gig economy. Artists on the platform are paid fractions of a penny per stream. And during the pandemic, when touring is near impossible, many are fed up. We hear from Belly’s Gail Greenwood and Polaris Prize-winning artist Cadence Weapon about why there’s so much frustration with Spotify. Then Ben Sisario, music industry reporter for the New York Times, breaks down why artists are speaking up now — and what the alternatives are.

In the Dragon's Den, a simple pitch can lead to a life-changing connection. Watch new episodes of Dragon's Den free on CBC Gem. Brought to you in part by National Angel Capital Organization, empowering Canada's entrepreneurs through angel investment and industry connections. This is a CBC Podcast. Hi, I'm Jamie Poisson. As we talked about on the show a few weeks back, Neil Young recently pulled his music from Spotify over COVID misinformation being spread by podcast superstar Joe Rogan. But since then, more artists have started protesting the platform

for reasons that go beyond misinformation. Soul singer India Ari pulled her music over Rogan's use of racist language and said it was about, quote, respect. Who gets it and who doesn't? Paying musicians a fraction of a penny and him a hundred million? The rock group Belly turned their Spotify banner into an image that says, delete Spotify. Hi, my name is Gail Greenwood. I'm the bass player for the band Belly. When Neil Young made the statement about it was Joe Rogan or him, it brought to mind that it was time to leave. And we should have left a long time ago. But it's really hard to get our music off of there. We have these deals from 30 years ago from the 90s when we were on major labels and so we

don't even have any control over our masters or where the songs are getting played. So we wanted to make a statement and Tom made it. Our guitar player Tom just said well heck I'll just make a banner that says delete Spotify and that was the only power that you know you don't have a lot of tools but you can't go up against a giant and And this is basically all you can do. We always knew that Spotify was one of the worst streaming services for paying their artists. The platform was built on the back of all of us music creators, and none of us are seeing a penny. Artists like Gail and her bandmates have been frustrated with Spotify for a long time, well before COVID, and they're not alone. My name is Roley Pemberton and I make music as Cadence Weapon.

Cadence Weapon is a Polaris Prize winning artist, but streaming on platforms like Spotify still doesn't pay the bills. And he doesn't think audiences necessarily get that. Well, I think people don't really think about it, you know, how it works that much. I don't think the information is really out there. I mean, just in my specific case, the money that I get through Spotify largely just goes to my labels that I've been on because they administer all my masters. So I think it's been really beneficial for the music industry, but it doesn't really trickle down to the artists, you know? And I think it's like this idea. It's like, yeah, you can listen to any song ever and it's just $10 a month, but it's like, what is the

actual cost of that? You know? And it's like, you look at the facts of it and then you see it's actually harmful to so many artists, but people ignore it because it's so convenient. But even though he's got serious problems with the platform, it's hard for him to quit. As an artist, unfortunately, if you're not in the position of a Neil Young or a Joni Mitchell, where you're like this large legacy artist and you can take the hit. If you're someone like me, you know, I have to be on Spotify because promoters look at the analytics when they're booking for festivals. You know, they look at my monthly listeners, you know, and it feels like if you're not on streaming, it's almost like you don't exist in the larger conversation of music right now.

Today, we're talking to New York Times reporter Ben Cesario about why artists are so riled up by Spotify's business model and what could happen next. Hi, Ben. Thank you so much for coming back into the podcast. Thanks for having me. So the heat on Spotify over the Joe Rogan controversy has also amplified concerns about its business model and how it might not be all that good for artists. And before we get rolling today, Ben, I wonder if you could just tell me how that business model works.

If I'm an artist or a band on Spotify, how do I get paid? Well, Spotify collects money from its subscribers and it also sells advertising. So all the money that it makes, it sort of puts into a giant pot and every month it cuts up that pot based on how many streams any particular artist or record company gets. And then it sends that portion to the record company, which is then supposed to pay the artist. And what are the record companies making out of this? I guess if you cut that up into parts, who gets the biggest part? The biggest record companies get the biggest part, as always.

The record companies are making bank on streaming. They are posting record profits. Everything has been going very, very well for the record companies, especially the biggest ones, the major ones like Universal, Sony, Warners. The bigger question is what trickles down to artists and what is every stream worth? and what is every stream worth. And so there's always been a lot of criticism of Spotify about how low that number is. The best estimates right now are somewhere around a third of a cent per stream.

Wow. And I know you just said there's a criticism around how low Spotify is. Could you compare that to its competitors for me? It's less than what Apple pays. It's less than what title pays, but it's more than what YouTube pays. And, you know, the truth is that nobody makes as much from a stream as they did from selling a CD. And that's just because it used to be that somebody would walk into a record store and pay 15 bucks and listen to the music.

But when you are paying $10 a month and listening to hundreds of songs or thousands of songs, that money is just inevitably going to get split up more ways. How's Spotify doing through this? Well, Spotify loses money. They just posted their fourth quarter earnings and they lose money. They post a net loss every year, as I'm pretty sure they always have. That of money in marketing and R&D and that sort of thing. But for every dollar that comes in the door at Spotify, they're paying out about 70 cents or maybe a little bit less than that for the cost of the music that they have on the platform. So their margin to begin with is a little low.

Out of that 30-something cents, they've got all their overhead, they've got their employees, they have their offices and all that sort of thing. And they, like most other digital services like them, often post a loss even as they're growing. like them often post a loss even as they're growing. I guess the question I'm trying to get at is the anger from artists that they're not getting enough money from Spotify. Is it fair that it's being directed at Spotify or should it be directed at the record companies? I mean, they're both boogeymen because it's a whole economic system that has developed that tends to reward the big record companies and reward the big tech companies and not pay much money to artists, especially artists who are not superstars. Spotify has released a lot of data about this that, to them, was a sign of just sort of how much money they are paying to artists. They said that in the year 2020, 870 artists generated more than a million dollars in payments. But when you dig into those numbers, you start to see that really it's a tiny fraction

of the total that are making a significant amount of money. About 97% of all the artists on Spotify make less than $1,000 in a year from their work. That's partly because there's so many artists on Spotify. There's more than 6 million artist accounts for every Beyonce. Beyonce. There's 500,000 people in their bedroom making a song and slapping it up on Spotify, and naturally those people are not going to be as popular.

But what this means is that only the uppermost, uppermost stars are really making anything that would look like a living wage from Spotify. Right. We're talking about the Beyonce's, the Taylor Swift's, Drake, etc. Right. They make money. I mean, it's their stars and they have millions of fans that listen to their music all the time. So they make money.

So that that point three cents3 cents really adds up. Why do these smaller artists stay on Spotify then? If they feel like, well, I don't know, maybe they feel like they're being taken advantage of or that they're not being paid properly. Well, a lot of them don't have a choice. They signed contracts with record companies which own their recordings. And so, you know, the record company signs a licensing deal with Spotify. And that deal is basically, you give us some money, we give you everything in our catalog. even if they do have a choice, generally the thinking among artists and their record companies, even their managers, is if you are an artist today, you want your music to be everywhere that a fan can get it. You want to meet the audience wherever they are. And the goal is that you want them to stream your music, but then you're hoping they'll buy

a concert ticket and you're hoping they'll buy a t-shirt and they'll follow you on instagram and if you're on tv they'll watch you there you know music is a big economic system and streaming is one part of it it's a big one um but it's not the whole game and so i think a lot of artists even if they're displeased with it, even if they're upset about things like the Joe Rogan podcast, they see a value to staying on. Now, because of this controversy, and I'm sure there's a lot of other things going on behind the scenes with these controversies, but Neil Young has removed his music from the platform of Spotify and Joni Mitchell and apparently some other people want to as well.

I'm very sorry that they feel that way. I most certainly don't want that. I'm a Neil Young fan. I've always been a Neil Young fan. Spotify paid Rogan 100 million bucks. Why has the streaming platform doubled down on podcasts? You think they're pumping money. They have been pumping money into podcasts the last couple of years.

I think part of it is just because podcasts are hot. I believe they're the biggest outlets for podcasts now. There's also a financial incentive for them. Spotify has to pay, as we said, something like 70 cents on the dollar for the music that they host. But the more podcasts they have, the more they can kind of shrink that. And the difference is that you don't have to pay royalties for podcasts. Usually they're paid up front. And if one person listened to it or 10 million people listened to it, the costs are still the same.

It's basically a gamble to be a little bit more profitable and a little bit less under the boot of the record companies. and a little bit less under the boot of the record companies. And so far it's, I don't think it's helped them turn a profit, but it has improved their margins a little bit, and it's gotten them some more ad money. Right, right. And talking about improving their margins, I mean, the company went public in 2018. And what kind of pressures are they under from Wall Street, from their

investors? Definitely a lot of pressure to grow. Wall Street likes to see media companies and technology companies grow. They want to see more subscribers. They want to see more listeners, more viewers, all that. The growth story, as they call it. I think that at this point, they want to see a path to profitability. They want to see how they can possibly get there. And so even if Spotify posts a loss every year, if the loss shrinks a little bit, if their operating profit grows a little bit every year, they the loss shrinks a little bit, if their operating profit grows a little bit every year, they can always say, hey, we're going to get there next year, five years, 10 years. Don't worry. We're going to get there. You're going to make your money.

So they have to sort of make a dog and pony show to Wall Street to say, sure, we lose money now, but look at how fast we're growing. Look at how much of the market we're capturing. Look at how our numbers are a little bit better every year. And sooner or later, it's all going to be great. And, and that's, I mean, that's the standard playbook. There's, there's nothing that's unique to Spotify about doing that. They're in an unusual position here because most of their competitors are owned by giants of the tech world. I mean, Apple, Amazon, YouTube, that's what their competition is. And so Spotify is never going to have the resources

that those companies have. If Apple loses a little bit of money on its streaming service, they can still sell a zillion iPhones and it'll be fine. If Spotify doesn't get enough subscriptions in the next quarter, their stock price is going to tank. In the Dragon's Den, a simple pitch can lead to a life-changing connection. Watch new episodes of Dragon's Den free on CBC Gem. Brought to you in part by National Angel Capital Organization. Empowering Canada's entrepreneurs through angel investment and industry connections. Hi, it's Ramit Sethi here. You may have seen my money show on Netflix. I've been talking about money for 20 years.

I've talked to millions of people and I have some startling numbers to share with you. Did you know that of the people I speak to, 50% of them do not know their own household income? That's not a typo, 50%. That's because money is confusing. In my new book and podcast, Money for Couples, I help you and your partner create a financial vision together. To listen to this podcast, just search for Money for Couples. I help you and your partner create a financial vision together. To listen to this podcast, just search for Money for Couples.

Is there some sort of other alternative here, or do you see some other real alternative emerging? There are other alternatives out there. They tend to be pretty small. I mean, the most prominent one is Bandcamp, which actually its streaming model, it doesn't really have one. It doesn't pay for streams. It pays when people download music and when they buy merchandise and stuff. But they share most of the money that they make with artists. They share most of the money that they make with artists. And all throughout the pandemic, they've been taking one day a month and waiving their cut so that all the money goes to the artists. So artists love Bandcamp.

But obviously, it's not as popular as Spotify. There's also other ones. And SoundCloud is kind of an interesting case because that was a service that started as kind of like a YouTube type service that it let anybody upload anything. And it became very popular with electronic music producers, rappers, people put podcasts up there, for example. Eventually they started a subscription service, kind of like Spotify, and they recently changed their model. This kind of gets into the weeds, but there's been a proposal that's been out there for a while for something called user-centric royalties. Which is that, as we said, when Spotify collects all the money in a given month and they start slicing things up. So Drake got 2% of the listening and Taylor Swift got 3% of the listening, whatever. That's how they split that money up.

And what it essentially means is that if I never listened to Drake, he's still getting 3% of my 10 bucks a month because I put my money into the pot and then the pocket split up among what everybody is listening to. The user-centric idea is that my 10 bucks is only going to what I listen to. And the theory is that this may be more fair. SoundCloud has been testing this and they've gotten a lot of kudos for doing that. Would artists having more choice also affect the music that we hear? You know, right now, as a listener, when I use my Spotify account, the algorithm is pushing me towards familiar music. I just wonder if more options would give us different music.

It's always possible. I mean, one of the ideas of the whole history of the record business is that the format sometimes winds up shaping the music. Top 40 Radio had a certain impact on what music was being made. Streaming, Spotify has had a certain impact. There's been pretty persuasive studies about how it's changed songwriting and production. And people tend to put the hook of a song closer to the beginning because a listener might only get through the first 15 seconds before skipping to the next song. I don't know it,

you know, it may, and maybe, maybe we'll see something change in music. If band camp is more popular, part of what algorithms do is send you to what's familiar in music. Um, I remember one music executive kind of ridiculed it to me once as like,

Hey, you like Simon try Garfunkel. Hello darkness, my old friend. I've come to talk with you again. Because a vision softly. you know like the the robot is never quite as good as a human curator to say try this try that so I think it's I think it's possible but I think the thing that the thing that would change how music is made the most is if artists sort of feel good about what they're doing.

And if they feel like they're reaching fans and if they feel like they are making a difference, they're going to keep doing it. I think part of the reason that Neil Young's protest has resonated so widely with musicians is because artists, especially in the digital age, have been told over and over again, you don't really have a lot of power. Looking for somebody with the strength to take it on. Keep us safe together. You have to play the game that is presented to you, and you just have to make the best of it. I think what Neil Young showed is artists, if they force the issue, might have a choice. So it would be interesting if whatever

happens with Spotify here, it would be interesting if we get into a phase where artists may be able to pick and choose a little more and say, I like this one. I don't like that one. I think the idea that artists have a competitive power and a choice in all of this is something that could really scare the tech platforms. And it would be interesting to see if that's where it goes. Ben, thank you so much for this. This was super interesting. Thank you for taking the time. Thanks for having me on the show. All right, that is all for today.

I'm Jamie Poisson. Thanks so much for listening to FrontBurner. We'll talk to you tomorrow. All right, that is all for today. I'm Jamie Poisson. Thanks so much for listening to FrontBurner. We'll talk to you tomorrow. For more CBC Podcasts, go to cbc.ca slash podcasts.