# BUT SPOTIFY IS PAYING 70% OF GROSS TO ARTISTS, ISN’T THAT FAIR? NO, AND HERE’S WHY…

Spotify is not paying sustainable rates for the cost of goods. Look – it’s like this, if something cost you \$100 to make, and someone else sells it for \$10… it doesn’t matter that you are getting 70% of the gross, you’re still over 90% unrecouped on a per unit basis. This is the problem with Spotify, is that it undervalues the true cost of goods (including R&D, etc).

Artists agreeing to streaming their music on Spotify are essentially agreeing to sell albums for One Dollar and Songs for Ten Cents… Oh Wait, Spotfiy actually pays way less than that… (calculated on a per stream basis).

This is why arguments about marginal percentages miss the point completely. It’s about simple math and simple economics.

The cost of music is not in the distribution of music (which is cheap). The cost of music is in the human labor of the CREATION of music (which is expensive).

The cost of goods is greater than the marginal cost to distribute those goods. Stop confusing the product with the container.

The CREATION of music is also more than the cost of RECORDING music. The cost of music is in the sustainable needs of the human labor for food, shelter, clothing, etc.

Spotify can not scale and work at current economics… One More Time…

SPOTIFY MATH FOR THOSE OF YOU AT HOME WITH CALCULATORS:

Just show us the math where streaming scales, we’ll wait. Spotify has 3m paid in the US at \$10 each.

\$10 x 12 mos = \$120 per year. Pay out 70% that’s a gross of \$84 per year per subscriber. Simple Math.

That \$84 per sub is in revenue to all artists in rights holders. Times that by 3m and you get a whopping \$252m a year in a \$7b business.

Multiple that by 10, to get 30m subs @ \$10a month and that’s only \$2.5b a year… and that’s a big IF Spotify ever gets to 30m paid in the USA… and IF they do, that’s ONLY 2.5b in revenue against the \$7b now…

So you effectively cut the revenue to everyone by 1/2 to 2/3rds… how does this math work without raising the price of subscriptions? It doesn’t.

It’s just math.

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