The music streaming service Spotify recently announced the addition of video advertisements on its ad-supported (i.e., FREE!) platforms. According to Spotify, on mobile devices, the video ads will be in the form of “sponsored sessions,” where users can watch a video ad in exchange for 30 minutes of ad-free listening. As for desktop users, they’ll encounter malevolent-sounding “video takeovers,” which will presumably occur at the same or similar frequency as the service’s current audio-only ads.
We all hope that the video ads will result in more revenue for artists. As a reminder, Spotify pays artists 70% of the income generated from subscription streams and ad-supported streams on a pro rata basis based on the percentage of streams that each song receives. Note that although the 70% figure is the same, subscription streams (streams by users who pay the monthly subscription fee) pay out more than ad-supported streams.
I know what you’re (probably) thinking: 70% of basically nothing is pretty much nothing, which is true. By comparison, iTunes also pays artists approximately 70% of the income generated from paid digital downloads, which amounts to about .70 cents for each .99-cent paid digital download. But for artists on Spotify, 70% of a stream amounts to about .005 dollars per stream. Given those figures, which if not 100% accurate are very close, the generally accepted wisdom is that a song must be streamed around 140 times to equal the income that an artist would receive from a single paid digital download on iTunes.
Now, there are a couple of things to note about that. First, obviously income from Spotify is spread out over time. Even assuming that I listen to my favorite songs 140 times over the course of 5 years, that means that the artist receives .70 cents slowly over the course of 5 years, at which point the band has probably gone broke waiting for royalties. Many artists would rather have even .50 cents now than 5 dollars 5 years from now. In that respect, sales via iTunes are better for artists – more money sooner.
But, remember that a stream does not always equal a lost sale. One great thing about Spotify is that you can listen to a wide variety of music whenever you like – including songs that you might never buy and wouldn’t even seek out at all unless you could listen to them for free, just to see what all the fuss is about. There are also people who simply won’t buy music ever again, so streaming to them is the alternative to pirating the music online. So, in the former case, you’re talking about streams that wouldn’t even exist if the song wasn’t available for free, which therefore certainly don’t equal a lost sale, and in the latter case, a revenue-generating stream that actually may replace an illegal download.
In either of those cases, the availability of Spotify is actually directing at least a little bit of income into the pockets of artists, where in the absence of such a service, the artist would arguably have received none. Is that enough to outweigh the possibility that there are at least some listeners who would have otherwise purchased the track, but who are now streaming it instead, but not enough times, or quickly enough, to replace the lost income? Maybe not – I’m just pointing out that not every stream is a lost sale.
None of the above, however, changes the fact that royalties generated from streams on Spotify should be higher. Perhaps even if just 100 streams, instead of 140, equaled a paid digital download, it would put enough additional money into the pockets of artists to make the whole thing worthwhile. Spotify claims that it currently has around 3 million subscribers in the United States, over 10 million or so in the rest of the world, and many, many millions more listening via ad-supported streams. And, hopefully with the addition of video ads, at least some of those streams are about to pay out more.
 Note that I use the term “artists” throughout this article, but just remember that the rights to a song may be owned or administered by record labels, digital distributors, etc., in exchange for a piece of the action, in which case how much of that 70% actually trickles down to the artist depends on the specifics of the deal that was inked.
 Same deal as the Footnote 1 – artists may not own or administer these rights.
 Some say .006 dollars – the rate changes based on a few factors. The rate I’ve quoted here is sometimes referred to as the “blended” rate, meaning an average of the various rates. But, what Spotify pays per stream is actually a little bit more complicated than I’ve made it seem here. An article that does a little better job of explaining it is linked here. Note that the rate also, unfortunately, apparently varies based on whether the artist is signed to a major label or distributor, in which case it may be slightly higher, although remember that if the artist is signed to such a deal, then they are almost certainly getting a good bit less, after the majors take their cuts. However, what that means is that arguably independent artists, and small label or distributor artists, are basically subsidizing the higher major label streams, and the majors are likely pocketing most of that money.
 Also, remember that even before services like the illegal version of Napster came into existence, it’s not as if many recording artists made good livings from record sales. And, their is much, much more released music now than there was 30 years ago.
 I’m also hopeful that artists can sign more favorable deals in the future, knowing what we know now about streaming, so that they can keep more of that money.