Spotify paid more than $2b in royalties

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Taylor Swift had criticised streaming services such as Spotify, saying they do not share enough of their revenue with musicians.

On Tuesday, Spotify chief executive Daniel Ek responded, saying the streaming service has paid more than US$2 billion (S$2.58 billion) in royalties.

He defended the service, calling it the fastest growing source of new revenue for the music industry. "We started Spotify because we love music and piracy was killing it," he wrote in a blog post on Spotify's website. "So all the talk swirling around lately about how Spotify is making money on the backs of artists upsets me big time."

He added that "lots of problems that have plagued the industry since its inception continue to exist. As I said, we've already paid more than US$2 billion in royalties to the music industry and if that money is not flowing to the creative community in a timely and transparent way, that's a big problem".

Middlemen, namely record labels and publishers, often take a big portion of the royalties paid by streaming services such as Spotify.

Spotify said 70 per cent of its revenue goes to music rights holders. But it also said money breaks down to payments of seven-tenths of a penny for artists every time their song is played.

Spotify said top-selling artists such as Swift can draw payouts exceeding US$6 million a year through the service. But for most artists, the payments are not enough to make a living.

"I'm not willing to contribute my life's work to an experiment that I don't feel fairly compensates the writers, producers, artists and creators of this music," Swift said to Yahoo Music last week after pulling her songs from Spotify. "And I just don't agree with perpetuating the perception that music has no value and should be free."

Some industry investors and analysts say Spotify is not the problem - they say it is the middlemen.

"Frequently lost in this debate is a discussion of the presence, or perhaps obsolescence of the middleman and the amount of revenue they keep," Mr David Pakman, an investor at the Internet venture capital firm Venrock, said in a recent blog post.

"They claimed they served an invaluable role in the creation of music. Interestingly, the overwhelming majority of these activities are not needed in the digital age - trucks, manufacturing - or cost a whole lot less to perform - electronic distribution."

Major music labels such as Universal Music Group, Sony Music and Warner Group all have minority stakes in Spotify, part of a bet that subscription-based listening is the future.

In the blog post, Mr Ek said Spotify gained 2.5 million subscribers in the last six months, bringing its total paying customers to 12.5 million out of their 50 million total users.

He also argued that Spotify is the industry's best shot at turning around a habit of getting music for free. He said 80 per cent of paying subscribers - mostly young users - started out as users of its free service.

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