For Songwriters to Earn a Living Wage, Spotify Must Step In

by

Spotify didn’t create the flawed system on its own; instead, it inherited it. Just like any shrewd startup entering a biased competition, it had to adapt – striking partnerships, paying respects, and keeping silent. However, now that it has grown from an underdog to the dominant player, it finds itself in a position where the same rules that helped build its empire are the ones that continue to disadvantage songwriters.

So the question is: will Daniel Ek change the game, or keep cashing out?

Spotify isn’t solely responsible for the songwriter crisis, but it plays a pivotal role in it. This is why Daniel Ek holds the key to resolving the issue. He didn’t create the problem, but it has landed on his doorstep. Now that he’s financially stable and self-reliant, he has the means to take action.

To put it simply, Spotify didn’t become a success due to comfortable arrangements; instead, it thrived despite them. The founder, Ek, constructed a worldwide tech titan by employing shrewd strategies, unwavering vision, and a touch of assistance from the majors who exchanged equity for early access. This gamble proved fruitful – for Spotify.

Currently valued at approximately $145 billion, Spotify surpasses the market value of most music companies it collaborates with. For instance, Universal Music Group’s valuation stands at around $56 billion, while Warner Music Group is slightly over $15.5 billion. In comparison, Daniel Ek, the founder of Spotify, has sold shares worth over $800 million since 2023, which exceeds the earnings of many songwriters on the platform combined. This isn’t just an embarrassing situation; it’s a striking fact that’s hard to rationalize.

Absolutely, I’ve earned my stripes here. I’ve been instrumental in building the largest digital music library known to gamers. Yet, when the boss of this industry is amassing a fortune reminiscent of Silicon Valley giants while songwriters are barely making barista wages, something clearly needs fixing. Spotify’s Daniel Ek is reportedly worth close to $10 billion by Bloomberg’s Billionaires Index. With that kind of wealth, he has the power to take charge – and it won’t put a significant dent in his fortune.

So far, Spotify’s recent actions have turned the songwriting community against it. Last year, the company faced harsh criticism in the industry for choosing to pay less to songwriters through a disputed bundling strategy with audiobooks, which led to a lawsuit by the Mechanical Licensing Collective. However, Spotify won this legal battle earlier this year as the suit was dropped. The NMPA declared back in June that this strategy has already cost publishers around $230 million. On the other hand, Spotify claimed earlier this year that it has paid over $4.5 billion in royalties to songwriters and publishers in the past two years.

Combining content, such as music with audiobooks, is a recent development that seems to be beneficial for companies like Spotify in increasing their subscriber base. However, this move has an adverse effect on songwriter royalties. When music is part of a discounted package, the earnings attributed to it decrease, which in turn reduces the mechanical payments to songwriters. Instead of merely receiving a small portion of the revenue, they are now dealing with a smaller total sum. This situation exemplifies how the system can foster growth but neglect those who create the actual product.

In simpler terms, Spotify must address the unfavorable conditions for songwriters because other platforms are also making concessions. Traditional music companies gain advantages from the current system and find themselves in a complicated situation due to managing both record labels and publishing houses’ interests. The publishers (who represent songwriters) ultimately answer to their superiors, who oversee the record companies. This isn’t just a tug-of-war; it’s more like a trap where one side aims to maximize profits by minimizing payments to non-artist contributors, whom their counterparts represent. Unfortunately, this situation leaves around 100,000 songwriters without an independent voice in negotiations.

The three primary music corporations, Universal, Sony, and Warner, have held shares in Spotify. In 2018, Warner sold its entire stake for over $500 million, while Sony offloaded half of its shares for $750 million. However, the question arises: How do these companies distribute earnings to their artists? The process involves a complex formula that takes into account the total streaming activity and distributes a portion to rightsholders based on their market share percentage. In this proportional model, the top 1% of artists garner more than 90% of the overall streaming income. Subsequently, it’s up to the labels and publishers to evaluate earnings according to individual agreements. Recently, Spotify (through its Spotify for Artists service) and various labels have implemented dashboards aimed at offering transparency regarding accounting to artists. It is important to note that no two deals are identical.

How did we arrive at this point? Let’s go back in time. As the streaming wars kicked off around the mid-2010s, the music industry showed renewed vigor. They vowed not to repeat their mistakes twice — first with Napster and then by giving Apple’s iTunes a dominant position for just 99 cents per song — this time they were determined to get it right.

Initially, they acted coy, waiting for the dust to settle among the emerging music services. They kept their best songs hidden and made technology companies work hard for access. When Spotify proved it could conquer the industry and sought partnerships, the major labels negotiated aggressively for a significant stake in the company – up to 20% ownership of Spotify’s startup. Instead of simply agreeing to terms, they chose to merge with Spotify, essentially tying the knot in a deal that included more than just licensing fees but also shares in the new company.

Now, they hold a significant portion of the shares, controlling approximately 75% of what was streamed in the year 2024. This is a decrease from 1994 when six major companies controlled over 85% of the broadcasts. Two key aspects distinguish this situation: firstly, there wasn’t a streaming partner taking around 30% back then; secondly, a dollar still consists of only 100 pennies today.

Spotify’s survival relies on the success of individual songs rather than the tech industry as a whole. Unlike many other companies, Spotify doesn’t own most music copyrights or control the catalogs, meaning it doesn’t have a strong connection to the past or feel protective towards it. Instead, its premium users are essentially renting the songs. If you download a track on the platform and then cancel your monthly subscription, that song will disappear from your library.

As Spotify matures, it retains the unpredictable energy and innovation of an adolescent – the type who might cause a fender bender or shake up the status quo. This isn’t a disadvantage; it’s their unique edge. They could be the company that ultimately reshapes the financial landscape for songwriters, an achievement yet to be attempted by others.

If Spotify were to allocate approximately 3% of its projected 2024 net profit ($39 million) towards increasing royalties for eligible songwriters, it wouldn’t necessarily transform their lives, but it could cover expenses like health insurance, a benefit that neither record companies nor publishers typically offer. Here’s another way to phrase it:

In 2024, if Spotify decides to use around $39 million of its projected net profit (which is about 3%) towards increasing songwriter royalties, this won’t make a substantial difference for most, but it could help cover health insurance costs – something that record companies and publishers often do not provide.

To fundamentally alter the financial dynamics of the music industry, Spotify could offer 1% ownership in their company to songwriters. This small yet significant stake would redefine the industry’s framework, not just symbolically but structurally. A trust worth over $1.45 billion, established and managed by a writers’ collective working alongside record labels, performing rights organizations (PROs), and publishers, could hold this ownership. This isn’t about political influence, but an industry-driven cooperative with joint governance and common goals. The trust would be repaid gradually using the revenue generated from songwriters themselves, supplemented by proportionate contributions from labels, publishing companies, PROs, and all broadcast platforms – essentially every entity that benefits from using songs.

At an annual yield of 5%, this investment could produce approximately $72.5 million each year, which is sufficient to finance the long-awaited infrastructure for writers. In fact, with one-third of that amount, around 50,000 eligible writers could secure essential health benefits, career support services, retirement plans, and even membership in a credit union tailored to songwriters. The remaining funds would be utilized for emergency aid, innovation grants, and profit-sharing among the community. After 30 years, the entire stake would be fully transferred to the songwriter community, not as a payout but as a means to establish a future that they themselves construct, as they are the driving force behind the creation.

Here’s another hidden fact: many songwriters aren’t equipped for combat at the moment. Many are solitary figures. Most don’t have representatives. They lack the platform of a stage with a microphone and an audience eager to defend them. They aren’t structured to negotiate collectively, and they often remain unnoticed in the industry’s hierarchy. Consequently, without anyone advocating for their share and no magical solutions to boost their earnings, they find themselves sidelined, much like a third-string quarterback in a game they themselves invented.

As a passionate music lover, I believe that the essence of the industry has always been and will continue to be the song. Producers, artists, studios, and streaming platforms like Spotify all owe their existence to the melodies we cherish. For Spotify to thrive, the rest must follow its lead. This isn’t about providing handouts; it’s about overdue renovations that could plug the leaks in the music industry.

In my opinion, Daniel Ek, you have a golden opportunity to make a lasting impact. You don’t need to shoulder the entire responsibility—just take the first step: Show commitment by standing tall and staying invested. Don’t milk the goose dry and cash out; invest wholeheartedly, and be remembered as the company that revived music.

The solution is clear, achievable, and within your reach. And I truly believe that shareholders will appreciate your efforts. Music history is a legacy waiting to be claimed, and the chance to etch your name in it is right there, in the heart of every song you help save.

Read More

2025-07-16 16:25