I’m seeing news articles that Spotify’s payment rate is declining.

But there never was a set payment rate per stream. It was always based on your streams in a pool of streams and what percentage you take in the pool of streams based on countries and the pool of money of available to be paid out and your percentage stake in those monies.

Yep it sounds simple, but it’s creative accounting at its best and the music industry is well known for it.

However there is an argument that with Spotify’s subscribers growing, the payments to artists for the same amount of streams they had in previous years is lower. A normal person would assume that a growing membership, would mean more money in the pool and that would mean a higher payment for the same amount of streams.

As much as I am a fan of Spotify and streaming services in general, all of these organizations also deal in the murky world of creative accounting like the labels.

And Spotify should be worried.

Their business model is based on licensing agreements. Like Netflix’s original business model. But Netflix started doing original content over 10 years ago. Spotify hasn’t.

Because Netflix knew that the companies they license content from, will form their own streaming service one day. In this case, Disney created Disney TV. And I reckon the labels are watching this with interest. If it works out okay for Disney TV, and the costs are low to host a steaming service, then the labels will consider their own streaming service. It’s just a matter of time.

So imagine a world with Universal deciding to do the same as Disney.

Because the labels never cared that people accessed the music of their artists illegally. They used that as part of their PR, to show that they cared about their artists and to get politicians to pass laws to protect their businesses.

What the labels really cared about was losing control of the distribution and the gatekeeper monopoly they had for so long.

So if the labels go into their own streaming offering, they will get back control of the distribution and a sort of monopoly again. And the only way for Spotify to exist if this happens, is to become a label themselves and pay people to generate content instead of paying organizations to access content.

Spotify might not pay artists what they think they should be paid but at least they are getting paid because Spotify has to pay based on the agreements they have with the labels and the legislation in place around royalty rates. If the label and the publishers keep the monies, then the artist has to negotiate a better deal when they sign up for that initial advance payment.

But once the distribution goes back under the labels control, good luck in getting paid because the labels will get all creative and will work out that the artist owes them money instead. And if the labels do work out that there are payments due to the artists, then those payments are based on the contract artists sign with the label.