#DigitalSkeptic: Spotify Being Eaten Alive at Online Music Buffet
NEW YORK (TheStreet) -- Sam Hamadeh has become an expert in waddling over and eating at the online streaming music buffet.
"We do not have an ax to grind in this," explained the entrepreneur-in-residence at The Wharton School of business, at the University of Pennsylvania. "But people are fascinated by how the digital music world works. So how Spotify, Pandora
Hamadeh, who owns and runs the 25-person PrivCo financial data analysis shop in New York, collects financial information on more than 220,000 privately held companies. The data he sifts on private online streaming music services such as Spotify and iHeartRadio are some of the most sought after.
And Hamadeh says, Spotify is probably finding itself in one tough spot.
"So far, the bigger Spotify has grown, the more money it loses," he said. "And if you do the math, there is no end in sight for the losses."
What puts Hamadeh's take on Spotify on the music investor pop charts is that last week CEO Daniel Ek began one odd online media tour. He made himself available to major outlets such as England's The Guardian to talk up a new website dubbed Spotify for Artists. Here in deep, deep detail, the firm breaks out how it shares revenues, fair and square, with music creators around the globe.
"Today we confirmed that Spotify has now paid out a total of more than $1 billion in royalties to date, $500 million of which we paid in 2013 alone!" trumpeted the kickoff post on the site last week.
Not surprisingly, figures like that set off a Web firestorm that finally, maybe -- just maybe -- the music business, and therefore entire digital economy, had found a much-needed ray of sunshine. Until, of course, one reads the fine print and realizes that Spotify pays what amounts to a per-stream payout rate to rights holders of between "$0.006 and $0.0084."
"It's not really a per stream rate," explained David Lowery, the frontman for acts including Camper Van Beethoven and Cracker, who has become the go-to source for how music revenues really work in the dark digital days. "But we talk about it in a per stream rate because it's the easiest to digest."
Lowery confirmed that artists are in fact paid by stream, but that higher payments due from Spotify's premium service, which runs $9.99 a month.