Commentary

Spotify, Substack Slammed For Payments To Artists

by March 24, 2021

Media platforms including Spotify and Substack have come under fire recently for how they unfairly distribute revenue among creators, whether they're musicians or writers. The criticism amounts to so much whining about the way the marketplace for content works.

Spotify last week started a website called "Loud and Clear" to make its royalty payments more transparent to recording artists, including those who complained about paltry amounts. Only 1% of the almost 7 million acts that stream music on the platform made at least $5,000 last year. An even smaller group of 870 artists made more than $1 million from Spotify's yearly payout of more than $5 billion.

The payments are concentrated among a handful of artists because only about 43,000 of them were responsible for 90% of the activity on Spotify, as the company revealed in a letter to investors last year. The numbers highlight the winner-take-all dynamic of the music business.

Meanwhile, Substack has come under fire for supposedly favoring writers whose reputations were established in the mainstream media, not as independents working in the media wilderness. One writer even described Substack as a "scam" that doesn't reward creators fairly. For readers who want more background on the controversy, I'd recommend the recent story by reporter Peter Kafka of Recode.

One of the more interesting details in the story is how Matthew Yglesias, co-founder of Vox, who started a newsletter on Substack last year, is earning less than he potentially could. Substack offered him $250,000 and 15% of subscription revenue for the first year to get his newsletter started. After the first year, his share of subscription revenue will rise to 90%.

Considering that his 9,800 paying subscribers are generating about $860,000 year, Yglesias is underpaid. The estimated $380,000 he's pocketing is less than half of the $775,000 he could have earned from his Slow Boring newsletter if he had collected 90% of the revenue.

But don't weep for Yglesias. Going into the deal, there wasn't any guarantee he would find that many people willing to pay $8 a month, or $80 a year, for premium access to his online discussion group.

That doesn't mean Substack will be a money maker for every writer, especially as the platform gets more crowded with creators. However, every journalist should be working on a business plan for an email newsletter, whether it's on Substack or on social-media platforms hungry for content, but don't want to overpay for it.

online publishing, revenue

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