An unprecedented recovery
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Spotify's announcement last week that it paid out $10 billion to the music industry in 2024 — more than any single company has ever contributed in one year — proves that a tech platform can single-handedly rebuild a creative industry if its incentives are aligned.
Why it matters: The lack of focus on music specifically by rival tech firms, such as Google/YouTube, Amazon and Apple, has created a clear lane for Spotify to build incremental tools and features that help the music industry grow, said Will Page, author of Tarzan Economics and former chief economist of both Spotify and PRS for Music.
- Spotify's most notable investments have been in discovery and social listening.
- Features like Discover Weekly and collaborative playlists have created new growth opportunities, especially for smaller artists, expanding the overall revenue pie for the industry.
By the numbers: By Page's estimates, Spotify alone has made up over 40% of the global growth in record label revenue over the decade.
- Roughly 80% of the total payouts Spotify contributes to the music industry go to record labels, Page estimates. The remaining 20% goes to artists and songwriters.
- In 2024, for example, Page estimates Spotify paid out around $8 billion to record labels of the $10 billion it contributed in total.
- Last year, Page estimates that the total global recording industry reached $31.6 billion. Spotify contributed more than a quarter of those payouts, up from around 6% in 2014.
Zoom out: Including payouts to artists and songwriters, Page also estimates that Spotify has contributed around 40% of growth to the overall music industry (which includes payouts to artists and songwriters) over the past decade.
The bottom line: The music industry bottomed out in 2014, not because streaming was cannibalizing the industry's growth, but because the industry wasn't addressing the consumer's need for streaming fast enough.
