As for Spotify, since it is not considered radio, either of this world or any other, they have a different additional royalty to pay. Like any non-broadcast use of recordings, they require a license from the rightsholder. They negotiate this individually with each record label, at terms not made public. I’m happy to make ours public, however: It is the going “indie” rate of .005 cents per play. (Actually, when I do the math, that rate seems to truly pay out at .004611 cents– I hope someone got a bonus for saving the company four ten-thousandths of a cent on each stream!) We didn’t negotiate this, exactly; for a band-owned label like ours, it’s take it or leave it. We took it, which means for 5,960 plays of “Tugboat”, Spotify theoretically owes our record label $29.80.
I say theoretically, because in practice Spotify’s .004611 cent rate turns out to have a lot of small, invisible print attached to it. It seems this rate is adjusted for each stream, according to an algorithm (not shared by Spotify, at least not with us) that factors in variables such as frequency of play, the outlet that channeled the play to Spotify, the type of subscription held by the user, and so on. What’s more, try as I might through the documents available to us, I cannot get the number of plays Spotify reports to our record label to equal the number of plays reported by the BMI. Bottom line: The payments actually received by our label from Spotify for streams of “Tugboat” in that same quarter, as best I can figure: $9.18.
Articles: Making Cents | Features | Pitchfork. Via David Ryan on Twitter. See also David’s explanation of why he stopped making his films and my little post on the options for DCES — Digital Cultural Entrepreneurs.