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Are labels the only ones profiting from Spotify streams?

As Spotify's losses mount, we investigate where the money is really going

Musicians and record labels may moan that Spotify is depriving them of income, but it’s Spotify itself that appears to be suffering most from the streaming boom. 

Warner Music Group has become the first major label to earn more from streaming than it does from selling downloads. The milestone was achieved at the same time as the world’s biggest streaming service, Spotify, posted worsening losses.

Warner’s streaming income grew by a third in Q2, while income generated from sales of downloads declined. That streaming revenue helped Warner to post a quarterly profit of $18 million, a marked improvement on the $60 million loss it recorded in the same quarter in 2014.

Discover hidden gems on Spotify

Spotify, on the other hand, is not popping champagne corks in the boardroom. Although the company saw its annual revenues surpass €1 billion for the first time, its losses widened to €165.1m (£119m) in 2014, according to figures seen by The Guardian.  

Spotify is coming under increased pressure to stop offering customers free, advertising-backed streaming. Apple is due to relaunch its Beats music service next month, and has reportedly been leaning on the music labels to force Spotify to end its free streams, boosting Apple’s chances of selling its own subscriptions. 

Spotify, for its part, has long argued that the record labels are failing to pass on enough of the streaming royalties to artists, some of whom have withdrawn their music from the service. “We’ve already paid more than $2 billion in royalties to the music industry and if that money is not flowing to the creative community in a timely and transparent way, that’s a big problem,” CEO Daniel Ek wrote in a Spotify blog post last November.  

Mercury Prize nominated singer-songwriter Tom McRae told our sister site, PC Pro, that he hadn’t earned enough to pay for a round of drinks from the 620,000 streams of his songs on Spotify, blaming his former record company Sony for pocketing the income.

As ever, it seems the middle man is doing very nicely indeed…

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