Jan 31 | Are Spotify's recent moves good for the industry?

Hey everybody,

Can you believe it's still January? It feels like we should be at least three months into the new year with all of the news, tragedies, and vibe shifts that we've already experienced here in 2025.

Speaking of big news, this week was FILLED with stories about stuff happening to, because of, and relating to Spotify. As such, I felt it was appropriate to build this week's newsletter around the question, is Spotify still a net positive for the music industry?

People have big opinions on this, and I'm not sure they always make sense. Regardless, this weeks stories have some big potential to change how you'd answer that question, so keep an open mind while you read!

As always, Indie Insider is sponsored by Habitat Financial , the industries only modular royalty accounting solution. Whether you're a big distributor, or a bedroom label, Habitat's modular allows you to easily design a royalty workflow that is tailored to the needs of your business. Check our www.habitat.financial to schedule a demo.

Alright, let's get started:

Spotify's Big Win in Court Means Lower Royalties for Songwriters

A U.S. court just handed Spotify a major legal victory, dismissing the Mechanical Licensing Collective’s (MLC) lawsuit that accused the streaming giant of underpaying songwriters and publishers. The core issue? Spotify’s decision to reclassify its premium subscription as a “bundle” due to the inclusion of audiobooks.

Why it Matters:

• Bundled services pay lower mechanical royalty rates than standalone music subscriptions.
• MLC argued that this was a loophole—Spotify launched audiobooks simply to justify paying less to songwriters and publishers.
• The court disagreed, ruling that Spotify had the right to make this change and, even if it was a strategy to lower payouts, it was still a lawful one.

What’s Next?

• The MLC has hinted at a possible appeal.
• Meanwhile, the National Music Publishers’ Association is lobbying Congress to change copyright law, allowing publishers to negotiate directly with DSPs—just like record labels do.
• If successful, streaming platforms would need separate deals with both labels and publishers, potentially making some music unavailable if deals can’t be reached.

This ruling feels like a blow to songwriters, but before jumping to conclusions, let’s take a look at how much money Spotify is actually paying out…

Spotify Pays Record $10B to the Music Industry in 2024

While songwriters may be frustrated by Spotify’s legal maneuvering, the platform is still paying out record sums to the music industry.

Key Stats:

• $10B paid to the industry in 2024—that’s $1B more than last year.
• For perspective: in 2014, the entire recorded music industry made just $13B.
• Spotify paid out about 63% of its revenue to the music industry in 2023—we’ll see if that percentage changes once Q4 financials are released.

The Bigger Picture:

• Spotify sees a future with 1 billion paying subscribers (currently at 500M across all streaming services).
• 60% of premium users started as free users—showing an impressive conversion rate.
• In 2014, about 10,000 artists made at least $10K on Spotify.
• Today, over 10,000 artists make $100K+ per year from Spotify alone.

It’s clear that Spotify is helping more artists make a living from streaming than ever before—even if its corporate tactics feel frustrating.

I’m not personally convinced that anti-Spotify sentiment is fueled by business logic. Rather, I think it tends to be fueled by an indie sector that is swamped with low-quality music, the increasing need to artists to spend most of their time developing online personalities, and the amplification of music’s loudest and wealthiest voices.

UMG Strikes Back: A New Deal with Spotify

In a surprise twist, Universal Music Group (UMG) may have found a way to escape Spotify’s bundle discount strategy.

The Deal:

• As part of its new multiyear agreement with Spotify, UMG secured a direct licensing deal for UMPG (Universal Music Publishing Group).
• According to industry sources, this deal effectively cancels out the discount Spotify applied to UMPG songwriters since Q1 2024.
• Spotify’s bundle remains, but UMPG will see higher payouts from other royalties to offset any losses from the bundle’s lower royalty rates.

What it Means:

• Other publishers (like Merlin and the other majors) may try to negotiate similar deals.
• UMG’s stock jumped 7% after the deal was announced.
• Spotify’s official response: “Spotify maintains its bundle, but this direct deal accounts for broader rights, including a different economic treatment for music and non-music content.”

Final Takeaway: Spotify’s royalty payout system is shifting fast. If you’re a songwriter or publisher, keep a close eye on how this impacts your MLC payments. If you’re an artist, it’s hard to argue against the platform’s ability to grow the music industry’s overall revenue. You’re not competing against Spotify you’re competing against other artists for the attention of listeners.

What do you think? Is Spotify still a net positive for the industry? Let’s discuss ??