I’ve been considering purchasing one of the paid plans for Spotify, and as part of my decision-making process I was curious about how the musicians are paid. According to this letter from the president of a small label, Spotify pays out half a penny for each stream to the owner of the recording – in some cases that is the recording label and in some cases that is the actual artist. If I were buying a song off iTunes, about 70 cents of my payment of $1.29 would go to the owner of the recording. So with some quick math – the owner of the recording is better off if I use Spotify and play the song 140 times or more.

On the other hand, the artist is better off if I listen to their song 20 times on Spotify as opposed to not purchasing it on iTunes at all.

One could argue about how it’s the artist that one should care about in terms of payment, but I will leave that worry up to the artists themselves and their skill (or lack) in negotiating their contract. I won’t be purchasing CD’s in any scenario, and I expect that the payment to the artist is the same in terms of percentage whether I use iTunes to buy (or Amazon, though I haven’t done research on their terms of payment) or stream from Spotify.

Now, I just wonder if I’ll want to pay the equivalent of an album on iTunes per month ($9.99) for the privilege of listening to everything on Spotify on my iPhone when I’m driving or at work. According to my Last.fm scrobbler, I listen to an average of 46 songs per day. That’s about 1400 songs per month. Compared to the half cent Spotify revenue that’s $7 per month. And most of the songs I’m listening to are from my own iTunes library: stuff I’ve already paid for.

All in all, not a lot of money in any scenario for an old guy like me who only has a few places and people he can reliably look to for new music.