To sum it up, the main problem with artists not earning a lot from Spotify and other streaming services isn’t the money paid from Spotify. It’s the fact that record companies take most of the money for themselves, leaving little for the artists.
Spotify currently pays about 70% of its revenue to rightsholders. That typically goes to middlemen — publishers for the musical work copyright, who then pay a portion to the songwriters, and record labels for the sound recording copyright, who then pay a portion to the musicians.
VC David Pakman (who testified in November 2012 before the House Judiciary IP Subcommittee about why the current music licensing scheme deters VC investment in new music services) recently analyzed data from middlemen in a few industries and found that many legacy middlemen are not earning the large share they take from creators in the digital age. Record labels, for example, contributed a lot more value when they coordinated and financed studio time (which can now be done with a basic computer and Internet connection, and possibly a Kickstarter campaign), manufacturing records and CDs and got them to retailers (which is no longer the primary way of selling music), and marketing (which can be done online with free services). Now, in the digital age, many of these services are no longer needed or performed.
In remarks last week at the Web Summit Conference in Dublin, Bono explained that rather than fighting against streaming, artists should be fighting for transparency