Spotify CEO to Jimmy Buffett: I want you to be better paid

Mr. Margaritaville approached the mic during an audience Q&A to ask Spotify chief Daniel Ek whether the executive would give him a raise.

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Joan E. Solsman
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Spotify CEO Daniel Ek says Spotify's growth has sparked changes in label payments to artists. Greg Sandoval/CNET

Spotify wants artists to be better paid -- even the ones who are pretty well paid already.

Daniel Ek, the founder and chief executive of the subscription streaming service, said Spotify is paying out 70 percent of every dollar to music rights holders. How much of that ends up with artists depends on whether Spotify has a relationship with an artist's label or with the artist, he said, speaking at a panel discussion at Vanity Fair's New Establishment Summit in San Francisco on Wednesday.

Spotify, the world's biggest subscription streaming service, with 10 million paid members, is one of several burgeoning streaming-music outfits like Pandora and Apple's Beats Music that collectively are infusing the music industry with its largest segment of revenue growth. However, alongside that growth is recurrent criticism that artists are being paid a pittance by the services, though the rancor has calmed in recent months as more streaming services make collaborative overtures to labels and artists.

During the audience Q&A portion of a panel discussion, musician Jimmy Buffett asked Ek: "Do you see anything in your future where we might get a raise directly from you?" He contrasted that against "the bulls*** you have to go through to deal with a label." The Spotify royalties that reach an artist are little more than a trickle, he added.

Ek responded that he agreed with Buffett. Early on, he said, many artists didn't understand whether streaming was good or bad for them. As Spotify grew and disclosed how much an artist was streamed and how that streaming translated into dollars, that transparency sparked a dialogue between artists and labels. "Because streaming became such a massive part of the revenues, labels even changed how they started paying out the artists," he said, noting that instead of once a year, payments became more frequent.

He also touted Spotify's scale, pointing out that in Sweden -- the company's first market and its home base -- Spotify accounts for 70 percent of all music revenues in the country.

However, Sweden is an unusual case. In the US, revenue from streaming music services is still smaller than digital downloads by a third, according to the Recording Industry Association of America, and streaming represents only about 27 percent of total industry revenues in the first half of 2014. In addition, transparency about streaming revenue may not be the only thing behind changes in how often artists are paid. Streaming revenues may simply have grown big enough to allow for more-frequent payments.