(Credits: Far Out / Spotify)
The digital age has revolutionised the music industry in profound ways, reshaping how artists generate income and interact with their audience. With the rise of streaming platforms, artists now rely heavily on live performances and merchandise sales to financially sustain their careers. This shift has democratised access to music but has also raised concerns about fair compensation for musicians, particularly those at the grassroots level. While vinyl sales have experienced a resurgence, streaming remains the dominant mode of music consumption, exerting significant influence over artists’ revenue streams. As the industry continues to evolve in the digital era, finding sustainable models for artists to thrive remains a pressing challenge.
It goes without saying that what a musician makes in the contemporary era pales in comparison to what it used to be, and this is across the board, from headline acts at major festivals to grassroots newcomers playing in local venues. Even a million streams – now deemed as a relatively low number – results in much lower royalties than it would have done when vinyl was the only means of purchasing music.
Spotify is the most popular platform, closely followed by Apple Music and Amazon Music, and this means that its practices come most under fire . On average, its model pays artists between $0.003 – $0.005 per stream. So, if an artist earns $0.004 per stream, that’s $4 for every 1,000 streams and a measly $4,000 for every million streams, which in days gone by would have meant millions of dollars for the artist, distributor, label, and master recording owner.
Essentially, it’s better to be an independent artist these days. However, this would mean self-funding a whole operation, which is generally an impossibility for most artists, and getting a track onto a streamer themselves. They could use a 0% share model from a distributor. However, only some distributors offer plans where they take no share of the royalties, and the artists keep 100%.
So, how does Spotify make its cut of the money?
While their exact earnings are kept confidential, it’s approximated that 65-70% of Spotify’s total revenue is distributed as royalties to artists and other rights holders, with the remaining chunk going to the company.
This revenue is generated through premium subscriptions and adverts. With the free models, advertisers pay the platform to expose consumers to their products. At the end of 2022, paid subscriptions on Spotify generated roughly nine times more revenue than free users. Unsurprisingly, though, the free version is more popular than the paid one.
According to Backlinko, as of April 4th, 2024, Spotify has 602 million monthly active users, of these, 236 million are paying subscribers. Elsewhere, it has also been reported that from the third quarter of 2023, the streamer had 379 million active users on a free, ad-supported plan. This rose from 295 million in the same quarter the previous year.
In the United Kingdom, Spotify Premium prices vary depending on the plan. The Spotify Premium Individual plan is £11.99 per month, the Premium Duo £16.99, the Premium Family £19.99, and the Premium Student £5.99.
How does Spotify’s streaming work for artists?
After the platform takes its share, the remaining figure goes to royalties, and that is shared between all tracks it has on offer. This makes what an artist can earn complicated and lessens their overall figure, as the various actors involved in a release are also compensated. This complexity means it is difficult to achieve understandable transparency so artists are left in the dark about earnings.
In the case of Spotify, the total royalties pot is divided by every track on the platform and their total streams. So, if an artist represents 2% of the total streams on Spotify, they will get 2% of the royalties share. Spotify estimates that 70% of every dollar it generates from music goes back to the industry and that they are “one of many music streaming services that generate revenue for the music industry, and streaming only makes up a portion of all industry revenues”.
There is a catch, though. Because the mechanism is proportional, with the share of royalties commensurate to the total streams, what really dictates things is the number of track streams compared to the total number of streams, not the plain old total number of streams. This is the mechanism that keeps Spotify in such a position of power.
So, if the number of song streams stays constantly high, and the total number of streams on Spotify increases, the track’s share would be smaller. Perversely, if the number stayed at the same level and the number of total streams on the platform decreased, it would get a larger share of royalties. So securing a million streams every month does not always result in the same income.
A Spotify spokesperson revealed on February 8th, 2024, that the company paid record labels and publishers more money than ever in 2023, at over $9billion. As we await their annual Loud & Clear report for last year, they state that the figure has nearly tripled over the past six years and represents a “big part” of the $48b+ the company has paid since it was founded.
How many streams do you need to earn a living on Spotify?
Incidentally, an anonymous source told Far Out that they experimented with how much they could make on streaming sites. This artist put out just one song on various streamers, attracting little over 1000 plays across them. It has earned just under £1 in total, which comes after signing up to a licensing company that collects the royalties owed for free, but with a sign-up of roughly £12. So, even for something so small, an artist would need 13,500 before breaking even. Not to mention the fact that it cost around £600 to have the track professionally produced (on a mate’s rates basis, too).
So, this means that if an album costs a self-funded artist roughly £8000 to make, release and promote using “mates rates” prices provided to us by Pet Deaths, going on the above rate of £1 for roughly every 1150 streams, if a musician puts out an LP per year, they would need 2.4million monthly streams to earn a liveable monthly wage of £1450 from Spotify alone after expenses. This means that Wet Leg, a recent indie sensation, earn just under minimum wage between them for their 2.3m monthly streams. And even that’s not true because they have to divide that pot among everyone else grabbing a slice of the pie.
Of course, Spotify is one single strand of streaming, that serves as one single strand of an artist’s revenue stream. Proponents would argue that such a figure is handy, reliable pocket money that augments the bulk of income earnings through vinyl sales, merch, touring and so on, for the trifling effort or simply uploading something you’ve already made. In fact, extreme proponents could argue that it’s a form of outreach that promotes you to the masses and actually pays you. But considering it is the most common way that the world consumes music these days, that figure proves startling and scary.
Has Spotify changed how streaming works?
As of 2024, things changed for Spotify. Tracks on the site need to have reached at least 1,000 streams in the previous 12 months to generate royalties. Song streams are updated whenever a user listens for 30 seconds or longer. CEO Daniel Ek denies that users could feasibly make $1,200 a month by uploading 30-second songs and cheating the system.
From the start of this year, artists will need to hit a minimum number of unique listeners for their track to be eligible for royalties. This has been enacted to prevent what Spotify calls “flagrant” streaming practices that play the system, including purposefully shortening songs and bots. For further details, check out Spotify’s statement.
