The global music streaming industry has been pretty much in the control of Spotify for the last few years, but with the introduction of new such streaming services, there has been growing criticism on how an artist get paid using their service and whether they are actually getting a fair deal. With more than 30 million customers worldwide and over 80 million global users, artists have a lot of expectations when it comes to the streaming giant. Fortunately, Spotify recently released some numbers that demonstrate how much an artist actually earns.
The more listeners an artist can attract, the more money they will receive. Sounds straightforward, but there are a few important caveats. Spotify generates revenue from selling subscriptions, as well as through advertisement to free users. The revenue earned from these two basic channels is added up and then distributed back, with 70 percent of the pie going to the rights holder. The rights holders are most often the record labels, who then distribute their share of the revenue to other parties involved in making the music depending on the individual deals.
How Spotify Determines Payouts
Spotify uses a particular formula to determine the royalties an artist will earn from a stream. This means that the payout per streams will be different depending on many moving variables that are specified in their particular formula. Among the variable that determines an artist royalty per stream include:
• The country the track is being streamed from
• Currency value of the country and the relative premium rate
• The artist royalty rate
• The percentage of paying customers as part of the number of streams in a song
Typically the average per stream payout to the right holder will most likely land between $ 0.006 and $ 0.0084. The average on each stream by those who have subscribed to Spotify's premium service will naturally be higher. So you can easily imagine that the more popular an artist is, the more likely he or she will make more money.
The Big Names
Let's use Beyonce as an example; let's assume her range goes at $0.0084 per stream (this is most likely what an artist of her caliber gets after the label’s share). While it's not possible to know exactly how much she made from all her music, we have enough information to come up with a close approximation. For example, '7/11’ is one of her top 5 songs on Spotify, with more than 101 million streams. If you do the math, she might have made more than $850,000 from that song alone. Taking that figure into consideration (along with her immense popularity) it wouldn't be a stretch to assume that she is bound to earn more than 4 million in her top songs on this service alone. Rihanna is the same, with more than one billion streams, most likely made a whopping $8 million.
What About The Little Guys?
The fact that the biggest artists around earn a good deal of money on Spotify should come as a surprise to no one, but what about smaller, niche artists? Despite the rise of other music services that have emerged over the last few years, Spotify remains the best option, even with new artists. It comes down to sheer numbers; while other services might offer better payouts per stream, they cannot compete with the number of subscribers that Spotify has amassed. And the more subscribers, the most potential eyeballs on your songs.
But even with that said, the reality is that labels and publishers are getting most of the royalties after Spotify takes their 30%, so not much will be left for a new artist. Independent artist usually receive 100 percent of their royalty payout though they will have to use an aggregator partner from Spotify. There is some hope though as Spotify has been trending towards increasing their payout per streams. Keep in mind that the company is young and still growing.
In the end, Spotify is almost always superior when it comes to paying an artist compared to other popular music streaming services (and far much better than terrestrial services). By 2015, they have paid over $3 billion in royalties to artists, which is better than any other music streaming services out there.
A lot can be said on how much (or how little) an artist earns on Spotify, and there are many parameters an artist has to consider when deciding whether such a service is right for them. But with all that said, no one can deny the fact that the service has had a significant impact fighting piracy, creating a service that has attracted millions of ears and billions of dollars. As an artist, it is imperative to drive people, especially young people, to pay for music; the fact that Spotify was able to achieve this cannot be praised enough.
Your Turn to Sound Off!
Have you or anyone you know put music on Spotify? How was the experience?