Spotify is a premium streaming service that pays artists on each stream. Explore the article to know how much does Spotify pay artists? And why Spotify is not increasing payouts and what it pays for podcasting. Payouts to songwriters and rights holders mainly depend on different factors.
Every time listeners listen to music on Spotify; it generates royalties. Hypebot report shows that as of August 2020, Spotify pays rights holders a total of approximately $0.003 to $0.005 a stream, which is almost ⅓ to ½ a penny. It’s the total paid to all holders; these include owners, self-released artists, songwriters, publishers, and labels as well.
How Much Does Spotify Pay per Stream?
Spotify, YouTube Music, and Apple Music are platforms that are dominating the music streaming market. However, there are many other platforms that streamers use to stream their favorite tunes. They get a chance to choose from giants like Spotify to niche services such as Tidal.
Each streaming platform has unique selling points, pricing models, and user bases; however, there is a difference in artist earning amount per stream. Have a look at the below image to know how much music streaming platforms pay artists for each stream; they earn many streams it takes to earn $1,000.
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Spotify has about 200 million monthly active users, but it has a negative reputation for handing out artist payouts. Artists earn around $0.0033 per stream. At the same time, Apple Music is the second most popular music streaming platform, with over 78 million active users in 2021. However, the company states that its average payout per stream is $0.01.
The royalty structure is divided between publishing and recording rights. The details might vary depending on the agreements; however, Spotify says labels get around 50 to 52% of revenue, whereas publishers get around 15 to 20%.
Spotify launched loud and clear to reveal that it paid around $23 billion in royalties to rights-holders, including nearly $5bn in 2020. Loud & Clear reveals that last year, 207,000 songs racked up more than a million streams. In 2020, around 870 artists generated around $1 million a year, whereas 1,820 topped $500,000 and 7,800 topped $100,000.
Why Won’t Spotify Increase Payouts?
Unlike most types of on-demand streams and song usage from top music streaming services such as Spotify, Tidal, Apple Music, and Deezer earn a performance royalty and mechanical royalty as well. The exact rate Spotify pays to the artists depends on lots of factors such as user account type, country, and more. Spotify uses its subscription revenue prorated per stream per artist to inform streaming rates; they could differ over time.
Apple Music recently upped its per-stream royalty payout to one penny per stream, whereas Spotify’s per-stream rate remains the same. However, Spotify’s per-stream payouts were hovering between $0.003 and $0.005, which is one-half of what Apple pays but usually far lower.
Ashley Jana asked Jim Anderson why Spotify could not pay more, although it has increased its per-stream payouts to rights holders to 1 cent. In reply to the question, a Spotify executive said, Spotify is created to solve the problem of piracy, not to pay more to people. So, it’s clear lack of interest from Spotify in benefiting the artist.
Spotify will not pay more to artists in the sense of greater royalty payments or other means of increasing compensation opportunities. Jana further said it’s not the natural company; it might go out of the way to shoot at musicians one way or another. It’s difficult for Spotify to guarantee a 1-cent payment to artists. It has been explained in a number of ways.
- Increase the size of the royalty pool by expanding the share of revenues to right holders (Bandcamp pays back 80 to 90%) or tapping into other reserves of cash.
- Negotiating with every label is a tedious task; hence streaming platforms prefer to pay a flat rate.
- Switching to a user-centric payment system is one of the effective ways that would compensate artists based on the proportion of streams of every individual who enjoys streaming instead of the proportion of streams in a monthly period.
Spotify has to turn steady profits and is trying to grow its service in the streaming market. Sharing more revenue with artists can limit its ability to invest, and price hikes would send users to its competitors like Apple and Amazon.
Spotify is facing tremendous pressure to change the way it handles its controversial podcasts and payouts to the right holders. The music streaming firms do business with giant record labels, independent acts that have less clout, and significant performers who hold their rights and profit heavily from the company.
How Does Spotify Deal With Podcasting?
Spotify has embarked on a trajectory that dilutes the labels’ influence. Since buying rights to Rogan’s show, emphasizing podcasting and ad-hosting platforms Anchor and Megaphone, the music streaming giant’s share revenue tied to ad dollars has increased.
However, the company believes that podcasts focus on user growth. In 2021, podcasting revenue increased by 627% YoY; however, podcasting is the main driver for Spotify’s Q4 2021 revenue share from ads reached a record 15%. The Spotify founder said that the company shares will rise to 30 to 40% in the next 5 to 10 years.
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Spotify takes every ad dollar for the podcast properties. The streaming firm assists monetization and takes around 50% of ad revenue when podcasters use Anchor and Megaphone. However, there are many more advantages when it comes to podcasting; the company does not owe royalties to each stream. It also doesn’t have to worry about voicing concerns for royalties.
Ending Note
Assuming a $15 minimum wage, at a presumed average per-stream revenue of $0.003 on Spotify, an artist would need 10,400,000 streams per year to make a minimum wage income. This estimate does not incorporate publishing administration fees, distribution fees, or promotion and marketing costs. The rates of different streaming services are also different; however, artists don’t get as much as they want on any of the third-party streaming platforms.
Instead, they can own their own by investing in a ready-to-use app similar to Spotify. The feature-rich solution helps you upload, manage, or delete any of the streaming content at your convenience. Want to launch your streaming platform at a pocket-friendly price and earn more, then Alphanso Tech can help you with the same. Get an app like Spotify to launch and make money like a music streaming platform.