How Do Streaming Platforms Pay Artists ?

Updated: Jul 13, 2020

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Today, more than a billion people around the world consume music on streaming platforms. That’s huge ! While 20 years ago there was no real alternative to listening on physical media such as vinyl or CDs, the music industry has since been totally upset with the appearance of YouTube in 2006 which marked the beginning of the streaming platforms era.

Hi it is Manwarp, I am a music producer and on my YouTube channel we explore the world of sound and the workings of its industry. Today we're going to talk about streaming platforms (be careful we're not talking about Netflix, or YouTube which is a bit apart but streaming services such as Spotify, Apple Music, Deezer and so on). Today, there are more than 200 different ones! What is the business model of these platforms? How do they pay artists? Whether you are a curious user or an artist, let's break down together this complex system that represents a significant source of income for artists. Ready?

3 Types of Streaming Payouts

Before we get into it, a quick side note. For every stream, three types of royalties are generated.

1. Mechanical Royalties

It concerns the intellectual property of a musical work naturally acquired to songwriters and their publishers (the owners of the composition) for the right to reproduce the composition. In the word of streaming, they are generated whenever the user chooses to play a song.

2. Public Performance Royalties

They will be paid to the same people for the right to publicly perform their music. Since none of the music is technically owned by the user, every stream is considered a public performance — even if it is enjoyed in the privacy of one’s headphones.

3. Copyright Royalties

The third, and the most substantial part of the overall payout is owed to the owners of the copyright on the recording side. It can be the artist, labels and distributors.

What you need to remember is that each time a song is played on a streaming platform, these three types of royalties are generated and will therefore be paid to the beneficiaries.

Stream's Value

As this market is very complex and the rates are in constant change, we can only estimate those numbers. According to the source, and based on 2018 calculation, here is what we’ve got.

The best known :

  • Spotify 0,0032$/stream

  • Apple Music 0,0056$/stream

  • Google Play Music 0 0055$/stream

  • Deezer 0,00436/stream

The top 3 most payin :

  • Amazon Music Unlimited : 0,0119$/stream

  • Napster : 0,0106$/stream

  • Tydal : 0,0099$/stream

Now, now that you have these numbers in mind, you might be tempted to draw conclusions. I know, I did the same. But let's take a step back and look at how these rates are actually calculated.

How are streaming payouts actually calculated ?

Most streaming services, from Spotify to Apple to Google Play, use what is known as a "pro-rata" distribution model. Here's how it works:

On the total income generated by these services, through subscriptions or advertising, about 70% is used to pay all artists and rights holders. To distribute this money, a "content share" is calculated for each of them - this is obtained by reporting the number of streams of an artist over the total stream on the platform.

Let's make an example with quick maths example. Imagine that an X streaming service generates $ 10,000,000 in revenue in a month and reserves 70% of this revenue for the beneficiary. If, over this same period, there are 2 billion streams and your music has been played 100,000 times out of those 2 billion, you would be paid $ 350 = (10,000,000 * 70% * 100,000 / 2,000,000,000) assuming that you are also songwriter and owner of the recording. Otherwise it's less, much less.

All streams are not equal

In fact these 70% are not put in a single case, but in several tens! Because the value of a stream will depend on which user the stream comes from: his subscription, his country, his enrollment, etc. For instance, the stream of a French who pays his subscription the equivalent of $ 12/month will have more value than the stream of an Indian who pays $ 1.7/month. And there are still dozens of parameters that come into play. This is precisely why we find a lot of different numbers on the internet. No one really agrees and we can only work with estimates.

How many streams to earn minimum wage ?

How many streams does it take to generate a minimum wage on Spotify for example? As I speak to you, the minimum wage is established at 1.521€ or approximately $1.715. If we base ourselves on the revenue / stream above, we need to make 536 000 streams per month to earn a minimum wage on Spotify. Deezer? 393 000. Tydal? 173 000. I'll let you do the math with the others if you want, in any case it's difficult to draw conclusions: I think that the platforms that pay the best do not only do it to better pay the artists but above all to compensate for the low commitment of their users. Just because Tydal pays you better per stream doesn't mean it will make you more money than any other services. It depends on the number of users.

I hope I have helped you understanding a little better how this system works, which is, among other fortunately, a source of income for artists. Any questions ? Any ideas for new videos? Tell in the comment section! If you feel the urge, you can give a small amount via my Tipeee page. This way I can spend more time preparing new videos and producing my music. But if you watch my content and listen to my music, I already have everything I need. I do a video break this summer to focus on my next musical releases which will come out very soon ! Make sure you don’t miss it: subscribe to my newsletter!

See you in the next one!


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