You may know Spotify for its end of the year “Spotify Wrapped” personal music stats or from stalking your friends’ listening activity on the desktop app. But for musicians, the most popular streaming platform in the world is an important part of making a career in music.
According to Spotify, over 28% of artists who earned over $10,000 from Spotify in 2020 and 2021 were self-distributed. The streaming platform estimates there are about 65,000 artists that have released at least ten songs and have at least 10,000 monthly listeners on Spotify.
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A Business Insider report from 2020 found artists earn as little as $0.0033 per stream.
The streaming service does not pay per stream, instead using a system that pays artists based on “streamshare.” This payment could vary depending on how music is streamed or agreements with licensors, Spotify says.
“Every month, in each country we operate in, we calculate streamshare by adding up how many times music owned or controlled by a particular rights holder was streamed and dividing it by the total number of streams in that market,” Spotify reports.
The Union of Musicians and Allied Workers found artists were paid an average of just over half a cent per stream in 2018 and under a third of a cent in 2020. The average artist pay rate declined 43% over two years.
Mackenzie Miller is a 22-year-old singer based in Seattle. Her single “Peach Lemonade” gained nearly 14,000 in the first few weeks of its release, but her paycheck was barely $5.
“You have to have an enormous amount of streams to even make minimum wage,” Miller says. “If your streams plateau, if people aren’t listening to it as much anymore, you’re not going to get paid anymore.”
Miller’s goal is to one day have her music become her full-time job. But low artist rates on Spotify means she has to share her music elsewhere to make money.
“I have tons of people come up to me after I play (live shows) asking if they can listen to me on Spotify,” Miller says. “And that’s great, and they give me streams, but it’s never enough streams to actually be able to quit my day job.”
In August 2022, Democratic congresswoman Rashida Tlaib introduced a new resolution calling for new streaming payment systems to fairly and directly compensate artists every time their music is streamed. Tlaib’s release included a staggering calculation. It would take more than 800,000 streams a month to equal a wage of $15 an hour.
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Instead of paying the artists directly, Spotify pays the rights holders, who pay the artists. According to Spotify, roughly two-thirds of the revenue from music goes to rights holders. Rights holders are the licensor the artist pays to represent them and upload their music to Spotify — often record labels or distributors. This money is divided into recording royalties (paid to the artist via licensor) and publishing royalties, which goes to the songwriters or owners of the song. Artists are paid different amounts depending on the contracts they have with their rights holders.
Nineteen-year-old singer Ava Mastroianni, who creates music under the name Ava Dallas, uses DistroKid to publish her music to streaming services. At about $20 a year, DistroKid gives all of the stream revenue back to the artist, who is in charge of producing and promoting their music.
“If you’re not attached to a label, then there’s so much more work you have to do and pay for,” says Mastroianni, whose 10,000 streams from the three songs she’s released hasn’t covered the upfront cost. “I’ve already paid $20 a year to DistroKid to distribute my music, so I am basically paying to release music.”
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Apple Music also does not pay per stream.
Apple Music shells out about $0.01 per play, the company self-reports. This doesn’t necessarily mean artists earn $0.01 per stream, though. Like Spotify, Apple Music calculates royalties on a stream share basis, which is the percentage of Apple Music’s total streams an individual song makes up.
Mastroianni, who is a music industry student at Northeastern University, said she’s learned merchandise and social media are two of the strongest cash cows in the industry.
“The TikTok Creator Fund, people are making so much money off of that and social media in general (with) advertisements, but I would also say merch is definitely one of the biggest sellers,” she says.
Creators with at least 100,000 views in the last 30 days are eligible to earn money from TikTok, which funds TikTokers who generate high views, engagement and content. TikTok even launched into the world of streaming in March 2022 with its distribution platform, SoundOn.
Outside of live gigs, Miller has found success in songwriting, where she says, “most of the money in music is.”
She makes $100 to write songs for customers of Songfinch, a platform where artists produce an original song based on the customer’s wishes.
Miller says she believes Spotify’s pay rate often dissuades artists from creating more music. She feeds her passion for art in other ways than uploading to Spotify, because when it comes to writing her own songs, hiring a producer is costly.
“Having to possibly spend up to $1,000 to get a song finished and out into the world and then to receive $5 back for it, it doesn’t really make you want to keep doing it,” Miller says. “All the money that I’m going to spend that I’m going to put into creating it and giving it a good quality, that I feel like I want it to represent me on Spotify, I’m not gonna make back.”
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