The rise of online music platforms has led to severe confusion in the music industry regarding how artists get paid royalties for the music they release. Amid controversy surrounding the claims of several artists who say they do not get paid from Spotify streams, many fans and new artists wonder if Spotify pays artists.
Spotify pays royalties from streamed music on the platform to the right holders of the music. If artists own their music, royalties go to the artist. If the music is owned by a label, royalties go to the label. 70% of what is earned from streams is paid to rights holders. 30% is paid to Spotify.
Spotify is the largest of all streaming platforms, with more than 433 million users on the platform, and there are millions of artists who use the service.
Many artists get millions of streams on Spotify, but there are headlines stating that they do not receive any money for them. Is this true? Let’s find out!
Does Spotify Pay Artists?
There have been many stories of Spotify not paying artists or at least stories of artists not receiving much money despite having millions of streams on the platform.
Simultaneously, Spotify releases their artist payment figures every year, and those figures reach billions of dollars.
What, then, is the truth of the matter? If Spotify pays billions of dollars to artists, but artists claim that they receive nothing, does Spotify pay artists at all?
The reality is that Spotify does pay out money for the music that is streamed on the platform, but the payment scheme is not as straightforward as paying artists per stream.
Spotify keeps 30% of the revenue generated on the platform, and the rest is split among the artists on the platform based on what percentage their streams are of all the streams on the platform.
This means that an artist who accounts for the majority of the streams on Spotify in a month will be paid significantly more than any other artist on the platform.
This shows that Spotify does pay money for the music streamed on the platform, but the reason why the artists do not always see much of that money is not the fault of Spotify or the artists but rather that most of the money goes to labels.
Most major artists on the platform are signed to record labels, and the labels usually own the rights to the music that the artists produce. Spotify pays money out to the owners of the music (known as the rights holders) regardless of who the rights holders are.
If an artist owns their own music, the money generated by Spotify streams will go directly to the artist. However, if the music is owned by a label, the royalty payments will go to the label, and the artist will be paid according to their contract with said label.
When an artist claims that they do not receive any money from their Spotify success, it is usually because the contract they have with their label is limiting what they can earn from their music.
How Do Payments Work On Spotify?
We have now established that Spotify does pay out significant funds for the music streamed on the platform, but how does the payment system on Spotify work for artists?
The payment system is very complicated on Spotify, but there is a simple way to look at it to make things easier.
In the days of physical music media, when we all listened to music on vinyls, tapes, or CDs, every album sold was counted as a sale, and all of the sales made profit. This profit was easily quantifiable because they equated to album sales.
In the days of digital music, quantifying album revenue is not as simple, as most music is no longer bought, but it is streamed, and it is usually streamed per track.
This makes it far more difficult to tally up the earnings of music on platforms such as Spotify.
For this reason, the model that Spotify uses makes sense.
The way payment works on Spotify is that all the money made by music streaming on Spotify is collected into a pool. Spotify keeps 30% of that pool along with some minor payments for various services employed by Spotify, and the rest is paid to the owners of the music on the platform.
However, the way the music rights holders are paid is by the percentage of overall listenership that the artist accumulated over a month.
For example, if Spotify has $500,000 to pay out in a month, and the music from one artist accounts for 10% of all streams on the platform, the rights holder of that music will receive a payment of $50,000 from Spotify.
The other artists or rights holders will be paid according to their own percentage of the platform streams as well.
This means that the music that makes the most money on Spotify is the music that is the most popular in any given month.
The fact that the majority of the money made on the streaming service is paid to rights holders such as labels is why independent artists on Spotify make far more money for their music than those signed to labels, despite the fact that their music is less popular and has fewer streams.
How Can Artists Get Paid More On Spotify?
Spotify does pay out a lot of royalties for the music streamed on the platform. However, there is a reason this money does not make it to many of the artists on the platform: the money is first paid to the rights owner (which is usually a record label).
For example, if a new artist negotiates a deal with a record label, the artist might only receive 10% of earnings, while the record label might get 90%. This might make sense if the label is doing all of the promotion, marketing, and advertising to launch the new artist’s career.
After Spotify takes 30% of the platform revenue and the record label takes 90% of the other 70%, the breakout looks something like the table below:
(70% to artist
(90% of 70%)
(10% of 70%)
record label might only get 7% (or
$7,000 per $100,000 of income)
of earnings from Spotify.
For this reason, if artists want to make more money from their music streamed on Spotify and other streaming services, their only options are to go independent and remove themselves from the label.
Even then, the artists will have to make new music, since their older work is owned by the record label. Another option is to renegotiate the terms of their contract with the label.
These are, unfortunately, the only options for artists who want to make more money on the platform.
Spotify does pay royalties for the music on the platform, but it is paid to whoever owns the music. If the music is owned by a label rather than the artist, the artist will not be paid until the record label pays them.
Independent artists are paid directly by Spotify, as they own the right to their music. this is the only way for artists on Spotify to make more money from their streams on the platform.