Posted on 14 Jul 2020

Royalty Structures: How Do Artists Make Money?

The answer to how much music streaming services pay their artists has always been a complicated one, but today, we will begin to unravel this key component of the music business. Aside from the immediate differences in payments due to distinct digital streaming platforms like Apple Music and Spotify, other factors such as reach and aggregate users can also influence royalty rates and the ability of artists to propel themselves to the upper limits of success.

In the music industry, royalties are payments that individuals with the right to pieces of music (artists, songwriters, producers, and composers) obtain from anyone who uses their licensed music. In other words, people compensate the right holders for the ability to use their music. When an artist’s music is distributed through digital streaming service (DSP) as it is often the case nowadays, they receive a payment for each stream of their music. Interestingly enough though, these platforms such as Spotify and Amazon Music do not have flat and fixed payments that they allocate per stream. Instead, a stream’s royalty rate is determined through the listener’s country and specific location, the artist’s royalty rate, how pricing and currencies vary amongst countries, and if the listener has a free or premium account. Due to these various factors which are always subject to change, it becomes extremely difficult to ascertain a specific stream royalty rate.

Nonetheless, studies of musicians’ payments on a number of digital streaming services have been conducted to gain a general understanding of estimated royalties across platforms. Some general findings include that per stream, Napster pays $0.019, Tidal pays $0.01284, Apple Music pays $0.00783, Google Play Music pays $0.00676, Deezer pays $0.0064, Spotify pays $0.00437, Amazon Music pays $0.00402, Pandora pays $0.00133, and YouTube pays $0.000069. Though these approximate royalty rates for each stream may alert artists to pick the highest paying services first, it is crucial to remember that the platforms with lower payments may still provide unique advantages due to them having higher user totals and greater international reach. Additionally, when artists release music on platforms some of the lower-paying platforms like Apple Music and Spotify, they provide a direct route to the fingertips of millions of fans; a process that used to be much more tedious, taxing, and expensive than now. These factors help provide an artist with the whole picture in digital streaming services and remind them that royalties are just reflections of the value these services bring to the client.

With numbers as low as these, an artist may wonder how it would be possible to achieve financial success to the extent they which through solely streaming. Playlist Streams is how! When an artist uses Playlist Streams, all their streams generate royalties and their music get exposed to large audiences. Although it is possible if your music is received extremely well by the users, this also points to the fact that royalties are simply one part of an artist’s finances. Other aspects such as touring, gigs, CD sales, and so much more will all help artists succeed financially and work in unison with streaming royalties. Furthermore, even if artists were able to make significant sums from just streaming royalties, then a large portion of it will be eaten up by other entities in the process of getting to the artist. For example, the Economist conducted another study in which their experts say that a billion streams on any subscription services bring an average of $7 million for big label companies and $1 million for the artist responsible for creating the music. Though this $1 million may seem like a substantial amount, we must put it into perspective as it is a sum that only a select few artists who top the charts for the day or week will receive. Every artist is nowhere near that popular, and the nonprofit organization Music Industry Research Association found that in a survey of 1,277 musicians, the median musician made $35,000 in 2017 and only $21,300 of that sum was from music-related sources. Clearly, there is a disparity between not just the payments received by label companies and big-name artists, but also between those larger name artists and the majority of the other artists in the industry. There needs to be much more improvement in relation to these rates and allocating a larger portion of them to the creators of the work.

Regardless of the fact that royalties are just one part of the equation and that they need improvement, they are undoubtedly one of the biggest portions of an artist’s financial journey because it allows them to be compensated for each time their music is used for enjoyment and even commercial purposes. Services such as Playlist Streams help boost your streams in an organic manner that will help you gain exposure while also monetizing upon it through the royalties. Ultimately, these royalties are dictated by a myriad of factors and are only one part of your financial journey as an artist. However, the exposure that these streams and royalties can help you gain is unmatched and truly beneficial for your journey in the music industry.