3 facts about streaming music payouts

In the wake of Apple Music’s letter – sent out last week – concerning streaming royalties, there seems to be some fresh (and continued) confusion circulating about how streaming payouts are calculated, and what may or may not make a streaming platform the more or less ethical listening choice.

Guest post by Bobby Owsinski of Music 3.0

You’ve probably read about the royalty letter that Apple Music sent out to its artists last week stating how the service was paying about a penny a stream, almost 3 times what Spotify is paying. If you’re an artist that probably made you want to go protest in front of Spotify headquarters (something that’s actually happening), but the problem here is that the letter doesn’t quite tell the entire story. Oh, there are no falsehoods involved, it’s just an incomplete picture.

There are plenty of other articles that go into depth about the payout differences, but I’m going to make this easy and lay out some streaming music royalty basics that apply to all services, at least for now (Deezer and SoundCloud might upset the apple cart here with user-centric royalties in the future).

1. No One Gets Paid On A Per Stream Basis

That’s just an easy way to calculate something that’s difficult to quantify. You actually get paid on market share, meaning that the more streams you have, the more each stream is worth. Also, the more total streams there are per month, the less each stream pays out. Since Apple Music has fewer total streams, its per stream payout will always seem higher than Spotify. You can see how Apple’s royalty letter clouds that picture somewhat.

2. Two Artists With The Same Number Of Streams Will Get Different Payouts

That’s even from the same service! Why? You get paid a different rate from the free ad-supported tier than from the paid tier. If one artist has more streams from the paid tier, they’ll make more money because the money pool in that tier was larger. Also, the country where the streams comes from matters. Since the subscription rates are lower from the standard $9.99 in many countries, the payout will be lower for the same number of streams. If most of your streams comes from India (with a subscription rate for Spotify of around $2 per month), for example, you’ll get paid a lot less than for the same number of streams coming from the U.S.

3. There’s A Middle Man Taking A Big Portion Of The Payout

If you’re signed to a label, it may be taking as much as 80% of the payout coming from any streaming service. Superstars might push that rate to 50%, but that still means that the final royalties paid to the artist are less than what it seems to be on the surface. Same with a publisher, which might be taking as much as 50% of the royalty income from that stream as well. Bottom line is that there’s a huge amount of money being generated from streaming, but the artists and songwriters are seeing a small portion of it.

Believe it or not, there’s even more that goes into determining royalty payouts, like bundles and family plans, that makes this one of the most complex calculations in the music business. You don’t have to known advanced mathematics to understand the basics though, and the 3 facts above will help you more than you know.