Spotify revenue is a controversial subject for a lot of musicians when they discover how little the ‘per play’ rate is.
While many listeners don’t pass up the opportunity to appreciate music, very few outside of the business are actually aware of how drastically music consumption over the last twenty years has changed, much less how revenue and royalties work.
Laying The Groundwork For Spotify To Gain Speed & Win The Music Streaming Wars
In spite of its seemingly humble beginnings, Spotify has changed the landscape of the business and ushered in a music industry renaissance that many thought would never arrive.
Since 1997, the ease and convenience of digital downloads have drained the vast majority of revenue for artists.
The model of the Spotify platform, which starts users out on an ad-based tier before pushing them to upgrade to Premium, is a simple one: regenerate the lost value of music and encourage even casual fans to start paying for their favourite artists’ work.
If people only have to pay one flat monthly rate to access a lot of music, Spotify CEO Daniel Ek theorized, they will be less likely to pirate music illegally, convert YouTube videos to mp3 files, or find other creative loopholes to avoid paying for music.
Spotify Revenue Numbers: Facts And Figures
As of March 2023, Spotify had over 515 million monthly active users. Of these, there are 210 million paying subscribers.
The basic Spotify subscription for Spotify Premium Individual is $9.99/month. This should equate to monthly revenues in the neighborhood of a minimum of $2.1 billion.
The official revenue split that Spotify offers is based on a per-stream average.
Spotify revenues per play equate to $0.003-$0.005 per individual stream. By this calculation, the total revenue earned from a stream is split 70/30 so that 70% of what’s earned is provided to the artist or rights holder of the music and the remaining 30% is provided to Spotify.
To properly communicate how little Spotify revenue is, for 1 million Spotify streams, royalties earned are $4,000 USD.
To make $1 on Spotify, a song would have to earn somewhere around 229 streams.
Compare this to Apple Music whose royalty rates are much higher at between $0.007-$0.01 per stream.
How Much Spotify Revenues Does Spotify Pay Music Artists?
Although Spotify still has room to grow, it has singlehandedly succeeded at distributing billions in royalties to artists in 58 countries worldwide.
There is some debate as to whether or not artists are still paid enough, but Spotify has certainly taken strides to compensate musicians at least somewhat fairly.
Earlier we referred to the 70/30 rule that Spotify uses. What Spotify distributes in that approximately 70% of revenues is to “rights holders”, aka the record labels, distributors, music publishers, and sometimes artists themselves.
Therefore, the 70% is split even further depending on how many parties have to be paid for the song streamed.
How The Spotify ‘Rights Holder’ Definition Works
This gives record labels and distributors incentive to aggressively promote their new artists. But there are some myths about how Spotify works that persist amongst new artists and fans alike, and many people misunderstand exactly what “rights holder” means.
If your label or distributor holds the majority of the rights, then you, the artist, are unlikely to see anything more than a very small royalty cheque.
The relationship between Spotify and rights holders can be confusing. Spotify ’s official website describes it this way:
“Our current payment agreements lead us to distribute approximately 70% of our gross revenues to master recording and publishing rights (both mechanical reproduction and performance) holders.”
They go on to explain that the precise division of the revenues to each type of rights holder varies by country.
How Do You Make Money On Spotify By Streaming Your Music?
In short, the more people stream your music on Spotify, the more royalties every rights holder earns.
To make money on Spotify, you need to work your butt off to get those streams. There is no cheating the system. Promote. Let people know your song is out and where to find it. Share it on social media and your website if you have one.
No one is going to get rich on Spotify. Even if you hit it big with a track that streams millions of times, it’s not going to bring in enough revenue to justify the massive marketing effort that will entail.
Via Spotify, you likely won’t even break even on the production costs for most of your tracks. That’s the truth.
The Bottom Line About Spotify Revenues
Although Spotify has tried to do better, they and the industry still seem to unfairly manipulate artists, taking from them their content for next to nothing and preventing them from recouping the full value of their art. Musicians making a living off Spotify revenues is non-existent.
Spotify, admittedly, is not the ideal platform, even for very highly-paid artists. As normalized as it is, no musician is truly making money on Spotify who hasn’t already been a part of a major record label and had massive success outside of the music streaming system.
But there is definitely a way to take advantage of Spotify, especially if you self-publish.
Whether you’re a performer or songwriter, the more you know about how Spotify’s revenue streams work, the more likely you are to actually profit off your music and not give all your hard-earned money away to a third-party.
No matter what, recognize that Spotify is a massive platform. For the exposure, especially if you’re an unknown artist, this can still be a path for a musician towards success in various forms, including economically.