Streaming Platforms: Spotify, Apple Music and how they pay artists

A music artist says Apple Music pays him 4 times what Spotify does per stream, and this shows how wildly royalty payments can vary between services. The royalties earned off of Spotify streams are notoriously low, but do provide some income to artists.

So just how many plays does it take for a musician to live above the poverty line?

Apple Music and Spotify are the two dominant players in the music-streaming market and they might seem the same to many consumers, with similar features and pricing. But because of the system by which artists are paid, they can vary wildly in the royalty rates they pay out.

Spotify has more than one hundred million monthly subscribers worldwide, which places the platform far ahead of its peers, but Apple Music and Amazon Music are gaining millions of new users with each passing month. Whether or not the global economy can sustain the numerous streaming platforms won’t be decided for some time, but whether or not artists can survive the streaming economy is a hot topic that needs to be addressed.

Any industry expert will tell you that musicians today have it easy. There are more avenues for exposure than ever, recording music is (or can be) cheap, and an increasing number of artists are finding success outside the traditional label system. It is theoretically possible for anyone with access to a laptop and the ability to convey a melody to become a digital sensation who has fans all over the world without the aid of big label money (though, to be fair, big label money still makes a sizable difference).

Streaming payouts are a relatively new revenue stream for musicians. No one is suggesting artists survive on streaming royalties alone. Still, with physical media sales bottoming out and competition for tour revenue increasing, the money made from streaming can have a significant impact on an artist’s ability to develop, not to mention sustain themselves.

Every other week someone goes viral online and builds an entire career of the profits made from streaming royalties. The majority of these overnight sensations are young and without families to support, but they still have the cost of living expenses that need to be met. That got us to thinking: Streaming Platforms: Spotify, Apple Music and how they pay artist.

First, let’s delve into this, how many streams does it take to survive on streaming revenue alone?

According to the Assistant Secretary for Planning and Evaluation (ASPE), the poverty line for single-person households is $11,770. If we ignore how that figure would be hard for anyone to live on in a major city (and most mid-size cities), then we can round up to $12,000 and use streaming revenue calculators to figure out how many Spotify streams someone would need to sustain themselves.

At an average payout of $0.006 per song stream, a musician living in the United States needs 3,000,000 plays annually to have a gross income of $12,000.

If the artist has a label deal the record company, the record company would get paid before the artist. Depending on the amount owed to the label, the artist may need millions of addition plays to see the same amount of income themselves. This is why many talents in today’s music industry are independently pushing their best to make some numbers count.

The ASPE also puts the poverty line for a families at $24,500. For a family of four (2 adults, 2 children), using the same average royalty rate, a musician would need 6,062,500 Spotify streams to earn that amount of gross income.

These numbers get much bigger when the musician is part of a larger group. Now you can understand why most groups fall off along the line. If a band has four members and all four have families where they were the sole source of income, the group would need to generate 24,250,000 Spotify streams to gross enough so each member’s family would be at or above the poverty line. That’s $97000.00 per group score.

How streaming services determine royalty pay for each artist

There are lots of factors that affect how much money one stream is worth in royalties. The main factors include:

• The listener’s country and location
• Whether the listener has a paid subscription or free account
• The specific artist’s royalty rate
• The relative pricing & currency in different regions

With the above in mind, it’s quiet clear music streaming services like Spotify, Apple Music, Deezer, Tidal and Amazon don’t have a fixed “pay-per-stream” rate when it comes to paying out music royalties to artists. Streaming services cut massive checks to hitmakers like Billie Eilish, Taylor Swift, Post Malone, and other frequent chart-toppers each month, but some smaller artists have continuously feel the payment system isn’t fair to them.

If you’re living your life as a musician from Africa, the later is true.

Most streaming services pay artists using a system known as pro rata, in which all the money generated from listeners each month is totaled up, then divided proportionally by listening time in order to determine how much each artist on the service should be paid.

If you’re a popular artist, you’re likely going to get more streams just by virtue of the fact that you’re popular. Alan Galbraith of the company’s licensing department also says “stream share” determines each artist’s cut of Spotify’s monthly revenue.

“One way to think about it is to think about divvying up a pie,” Galbraith says. “For instance, if there are a million eligible streams in a month, and you have 100,000 streams in that month, then your stream share is 10% of the revenue pool, or pie.”

In other words, if Billie Eilish accounts for 10% of all streams this month, then Eilish gets 10% of the money users paid to Spotify, regardless of which users actually streamed her songs.

But some in the industry prefer a different type of payment system.

One alternative is a user-centric system, which means that if one user pays $9.99 a month for Spotify Premium but only listens to independent artists, that user’s $9.99 would be paid exclusively to the artist.

Again, no one is saying an artist should survive on streaming royalties alone. Some will be able to make it work, especially if they have a large following and low overhead, but most will need to create as many revenue streams as possible to survive. The key to a long career in music today is through the development of a community around an artist and their work that promotes purchasing merch, physical media, and concert tickets. That has always been true, and likely won’t change anytime soon.

Streaming Payouts on Spotify, Apple Music, Google Play and Deezer

The complete table can be above shows the payout rates, but here’s a TL;DR summary for what we’ve got:

• Spotify paid the artists $0,0032 per stream
• Apple Music got the average rate of $0,0056
• Google Play Music landed a $0,0055 payout rate
• Deezer fell slightly lower at $0.00436

This quote was observed before Deezer introduced its user-centric payment system.

In full detail: Amazon Music Unlimited, Napster and Tidal got the top-3 rates at $0,0119, $0.0106 and $0.0099 respectively. However, don’t get too excited about Amazon’s numbers. The lion’s share of the tech giants subscribers are in fact over at Amazon Prime bundled streaming service — and for Amazon Prime, the average rate came to just 28% of the Unlimited’s payout, or $0,0034. We will discuss this into detail another day. Adios!

Samcilla Baakojr is the Chief Technology Officer & Director, Digital Engagement at Pivot Digital Media. He occasionally feature as host of the New Habits Show on Netbuzz Radio. He is also an entrepreneur known for promoting careers in the entertainment and aviation industry. As an entertainment journalist he walks with more than half a decade experience in streaming media and digital marketing.