When artists put their work on streaming platforms, they get paid a royalty for streams and downloads. Some pay a lot more than others, and some, like Deezer and Apple Music, are in the middle of trying to improve those rates.
For those who want a fast answer to what they might get paid, we have a handy Spotify Royalties Calculator that also includes royalty rates from Deezer, Napster, TIDAL, YouTube Music, and more.
For a deep dive into the workings of Apple Music, check out Apple Music Royalties - where you'll get everything from how it's split to who needs to send an invoice and the payment type they use.
What are the different types of music royalties?
When you are new to the industry, you might not know that different royalties are paid to artists, composers, publishers, record labels, and more.
So, let's take a deep dive into who gets paid and what for.
Sync Royalties
Most of the time, a synchronization deal is something that many artists want. It means your music has been hooked up to visual media - like movies, TV programs, games, and adverts. And anything else in that bracket.
Mechanical Royalties
Physical copies of music, like tapes, CDs, and vinyl, are classified as mechanical reproduction. Mechanical revenue happens when you sell any of those; streaming royalties are also included in this bracket.
Note: a record company will pay these royalties out if you are signed, but an independent artist will get paid from their distribution service.
Print Music Royalties
Print royalties are usually for film and classical composers rather than regular recording artists. As the name suggests, the royalty is paid when the music is transcribed into print. The print sheet music will usually be distributed via a print music publisher, and royalties are paid based on the number of copies made.
Performance royalties
Performance royalties apply when a song is performed, streamed, played, or recorded in public. So when the music is played in a restaurant, coffee shop, store, on the radio, at clubs, on internet radio, and from music streaming services - they all count.
These can be broken down into publishing royalties and songwriter royalties. In these cases, the royalties are collected by companies like PRS for Music in the UK or SESAC and GMR in the US.
So where does streaming come into it, and who gets paid what and when?
How are royalties for artists calculated?
Your income is based on how many people buy or stream what you have created. Basically, the more popular you are, the more money you make - almost.
For mechanical royalties, the US government has a set rate that needs to be paid, and that is $0.091 per digital download or CD.
So every time a CD is pressed or a song is downloaded, that is what you will be paid. And, since the government has set the rate, it only changes if they change it.
These royalties are paid to you, the artists, from your publishing service, publisher, or publishing admin. In the UK, the set rate is calculated using a set percentage of the Retail Price or the Published Price to the Dealer.
For PPD, the rate is set at 8.5%, but if that isn't available for whatever reason, it will be 6.5% of the Retail Price.
Bigger artists don't usually get everything they make through streaming because their record label recoups on marketing, travel, recording costs, and more.
But, because of the volume they sell, it amounts to a lot of money anyway. Smaller artists who use a distribution service will see a higher percentage of what they sell, but because the volume isn't as high, it isn't as much money in the end.
The middle ground for many artists is a good indie music label, and these often go 50/50 for a while so everyone can make some money.
Streaming royalties for a while were the great unknown, but since 85% of music is now listened to via streaming services it makes up one of the largest amounts of income for music makers.
Performance and mechanical royalties are paid for every stream over 30 seconds.
Here is the thing, though: performance royalty amounts are kept behind closed doors and negotiated with companies like PRS, ASCAP, and BMI. The mechanical rights part is easier to look at… but not crystal clear by any means.
Taking information from Spotify’s own royalties page, here is what they say:
" Contrary to what you might have heard, Spotify does not pay artist royalties according to a per-play or per-stream rate; the royalty payments that artists receive might vary according to differences in how their music is streamed or the agreements they have with labels or distributors."
Music on Spotify earns two kinds of royalties: recording and publishing.
- Recording royalties are payments made to rights holders; these get paid to the artist through their distributor or record label.
- Publishing royalties is the payment made to the songwriters and the owner of the composition. It gets paid to the collection societies, mechanical agencies, and publishers.
CASE STUDY: What are Spotify artists really getting?
So, how does Spotify say they calculate these royalties?
- Spotify distributes revenue from subscriptions and ads to rightsholders.
- Net revenue is calculated after subtracting costs like taxes and processing fees.
- Streamshare determines a rightsholder's net revenue share based on their total streams proportion.
The reported average reported royalty payment per stream for Spotify is $0.003 - $0.005, according to companies, like Ditto, that aggregate music on behalf of artists.
So what about the Apple Music royalties calculator?
Apple Music might be one of the easiest music royalties to work out because they have made their average pay-per-stream/play public for the last few years, currently $0.01. Remember that while that is the technical PPS payment, royalties are paid on a streamshare basis.
What makes Apple Music interesting when it comes to royalties is that they don't pay big labels and indie labels differently. They all receive a 52% headline rate.
What is a headline rate, you ask? The headline rate for streaming royalties is the initial percentage the rights holders get before adjustments and deductions. In real terms, it means that 52% of the revenue generated goes to the label.
And, in keeping with that same parity, Apple Music pays the same headline rate for all compositions based on region or country. So, songwriters get fair and equal pay across the board, too.
What factors impact how much Apple Music and Spotify pay in royalties?
It is a great question: when companies like TIDAL and Napster are paying well above average, what factors have Spotify and Apple Music stated impact how much (or not much) they pay artists?
Interactive vs. Non-interactive streams
Throwing an extra complication into the mix, there are two types of streams: the interactive stream and the non-interactive.
You can even split the streaming platforms into categories. An interactive stream is where the user chooses what they listen to, and a non-interactive stream is more like a radio - you are listening, but you don't get to choose what comes up next. Both Spotify and Apple Music fall under interactive, but it is part of what makes up thier royalties system.
Subscription types
Each user's subscription type will impact how much their streaming time is worth. Paid subscriptions pay more, while ad-supported listening doesn't offer as high value, so it is worth less.
And the amount of subscribers makes a difference, too. Apple Music doesn't offer a free tier, which is reflected in their higher average payouts and the parity in headline payments.
Figures released in February 2023 showed that Apple Music has 88 million subscribers, while Spotify, according to Techcrunch, has 551 million users, and 331 million of those are on the ad-supported free tier, while the rest are spread across their varying paid tiers.
Location
Another factor that changes how much you get paid by almost any streaming site is the region or country you are listening from. Wealthier countries have a higher royalty rate.
So why do Apple Music and Spotify pay different royalties?
The answer is in the streamshare. With Spotify having a phenomenally higher amount of accounts, the rate per stream is lower due to the royalty share.
Apple Music pays more because its subscriber base is all paid, with fewer subscribers.
This seems backward, but that is just how stream-sharing works. Here is how Spotify explains it:
"Every month, in each country we operate in, we calculate streamshare by adding up how many times music owned or controlled by a particular rights holder was streamed and dividing it by the total number of streams in that market. So if an artist received one in every 1,000 streams in Mexico on Spotify, their rightsholder or distributor would receive one of every $1,000 from the Mexican royalty pool. The total royalty pool for each country is based on the subscription and music advertising revenues in that market."
Should artists put their music on Apple Music or Spotify?
The answer is - both. Artists should look to maximize their revenue when possible, but just keep in mind that one will be paying more than the other - and that none of the numbers are set in stone.
It is also worth noting that Deezer and Apple Music are looking at giving a higher revenue to artists that offer more quality, like using Apple Musics Spatial Audio or putting things like a user-centric or artist-centric payment model in place. So artists get more when their fans actively search for them and then play their music.
Key takeaways?
Getting Paid for Your Jams: Artists make cash when their tunes are listened to on streaming platforms. But here's the twist - the cash you get varies on platforms like Spotify, Deezer, and Apple Music - because of agreements they don't disclose and other factors like location.
Cash for Different Music Royalty: There are different paychecks for different gigs in the music biz. Think sync, mechanical, print, and performance royalties. Each one gets paid different amounts - which also vary based on the agreements.
Follow the Money Trail: How much you make depends on how many folks dig your music. For mechanical royalties, the US government sets a rate at $0.091 per download or CD. Spotify? They pay based on subscriptions, ads, and different stream types.
Spot the Difference: Spotify slides you about $0.003 - $0.005 per stream, while Apple Music hands out around $0.01. Why the diff? Stuff like subscription types, user numbers, and how they divvy up the streaming pie.
Smart Moves for Artists: Here's the inside scoop - drop your beats on both Apple Music and Spotify. More platforms mean more cash. Oh, and keep an eye on cool initiatives from Deezer and Apple Music, like bonuses for top-notch quality. Your fans hitting replay could mean more in your pocket. Try using SmartLinks to promote your music.
For users, where you spend your time and money is starting to matter more when it comes to supporting your favorite artists, and with price hikes from different streaming services, many people have been switching from one platform to another. Sounds like something you want to do? FreeYourMusic has made transferring your music from one streaming service to another easier than ever - nice!
