Whether you are an artist under one of the major record labels or an independent musician producing music in their home studio, you will eventually want to know how much you earn when people consume your music. Since the development of the Napster (1999), the music industry has experienced a great shift towards music streaming platforms in which users are able to access large music libraries at a low cost per month, rather than owning a personal copy (i.e. CDs). This gave rise to the applications we know and consistently use today: Spotify, Tidal, Deezer, Apple Music, and Amazon Music. However, it is quite commonly known in the industry that these platforms do not compensate artists nearly as much as they deserve when it comes to how much per stream they would earn. The reality is that most artists make less than a cent for one stream, however the actual pay out can vary from platform to platform. 

The reason why it is difficult to determine an exact number for royalty rates per stream is because most platforms do not have a pay-per-stream rate. There are multiple factors that go into how much an artist will make per stream off their music: The listener’s location and which country they are streaming from; whether the listener has a paid subscription to the platform; if they are listening with a free account (this calculates premium users as a percentage of the total users); what you as the artist have as your specified royalty rates based on in-app advertisements; and lastly, the currency and pricing conversions for different areas. In addition, these rates differ between signed and unsigned artists, different distributors, and even the royalties earned through a Performing Rights Organization (PRO). 

According to Indie Music Academy’s Music Royalties Explained: The Ultimate Guide for 2020, Spotify’s mechanical royalty rate is about 10.5% of the company’s gross revenue, minus the cost of public performance. The platform actually used to openly display their estimated pay-per-stream rate to be “between $0.006 and $0.0084”, however has since taken down the section of their webpage that showed this information. What we can tell is that royalty rates are actually dropping, as more free users join the platform and take up the majority percentage of users on the app.

With all of these factors taken into account, calculating an exact number for each platform’s payout rate per stream is quite difficult as many of these factors vary between streams.If you are an artist looking to put their music out on Spotify or other music streaming applications, it is important to know your expected royalty rate per stream. Therefore, we did some research to consider all of the factors that go into artist’s streaming royalty payouts.

Signed Vs. Independent: Which Route Should You Take?

If you are in the industry, you are all too familiar with the common conversation of whether it is better to sign with a record label, or to establish your career independently. Technology has made producing and distributing music independently much easier, and unsigned artists can maintain their creativity and ownership over their music. However, signing with a record label provides you with resources that may be harder to access on your own, such as a manager or a booking agent. 

While there are advantages and disadvantages to both, one thing that is not commonly considered is the difference in streaming royalty rates between the two types of artists. Unsigned artists typically see more of their royalty earnings than signed artists, mostly due to the contractual agreement that signed artists make when beginning a relationship with their record label. For example, 

In order to understand how the royalty is distributed, and why unsigned artists usually earn more off of their streams, you must understand the two main forms of music copyright and royalties. Every stream generates two copyrights that must generate royalties which must be paid out to the necessary parties: the Music Composition (MC) Rights and the Sound Recording (SR) Rights. When talking about the gap in royalty rates between signed and unsigned artists, we have to focus on the Sound Recording royalties and the specific use of Master Recording Licenses. 

Signed Artists

In the case of major record labels, the Sound Recording royalty is paid directly to the major label, which depending on the contract between the company and the artist, the label takes about 50 to 90% of the earnings, thus leaving the artist with about 10 to 50% left to take home. However, in the case of independent labels, they take a much smaller percentage (about 10% to 15%) because another player is involved: the aggregator. An aggregator acts as a conduit to distribute your music across all streaming platforms throughout the globe. These channels such as Orchard and Ngrooves take about 15 to 20% of the royalty earnings before the record label gets to take their cut. The artist is the last one to see the earnings after both previous parties have taken their share of the revenue, however the indie label artist is left with a significantly greater amount than a major label artist; usually at least 50% depending on the contract they have with the label.

Unsigned Artists

When it comes to SR Royalties for unsigned artists, they do not have a record label to take a cut of their earnings. Just as the independent labels do, unsigned artists normally go through an aggregator to distribute their music such as CD Baby, TuneCore, or United Masters. These distributors take up to 10% of the royalty before the revenue reaches the artist. However at that point, the artist is left with about 90% of their revenue to keep, which leaves them with the majority of their earnings.

When looking at how the streaming royalty earnings are divided between record labels, artists, and aggregators, the debate on whether the independent artist route or the record label route is the best to take is really all up to what the artist prefers. Cutting out the record label from the equation made a big difference in how much the artist earns from their streaming royalties. Therefore, one may argue that acting independently of a record label is the best route to go. However, the independent artist route is only more profitable if the artist can either promote themselves or gather a team to help expand their audience and earn more streams. This is much harder to do without the resources and the money that can be provided by a record label, which is why this path may be more attractive to artists who are willing to give up some of their earnings for the benefits that they can get through signing.

Signed vs Unsigned

Due to these factors, the royalty rates between signed and unsigned artists differ amongst each streaming platform. Further in the article, we discuss the streaming rates for different individual platforms, however to show the comparison we took the payout rates for Spotify. For signed artists under major labels, Spotify pays approximately $0.0084 (according to Mariah Carey’s statistics from her hit single “All I Want for Christmas is You”). However for indie labels and independent artists, the pay per stream rate is about $0.00331. The reason for this gap is because these streaming platforms understand the nature of contractual deals that artists have with different types of labels in the music industry. For the major labels, Spotify pays out a higher rate because the artist’s cut is divided amongst the label, their manager, their publisher, and other parties. Therefore, by the time the artist sees any profits, they will still be left with a decent amount of money leftover from their streaming royalties. However, this is not the case with independent labels and artists who often see a higher percentage of their streaming rates because there are not as many divisions when paying out to the appropriate creditors. As an artist, this leaves an important decision regarding your music. As stated before, independent artists receive a higher percentage of their profits, however they evidently get paid out less than signed artists. In addition, a record label can provide more resources for marketing, promotion and publishing that could possibly result in more revenue even after all the creditors take their cut. In either scenario, it is up to the artist to determine what they feel is best for their career path and how much dedication they have to their music.

Sync Licensing

Sync licensing is a whole other royalty that is related to the Sound Recording Rights. This royalty is generated by the licensed use of the sound recording when synced to a visual image such as a movie soundtrack, a play, a short film, tv show introduction, video advertisement, or even a video uploaded to YouTube. The amount of profit an artist makes off of these royalties is determined by multiple factors: the length of the recording sample that is used in the visual (will a 30 second snippet be used or the entire song?), the prominence of the sample (is it background music or the primary audio track?), how often the music will be used in the visual, the popularity/importance of the visual, and the budget for the visual (Erin M. Jacobsen, The Music Industry Lawyer). In addition, this also varies between signed and unsigned artists, as those with record label contracts may see less of the royalty earnings from these sync licenses, as the label is contracted to take the first cut. 

Due to all of these existing factors, it is difficult to determine an exact royalty rate for sync licenses. These terms are typically negotiated between the artist or the representative (this could be their record label, manager, or lawyer) and a representative of the party looking to obtain the license. Therefore, when calculating the royalty rate at which you will negotiate, it is important to consider all of these factors to ensure that you are valuing the use of your music at the appropriate price.

What Is A Performing Rights Organization, And Why Is It Important?

Now that we went over the division of Sound Recording rights and royalties, we can dive into Music Composition Rights and royalties; what they are, how they are generated, and how they are divided. This is important information to understand, especially for independent artists who are not only the performer of the song, but are also typically the songwriter and publisher as well. According to this article by the performing rights organization, Broadcast Music, Inc. (to be discussed later on) there are two types of Composition Royalties: Performance Royalties, which are earned through public performance, and Mechanical Royalties which are created through physical and digital reproduction of a track (i.e. a physical CD, vinyl, streaming service, etc.).

The first thing with which to familiarize yourself when understanding the function of Performance Royalties is a PRO. PRO is an acronym for Performing Rights Organization, which is an entity that collects performance royalties for any artist that has their songs registered with their organization. In the United States, the three main PRO’s are BMI (Broadcast Music, Inc.), ASCAP (American Society of Composers, Authors, and Publishers), and SESAC. More performance rights organizations exist internationally, such as GEMA in Germany, and JASRAC in Japan. All of the PRO’s are basically the same (aside from SESAC which is the only invite-only PRO in America) and perform the same function: collecting mechanical royalties for songwriters and publishers.

Performance royalties are generated whenever a particular song is performed, recorded, played, or streamed in public. This could include a song being played at a live concert, a song’s feature on a radio station, or simply a song used as background music at your local bar, coffee, shop, or restaurant. This also includes music streaming platforms, as well. Whenever music is played in public, it generates a royalty. These performance royalties are divided into Songwriters Royalties and Publisher Royalties, which is collected by the PRO and then distributed to the appropriate parties. However, if you are not affiliated with any of the aforementioned PRO’s, then you miss out on earning these royalties because the organization does not have any record of you and your affiliation to the song. Luckily, registering for ASCAP or BMI is fairly simple and cost free, so we would highly recommend affiliating with an organization as soon as possible in order to maximize the amount of performance royalty revenue you earn. 

So how does the Performance Royalty get paid back to the appropriate entities? The PRO’s collect these performance royalties and often take a small percentage (about 10.5%) of the royalties for their own cut. Then, the performance royalties are divided amongst the publisher and the songwriter. This split is usually an even 50-50 division if one is registered with a PRO. The Songwriter’s Royalty is always paid out to the credited songwriter, therefore these profits will not be compromised by any other party that was not involved in composing the music. However, Publisher Royalties require the services of a publishing company, otherwise these profits will not be paid out appropriately. As an independent musician, earning a publishing deal can prove to be difficult as these deals are normally offered to artists with an established foundation in the industry. Therefore, independent artists go through publishing administration services such as CD Baby Pro, TuneCore, or Songtrust which collect publishing royalties for a small fee. 

Regardless of how you choose to earn your royalties, payment starts with an affiliation to a Performing Rights Organization, which is why it is important for both signed and unsigned artists to register their music with one of the organizations in the United States. Otherwise, you will miss out on very important royalties.

Music Streaming Platform Payout Rates

While we stated before that multiple factors go into a streaming platforms’ pay per stream rate, many sources have made estimated calculations on what these rates may look for different platforms in the United States. While these are only estimations and do not apply to users that are streaming from international locations, they can provide a general idea of what you earn from your music from each platform.

Napster was released in 1999 and was the very first streaming platform that caused a revolutionary shift in the music industry from purchasing and owning music, to accessing music for free. It also seems to be the platform that pays out the most to artists per stream. For every music stream from Napster, the artist makes about $0.01064.

Tidal is the second highest paying streaming platform with a pay per stream rate of $0.00989. This platform has a long history with rapper Jay-Z and other artists who partnered with the company to provide exclusive content to listeners that could not be found anywhere else.

Apple Music is the streaming service that Apple created on top of their iTunes store where people purchase music. Apple Music’s pay per stream rate currently sits at about $0.00563 per stream.

Google Play Music is one of the streaming services offered by Google. The pay per stream rate for this platform is approximately $0.00551 per stream.

Deezer is a French streaming platform that was launched in 2007. They currently have a term agreement with UMG, WMG, and Sony Music which allows users to listen to music from all three major record labels both on or offline. Its pay per stream rate is about $0.00436.

Spotify is probably the streaming platform that most listeners are familiar with, however it sits lower on the list of pay per stream rates for artists. For every music stream on Spotify, the company pays out about $0.00318.

Amazon Music Unlimited is a platform created as an extension of Amazon Prime. Its pay per stream rate is approximately $0.01196 per stream. Alternatively, users listening via their Prime membership only earn artists $0.00339 per stream

Pandora is another very popular music streaming service and internet radio platform. The platform pays out about $0.00151 per stream.

YouTube may have the lowest music streaming payout for artists, estimated at $0.00164, however depending on the streaming source (the users plan and how the content is viewed) this number can change. Content viewed via the YouTube Red is estimated to earn up to $0.00802 per stream, while YouTube content ID comes out to a one of the lowest payouts at $0.00087.

Music Distributors: Which Pays The Most?

Another source of royalty income are the music distributors that artists use to put their music out onto streaming platforms and digital stores such as Spotify, iTunes, Pandora, and even TikTok. As stated before, every single time a user presses play on their device, the stream generates both mechanical and sound recording royalties. However, rather than the artist receiving royalties from every individual platform, music distributors act as the middle man to allocate all of royalties, and pay them out to the appropriate rights owners all at once.

For artists signed under a record label, they usually distribute your music for you (this is most common amongst the major record labels) or the relationship to a music distributor is most likely already established. Some distributors such as The Orchard work exclusively with labels rather than individual artists. However, most independent artists use open music distribution websites not only for publishing their music onto online stores and streaming services, but also as aggregators for royalties. These services are usually advertised as easy and efficient ways of releasing music, as the artist is able to simply upload their track, an album cover and include the necessary metadata. However, different distributors charge either a flat fee per single or album, or take a percentage of your royalties for providing the distribution service. Some websites even do both, therefore it is valuable for an artist to understand the differences amongst distributors in terms of fees and royalty payouts, to ensure that you are seeing the highest percentage of royalty income possible.

CDBaby

CDBaby is a very common open music distributor amongst smaller independent artists in the industry, and they distribute to over 150 stores. However, their services are quite costly in terms of the prices to release music and the percentage of royalties they take. To release a single, the distributor charges a fee of $9.99, or if you prefer the “Pro Single” option which offers full monetization, direct affiliation with a PRO, and worldwide publishing, the cost is about $29.95. For a full album, a flat fee of $29 is charged, and with all of the “Pro” features, the price bumps up to $69. In addition to these flat fees, CDBaby takes about 15% of your royalties. 

TuneCore

TuneCore has very similar rates to CDBaby in terms of fees when publishing singles and albums. However, the distribution site advertises 100% royalty payout to artists, meaning they do not take any percentage of your royalty earnings when aggregating the income from the different stores. TuneCore also distributes to over 150 stores and streaming platforms, and advertise licensing support for songwriters if their music were to be played on film or TV, and other additional services

LANDR

Landr is another open distributor that distributes to over 150 stores and is either free or charges an annual fee of $20 to $90 depending on the subscription you choose and the services you require for your music. The flat fee that they charge per release also depends on the subscription you choose, as their LITE plan charges about the same prices for singles and albums as the two sites listed above, however if you opt for one of their paid plans, the flat fee is cheaper per release. LANDR also takes a commission off of your royalty sales that varies between subscriptions: 15% for the Lite Plan, 9% for the Complete Plan, and 0% for the Unlimited Plan. 

In addition to distribution, LANDR creates promo links for your music, Facebook and Instagram monetization, TikTok distribution, and more services under their subscription plans. Another service that LANDR offers is mastering that caters to the different streaming platforms. However, one must purchase a separate subscription plan for that service.

Distrokid

Distrokid is another commonly used open distributor in the industry, and releases your music to all of the major music stores and streaming platforms, and advertises their significantly lower rates for service, Distrokid charges an annual fee of $19.99 to upload an unlimited amount of songs. As stated on their website, Distrokid’s competitors charge “at least 2x that just to upload one album”. The biggest perk of Distrokid is that the artist receives 100% of their royalty earnings. They also offer bonus features such as the ability to obtain licenses to cover songs, YouTube monetization, and automatic “splits” to route income percentages to the appropriate parties.

United Masters

Rather than charging a flat fee per release, United Masters takes about 10% of your royalty earnings with each song or album you distribute through their platform and only distributes to about three stores. However, in order to take advantage of all of the benefits United Masters has to offer, artists should join what is called SELECT Artists, which is a paid membership program that offers 100% royalty payout, full distribution to over 35 stores, and fast and unlimited distribution. This program also offers access to brand deals that artists can use for exposure and promotion. Artists are also granted access to their analytics and real time data of their releases.

Ditto

Ditto Music is another distribution website that allows artists to keep 100% of their royalty earnings while charging an annual fee for its services. The three subscription plans are created for different types of entities in the industry that would require distribution services, dubbed Artist, Professional, and Record Label. They range from about $9 to $300 per year depending on the features you need and how many artists you want under the plan (ranges from one artist to forty). In addition to distribution, Ditto offers 24/7 artist support and full access to sales, analytics, and trending data that can help boost sales in the future. 

Spinnup

Spinnup is a subsidiary distribution platform that is owned by Universal Music Group. Fees for releasing music range from about $4.99 to $19.99 depending on how many tracks are in the project. Spinnup also pays out 100% of royalty earnings to artists with additional services such as promo links, artist sites, and the ability to upload lyrics and credits for every person or party behind the song. However, what is most unique about this distribution platform is that its direct connection Universal opens up artists to the opportunity to be discovered and signed to a major label. If Spinnup recognizes a top track that was uploaded through their services, the tracks will be sent to the A&R team at UMG, which may lead to the next step in your music career.

With all of the different ways music can be used, consumed, and distributed, there truly cannot be one set number to assign for how much streaming royalty rates pay artists. However, it is important to understand all of the factors that go into royalty payouts, and exactly where your income is generated, in order to ensure that you as an artist are seeing the maximum amount of earnings from your creations. As streaming takes over the music industry and consumers shift to platforms such as Spotify, Napster, and Pandora, it can be easy to miss out on potential royalty payouts due to lack of understanding and action on how royalties work. Whether you are signed or independent, every artist deserves the appropriate credits and reward from their music, and knowing the basics of royalty payouts is the best way to ensure you earn what you make from your work.