How Spotify Pays Artists: The Flow of Money from Ads and Subscriptions

Streaming has become the dominant revenue source in the music industry, accounting for 84% of earnings in the U.S. and 67.3% globally. Spotify pays artists through a streamshare system, where subscription fees are pooled and distributed based on the number of streams each rights holder receives. This model has faced criticism for favoring major labels and popular artists, leaving independent musicians struggling to earn a sustainable income from streaming alone. The concept of a per-stream payout is misleading, as it varies significantly depending on the number of streams a listener plays in a month. For instance, a single stream could yield a higher payout than multiple streams, complicating the understanding of earnings for artists. Many musicians find it challenging to make a living solely from streaming due to the opaque nature of the payout system and the way music is consumed today. Artists who create longer compositions or music not suited for background listening often do not benefit from the current streaming model. As a result, there are calls for a shift to a user-centric payment system that could better support independent artists. The ongoing debate highlights the need for a more equitable distribution of streaming revenues. In May 2024, Spotify's decision to include audiobooks in its premium subscriptions led to a decrease in royalty rates for U.S. songwriters. This change underscores the complexities of the streaming landscape and the ongoing challenges artists face in securing fair compensation for their work.