Questions and concerns about artist income from streaming have been around for over a decade. Since we launched it in 2021, our aim with this site is to provide a valuable foundation for a constructive conversation and to provide increased levels of clarity and transparency about this topic to the artist community. In sharing more information, we aim to answer questions and share useful resources about today’s streaming industry and Spotify’s role within it. We’re currently the only streaming service that makes this level of royalty data available, and we hope others will join in the conversation as well.
Your Questions, Answered
We know you have a ton of questions around music streaming economics and we want to make sure to get you the answers. We’ve included the questions we get most frequently from artists and will continue to add to this list as more questions come in.
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What’s new on Loud & Clear this year?
On March 19, 2024, we updated Loud & Clear with new information:
- We added 2023 royalty data across the entire site;
- We published a new set of Top 10 Takeaways at the top of the site to summarize all the data;
- We added more detail to the Revenue Generation Over the Years section;
- We added new “How They Made It” videos spotlighting artist stories; and
- We updated the Additional Resources section with partner guides and reports
Wasn’t the music industry better off before streaming?
Spotify plays a leading role in a healthier music industry, as a sort of radio station and record store all rolled into one — but without their limitations.
With radio, artists can reach lots of listeners. However, there’s limited space in a radio station’s rotation of songs, making it harder for artists to break through. And in some markets, not all artists are compensated for their music being played.
Artists benefit from a high purchase price in record stores, but physical and digital sales don’t generate money from all of an artist’s fans — only those willing to spend money to download tracks or purchase a full album. And again, there is the issue of limited space – not all artists are able to have their CD or vinyl on a shelf in a physical record store.
Spotify solves these challenges with streaming. Streaming is where fans come to put their favorite artists on repeat, but it’s also where casual fans discover new music or rediscover old favorites. And revenue is generated from both types of listening — from fans who pay for Spotify Premium to advertisers that fund Spotify’s Free tier. (We have well over 200M Premium subscribers, and more than 60% of first-time subscribers start out on the Free tier and then later upgrade.)
Based on our analysis of RIAA data, the music industry in the CD era favored superstars twice as much as it does today. At the peak of the CD era, 25% of US sales were accounted for by the top 50 artists. In 2023, only 13% of US streams on Spotify were of the top 50 artists — meaning that revenue opportunities now reach far beyond the biggest stars.
When Spotify launched in 2008, the global recording industry was being ravaged by piracy — spiraling downward from 1999’s peak of over $24 billion in revenue to the industry’s low point in 2014, when the combined market of physical and digital sales was $14 billion.
Since then, streaming has powered the resurgence of the music industry. Spotify’s all-time payouts to music rights holders now stand at ~$48 billion.
When you consider the growth of the overall royalty pool paid out to rights holders and the expanding number of artists succeeding thanks to streaming, we believe the future is incredibly bright for artists’ careers. The IFPI’s* 2024 report showed that the global recorded music industry in 2023 has far surpassed the 1999 peak — reaching $28.6 billion as an industry.
*All statements on this website attributable to IFPI represent Spotify’s interpretation of data, research opinion or viewpoints published as part of the IFPI Global Music Report in March 2024, and have not been reviewed by IFPI. Each IFPI Publication speaks as of its original publication date and not as of the date of this report (March 25, 2024).
Is streaming only helping music’s biggest stars?
No. Streaming has fundamentally changed the music ecosystem — lowering barriers to entry and democratizing access to audio for listeners across the world. Artists no longer need big budgets to create, distribute, and amplify their music around the world.
More artists are sharing in today’s thriving music economy compared to the peak of the CD era. In the heyday of CDs, nearly 25% of US sales were accounted for by the top 50 artists. On Spotify in 2023, only 13% of US streams were from the top 50 artists –– meaning that today, revenue opportunities reach far beyond the superstars.
We’re seeing that Spotify royalties are powering artists’ careers at all stages. In 2023, 66,000 artists generated $10,000+ (up from 23,400 in 2017). And careers don’t just start on Spotify, they grow on Spotify. Of the 23,400 artists who generated $10,000+ in 2017, nearly half generated more than $50,000 in 2023, and likely $200,000 overall across all recorded revenue sources.
On the other end of the spectrum, Over 80% of the artists who generated $1,000,000 on Spotify in 2023 didn’t have a song reach the Top 50 of Spotify’s Daily Global Songs chart. In the streaming era, the charts aren’t big enough to contain all of the artists finding success. Fans’ tastes are more diverse, and the royalty pool is increasingly massive ($9B!) – which means more revenue to a wider range of artists, many of whom aren’t household names and didn’t need a “hit” song to have a big year.
I heard Spotify pays a fraction of a penny per stream. Is that true?
In the streaming era, fans do not pay per song, so we don’t believe a “per stream” rate is a meaningful number to analyze. Spotify, like every major streaming service, pays royalties based on an artist’s share of overall streams across the platform. We call this “streamshare.”
Spotify is focused on maximizing the total size of the payments we are able to make to rights holders — those that pay artists and songwriters — and the data on this site reflects our progress. We pay out more than any other streaming service; in fact, Spotify paid the music industry more money than ever in 2023: $9B+. That figure has nearly tripled over the past seven years, and represents a big part of the $48B+ Spotfy has paid since its founding.
And our incentives are aligned with artists — the more revenue we generate, the more payouts for artists. Along with every major streaming service, we pay out roughly two-thirds of every dollar we generate from music back to artists’ and songwriters’ rights holders.
Still, we understand that artists find it useful to calculate an effective “per stream” rate — dividing the total size of the royalty pool on Spotify by the total number of music streams on Spotify. We dig into that in the “Why does the ‘per stream rate’ appear lower for Spotify than some other streaming services?” question on this page.
Our model drives more fan engagement and generates revenue from more places, which means larger total checks from Spotify to rights holders. That’s why we pay more than any other service. We make some choices that decrease the effective “per-stream rate,” but we believe we are maximizing overall revenue and generating the most possible money for rights holders and their artists and songwriters.
Why does the “per stream rate” appear lower for Spotify than some other streaming services?
In the streaming era, fans do not pay per song and no major streaming services pay per stream, so we don’t believe that a “per-stream rate” is a meaningful number to analyze. Still, we understand that artists find it useful to calculate an effective “per stream” rate or, in other words, a revenue-to-streams ratio — dividing the total size of the royalty pool on Spotify (the numerator) by the total number of music streams on Spotify (the denominator). Both of these numbers are growing incredibly quickly every year.
There are a number of factors that contribute to that ratio looking small, which we understand can seem problematic. We don’t believe it is; we are confident our model is maximizing revenue for everyone.
There are three key business decisions we make to maximize revenue to rights holders. Even though they decrease the effective per-stream rate on Spotify, we believe artists care more about a larger paycheck than a higher per-stream rate.
High Streams per Listener: First, the average subscriber to Spotify listens to more music per month than on other services. That means more listeners discovering more artists, more opportunities to deepen engagement with listeners, and more chances to convert listeners into fans who buy tickets and merch. This engagement — as well as the millions of new Spotify listeners signing up every month — impacts the denominator of the revenue-to-streams ratio.
More Global Audience: Second, Spotify is more popular in countries with lower prices, which makes our revenue-to-streams ratio look lower compared with services not focused on those markets. Meeting listeners at an affordable price for them is the way to generate revenue from these markets that wouldn’t have been captured otherwise. Growing into these territories increases total revenue for the industry and for artists, which increases the size of the royalty pool for rights holders. This impacts the numerator of the ratio.
Ad-Supported Tier: Third, unlike many of our competitors, Spotify runs both a Premium subscription service and a free ad-supported service — so looking at Spotify’s revenue-to-streams ratio next to subscription-only competitors isn’t a direct comparison. While the ad-supported service doesn’t generate as much revenue per user as the Premium service, we’ve conducted extensive testing that consistently shows that when we take the free service away, those listeners turn to non-revenue-generating alternatives, meaning the collective music industry would miss out on revenue. The 2024 IFPI report found that across the industry, revenue from ad-funded streaming increased 10% (to $5.3 billion) in 2023 and now has surpassed revenue from sales of physical formats. This also impacts the numerator of the ratio. Offering an ad-supported service is also one of our most useful mechanisms for getting listeners to pay for music: More than 60% of first-time subscribers start out on the Free tier and then later upgrade. Again, this means we are maximizing the revenue for everyone.
How do artists and songwriters get paid?
Spotify doesn’t pay artists or songwriters directly.
Spotify primarily makes money for music from two sources — Spotify Premium subscribers and advertisers on Spotify’s Free tier. Approximately two-thirds of this money is paid out to music rights holders to what we call the “royalty pool.”
Spotify allocates that royalty pool based on each rights holder’s streamshare on Spotify. This money is not divvied up based on a fixed amount per stream because Premium subscribers do not pay per stream; they pay a subscription fee for access.
From here, we encourage you to check out the following videos: How the Money Flows, and How the Money Flows (Publishing Edition).
How is streamshare calculated?
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.
I’ve read a lot about artificial streaming and noise on streaming services. How does this impact the Spotify royalty pool?
As Spotify payouts to the music industry continue to grow – over $48B and counting – we want to make sure that the money is going to the people our platform is designed to enable: emerging and professional artists.
However, as the royalty pool and catalog on Spotify have surged, three particular drains on the royalty pool have now reached a tipping point. So, we’re working in close collaboration with industry partners – artist distributors, independent labels, major labels, label distributors, and artists and their teams – to introduce new policies to (1) further deter artificial streaming, (2) better distribute small payments that aren’t reaching artists, and (3) rein in those attempting to game the system with noise. While each of these issues only impacts a small percentage of total streams, addressing them now means that we can drive approximately an additional $1B in revenue toward emerging and professional artists over the next five years.
You can read more about the new policies here.
Why don’t songs with less than 1,000 annual streams earn recording royalties on Spotify anymore?
In November 2023, we announced a set of new royalty policies coming to Spotify in early 2024, aiming to direct an additional $1 billion to emerging and professional artists over the next five years.
One of the new policies is that tracks that don’t have at least 1,000 streams in the past year will no longer generate recording royalties on Spotify. Spotify makes no additional money under this model, and the policy has no impact on the total size of the music royalty pool paid out by Spotify.
This policy targets the population of tens of millions of tracks on Spotify that generate only $0.03 per month on average. In the aggregate, these tracks with under 1,000 annual streams represent 0.5% of total streams (and therefore 0.5% of the total royalty pool). Now that Spotify’s royalty pool has become so large — $9B+ in 2023 alone — 0.5% is now a material amount, around $40 million.
In developing this policy, our focus was on making sure as much money as possible reaches the people our platform is built to serve, emerging and professional artists. Because labels and distributors require a minimum amount to withdraw (usually $2-$50 per withdrawal), and banks charge a fee for the transaction (usually $1-$20 per withdrawal), this money often doesn’t reach the uploaders. And these $0.03 monthly payments are often forgotten about.
We believe it’s more impactful for these tens of millions of dollars per year to increase payments to those most dependent on streaming revenue — rather than being spread out in tiny payments that typically don’t even reach an artist. 99.5% of all streams are of tracks that have at least 1,000 annual streams, and each of those tracks will earn more under this policy.