Content: 1. how much can you earn from Spotify's streams?
2. Spotify royalties compared to other music streaming platforms
3. But who pays more money to artists?
4. How does the Spotify calculate your royalties?
5. Listeners Country origin
6. Premium or Free
7. What are the changes made by Spotify recently?
8. Minimum of 1,000 streams
9. Penalty digital distributors for bot streams
10. Sound effects and white noise royalties
11. So how much does Spotify pay per stream eventually?
12. How to earn more money on Spotify
You uploaded your music online, and it's finally on Spotify. For every artist, the next question that comes to mind is how much Spotify pays per stream or how many streams you need to get a nice passive income. This article was made to shed some light on streaming royalty payments on Spotify, Apple Music, and other streaming platforms, how much revenue you will be able to make using Spotify and the different streaming platforms, a comparison between the different streaming platforms, who pays the most and who pays less.
So, how much can you earn from Spotify's streams?
On average, Spotify's payout rates for artists are between $0.003 and $0.004 per stream.
Starting in January 2024, Spotify will start paying artists once they reach 1,000 streams in the last 12 months.
In other words, if you reach 1 million streams, you will receive about $3,000 to $4,000 in royalties throughout your digital distribution. If you're the rights holder for the Rolling Stones band, this can be summed up to big numbers, but for the beginner independent artist, it will take a lot of time to generate significant revenue from Spotify.
Spotify royalties compared to other music streaming platforms
So, as we all know, Spotify is the most popular music streaming service on the planet.While Spotify has more than 300 million users, Apple Music has about 80 million users. Tidal is estimated to have at least 3 million users; Amazon Music has about 82 million users.
This is why so many musicians are aiming Spotify to be their music promotion platform.
But who pays more money to artists?
There are a few factors to be considered here, such as how long a song needs to be streamed in order to be considered eligible for royalty, monthly listeners, whether you are working with a record label or a digital distributor, and more.
But just to simplify the question, here's a rough estimation for how much artist revenue will be generated with a million organic streams over the different music platforms:
Spotify: $3,400
YouTube Music: $7,350
Apple Music: $6,750
Amazon Music, $4,250
You can check out this Streams calculator to find out more.
No doubt, Spotify pays artists very small amounts of money per stream, but then again, it's the biggest music streaming platform, and it is most likely to generate you, as an artist, the highest total of royalties compared to other streaming services.
Bear in mind that the numbers are not accurate and could be effected by different factors effecting your royalty payments.
How does the Spotify calculate your royalties?
Similar to numerous other on-demand streaming services, Spotify has a distribution mechanism referred to as "pro-rata."
There are three different criteria taking place in order to calculate your artist's earnings.
1. The agreed-upon worldwide payout terms
2. The total number of streams on Spotify
3. The overall income stream from Spotify's streams
There is therefore no such thing as an all-in-one revenue pool in the streaming industry, and not all streams are equal. Every track and every artist can generate different streams. There are many factors to be considered: the local market, your country, premium listeners account, and so forth.
The pay-per-stream rate for each artist that releases music will fluctuate constantly because hundreds of factors might impact total earnings.
Listeners Country origin
Spotify premium prices are different in every country; for example, an American Spotify listener will not pay the same amount of monthly subscription fee as a premium user from Africa.
That being said, an American listener will generate artists more royalties per stream than an African one.
Premium or Free
A premium listener pays a monthly fee, compared to a free listener who pays none.
Spotify is calculating all the premium streams and the free streams and it is not rewarding the artists equally, meaning artists are getting paid more when the listeners are premium users
Also, the question of how much does Spotify pay per stream is about to receive a different answer starting in 2024.
What are the changes made by Spotify recently?
Spotify made some serious changes recently that will effect streaming payouts in the music industry.
There are three major changes that will be effective starting in January 2024:
Minimum of 1,000 streams
1) Tracks will have to generate at least 1,000 streams in the previous 12 months in order to generate royalties. Meaning, if you release a track and it doesn't generate 1,000 streams within the first year, you will not receive royalties for it. Why was this change made?
Digital services and similar music services tend to release royalties to independent artists once they reach a minimum of $50.
Spotify used to wire the royalties to the digital distributors, and they would keep up to $50 until they paid artists. This means these small music royalties will now park at Spotify instead of staying at the different music distribution services. These small streaming payouts can eventually add up to millions of dollars. We will start seeing digital distribution companies shut down in the next few years, and the bigger distributors will most likely raise their artist subscription fees in order to handle the loss of income.
Penalty digital distributors for bot streams
Spotify claims they are making a huge effort to block all bot streams generated on their music platform.
and for obvious reasons, no one likes to pay valuable royalties for a fake activity. Spotify will start taking action against distrusters of artists that are using fake bot services to generate fake streams and manipulate their stream count. In some way, this is good news for the hard-working, genuine artists, but I doubt if that will lead to more payment coming back to the "real" artists. In terms of earnings, Spotify is not in good shape, and it's not been a very profitable company over the last decade. It does generate a lot of revenue, but in the bottom line, there isn't much money left after all the expanses and exceeding licensing fees for the major record labels. In fact, it's more bad news for music critics. These companies will start to pay fines, which will be deducted from their future royalties. They will also have to develop new technical ways to evaluate each artist to track and remove fake streams; this costs money and human resources. Like the previous change mentioned above, this will most likely cause the smaller distributors to close their doors and the bigger distributors, such as CDBABY, Ditto Music, or Distrokid, to raise their artist fees in order to be profitable.
Sound effects and white noise royalties
Up until now, Spotify counts a stream once a track has been listened to for more than 30 seconds, and it was calculated as streaming revenue.
Different users have uploaded many sound effects and short white noises and generated earnings from short snippets of sound effects.
This was unfair to artists who've spent months producing songs. I'm actually surprised it took so much time for Spotify to handle this matter, but better late than ever.
Starting in 2024, users will have to listen for at least two minutes in order for it to be eligible for streaming royalties. This change applies only to "white noise" recordings or sound effects and will not effect music or songs, according to Spotify. This means Spotify will have to pay lower royalties for white noise creators and keep more money in their bank account.
This is good news for hard-working artists, but then again, I'm very skeptical if we will see a positive impact on genuine independent artist earnings, and most likely the unpaid royalties will stay on Spotify.
So how much does Spotify pay per stream eventually?
After all the new changes, Spotify will not change the amount of streaming it pays to independent artists, but it did change when and how they would pay these royalties. If you're an artist just starting out, these shouldn't bother you too much. Streaming royalties are not something you should count on, especially in the beginning when you are trying to get your foot in the door. Sources of income for artists are variable and should come from different areas within the music industry. Read more about this in our article: 12 Best Ways to Make Money as a Musician
How much royalties Spotify paid over the years?
Here is a breakdown of the money Spotify has given to artists in years;
2020
During 2020 Spotify announced that it had handed out, than $5 billion in total payments to the music industry. These payments went to record labels, publishers and artists directly.
2021
In the year 2021 Spotify disclosed that they distributed over $7 billion in royalties to the music industry. This marked a rise from the year.
2022
For 2022 Spotify revealed that they paid out more than $9 billion in royalties continuing the trend of increasing payouts each year.
2023 (up to August);
As of August 2023 Spotify has not provided full year figures for royalties. However judging by their growth pattern its estimated that they likely disbursed between $10 12 billion in royalties during the first eight months of 2023.
Overall since its establishment in 2008 Spotify states it has paid out over $30 billion, in royalties to the music industry. The payouts have consistently increased annually as Spotifys subscriber base and revenue have grown.The way royalties are divided and the actual amount received by artists are debated topics, in the music industry. Numerous artists, those who're smaller or independent believe that the royalty rates, per stream are insufficient.
How Profitable Is Spotify?
Spotify has not been consistently profitable, as a company. Lets take a look at Spotifys performance over the years;
Since its establishment in 2008 Spotify has mostly reported net losses. The company has focused on expanding its market share than profitability.
In 2020 Spotify recorded its net profit of €15 million marking a significant achievement for the company.
However in 2021 Spotify went back to reporting losses with a full year loss of €34 million.
By 2022 Spotifys net losses widened to €709 million as it continued investing in podcasting, research and development (R&D) and international expansion.
While the companys gross margins have shown improvement over time substantial operating costs related to sales, marketing and content acquisition have offset these gains. Kept Spotify in the overall.
Spotify anticipates achieving full year profitability in the " term" by expanding its subscriber base and enhancing profitability, per user.
To sum up although Spotify has had quarters at times it has not managed to sustain annual net profits since its inception.
The company is concentrating on expanding its operations to capture a market share prioritizing long term growth, over profits. Spotify continues to face the challenge of maintaining profitability in the competitive music streaming industry.
Spotify plans for the future
Spotify is getting ready to make some changes, to its subscription plans. The music streaming service is planning to raise its prices in countries, including the U.S. And introduce a subscription option as reported by Bloomberg.
By the end of April Spotify is looking to increase the cost of subscriptions by $1 per month. Family and Duo plans by $2 in the U.K., Australia and Pakistan. In the U.S. prices are expected to go up " this year."
Additionally Spotify will introduce a tier that allows users to stream music and podcasts but not audiobooks. This tier will be priced at $11 per month. Users interested in audiobooks will need to pay extra.
The time Spotify raised its prices was year when it bumped up the cost of its Premium subscription from $9.99 to $10.99, per month.
The cost of Spotifys Premium Family plan has gone up to $16.99, per month from $15.99. Similarly the price for Premium Duo now stands at $14.99 up from $12.99 while Premium Student increased to $5.99 from $4.99. These price adjustments are notable as Spotify had not raised its prices in around 12 years until year.
Spotify recently alerted its investors about price hikes in 2024. In a call held in February Spotifys CEO Daniel Ek mentioned that the companys investment threshold had risen, potentially leading to some modifications.
Ek stated, "We have strategies to boost revenue growth over time " adding that these strategies include expanding user base developing ventures with additional revenue streams and enhancing revenue per user through price increments.
A photo of David Kaefer attending The Future of Audiobooks Event with Spotify 2023 in New York City, on October 3rd, 2023.
Spotify has been making strides in the audiobook industry with an addition of 200,000 audiobook titles, to its U.S. Platform for premium subscribers who can access up to 15 hours of audiobooks monthly.
In the quarter of 2023 Spotifys gross margin saw an uptick to 26.7% from the previous quarters 26.4% despite facing startup costs related to audiobooks. CEO Ek mentioned during an earnings call in February that Spotify became the provider of audiobooks after Audible showcasing growth in a competitive market.
The push into audiobooks came before Spotify announced layoffs affecting 1,500 employees in December representing a workforce reduction of 17%. Ek attributed this move to the companys efforts to streamline costs and optimize its structure, for sustainability.
How to earn more money on Spotify
So how can you generate more streams and more royalties on Spotify? The answers are playlists, In order to get more streams and more listener rotation, you'll need to get on organic playlists.
This is where we can help you.
Our platform offers music submissions to independent organic curators, including Spotify playlists, music blogs, online radio stations, YouTube channels, and TikTok influencers.