Spotify is one of the most popular music streaming services worldwide, and it has significantly changed the way people consume music. It has also become an essential source of income for many musicians, allowing them to reach millions of listeners and earn money from their music.
However, the way Spotify pays royalties to artists has always been a topic of discussion among musicians and industry experts. In this article, we will explore how Spotify royalties actually work in 2023.
How Spotify Calculates Royalties:
Spotify pays royalties to artists based on the number of streams their music receives on the platform.
However, the amount paid per stream is not fixed and can vary depending on several factors. In 2023, Spotify implemented a new system for calculating royalties, which takes into account the following factors:
- The total revenue generated by Spotify: Spotify pays a percentage of its revenue to artists as royalties. In 2023, this percentage has been fixed at 50%. This means that 50% of Spotify’s revenue goes to paying artists for the use of their music.
- The total number of streams received by an artist: The more streams an artist receives, the higher their earnings from Spotify. In 2023, Spotify changed the way it calculates streams to make it more equitable for all artists. Instead of paying a fixed rate per stream, Spotify now pays a variable rate based on the total number of streams an artist receives. This means that artists who receive more streams earn more money per stream than those who receive fewer streams.
- The country of the listener: The royalty rates vary depending on the country where the listener is located. In countries with higher living standards, the royalty rates are generally higher. This is because listeners in those countries are more likely to pay for a premium subscription, which generates more revenue for artists.
- The type of subscription: Spotify offers different subscription plans to its users, and the royalty rates vary depending on the type of subscription. Premium subscribers generate more revenue for artists than free users. In 2023, Spotify introduced a new subscription plan called Spotify Platinum, which offers exclusive access to certain artists’ music. Artists who are part of this program earn higher royalties than those who are not.
- The popularity of the track: Spotify pays more royalties for popular tracks than for less popular ones. This means that artists who have a larger following and receive more streams earn more from Spotify. In 2023, Spotify introduced a new system for measuring popularity, which takes into account not only the number of streams but also the engagement of the listeners. This means that artists who have a dedicated fan base that listens to their music repeatedly earn more from Spotify than those who have a lot of one-time listeners.
How Royalties are Distributed:
Once the royalties are calculated, they are distributed among the rights holders of the track. The rights holders include the artist, the record label, and the publisher. In 2023, Spotify implemented a new system for distributing royalties, which aims to make the process more transparent and equitable.
Under this system, royalties are distributed in the following manner:
- The artist receives 50% of the royalties: The artist who created the music receives 50% of the royalties generated by their tracks. This means that if an artist earns $100 in royalties, they receive $50.
- The record label receives 35% of the royalties: The record label that owns the rights to the music receives 35% of the royalties. This means that if an artist earns $100 in royalties, their record label receives $35.
- The publisher receives 15% of the royalties: The publisher who helped to distribute the music receives 15% of the royalties. This means that if an artist earns $100 in royalties, their publisher
Spotify’s new system for calculating and distributing royalties is designed to make the process more transparent and equitable for all artists. The new system takes into account several factors, and it ensures that all rights holders of the track receive a fair share of the earnings.