How Do Artists Make Money From Spotify? Spoiler: With Great Difficulty…
Spotify is the world’s #1 music streaming service but in order to make the big bucks on the platform, you need to be getting BILLIONS of streams a year…
Spotify is an odd thing when viewed from the perspective of an artist. On the one hand, it allows you to reach potentially millions of new fans every day. But there are plenty of downsides; Spotify payouts are not great – we’re talking less than what an artist would have made from CD sales back in the day.
For instance, say your new band managed to snag itself 1000 streams. That’s pretty good, right? It is, especially for a generally unknown artist. This many streams, based on Spotify’s 2019 payouts, would net you around $3 to $4 MAX, so enough for a large coffee.
How Spotify Collects Money & Distributes It To Artists
Spotify runs on membership fees, you sign up and pick an account type (as of right now there are several options). This money goes into a kitty and, is then allocated to artists based on how many streams their music gets, minus Spotify’s business costs – both fixed and variable.
Now, a company the size of Spotify will generate A LOT of money over the course of a year. But growth in the tech space comes with plenty of costs; you need staff, you need premises, you need developers, and you need marketing. And these things all cost money, of course – Spotify is a business and it has all the usual business costs.
Spotify is, however, in its simplest form a profit-sharing enterprise: all the profits it generates are shared via dividends with its artists – either directly or to their respective labels and/or handlers. Where problems start, however, is that payouts for smaller artists are usually terrible – like $5 a month for 2000 streams. And that’s not going to pay the bills.
How much does Spotify pay per play? According to the most up to date information, Spotify pays anywhere between $0.006 to $0.0084 per play to the rights holder of the song. This money is sent to a bank account, usually the label’s, and is then shared with management, the artist, and whoever else owns a slice of the pie.
Even Mariah Carey Struggled To Make Money on Spotify…
Mariah Carey and her songwriting partner wrote “All I Want for Christmas is You” in 15 minutes back in 1994. Since then, the song has gone on to earn them around $60 million in royalties, through radio airplay, use in films and media, and, of course, through CD and cassette sales back in the day.
$60 million. Let that sink in for a moment.
A few Christmases ago, “All I Want for Christmas is You” topped the charts on Spotify, securing 11 million streams within 24 hours on December 24. Can you guess how much money this made? Based on the above figure, Mariah and co would have netted just $92,4000 from Spotify.
Less than $100,000 for 11 MILLION streams in a single day.
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Most artists on Spotify, like 99.9% of them, will never even get close to 1 million streams throughout their entire career let alone 11 million. And even if they did, and then had to split the proceeds between all parties involved, they still wouldn’t be making enough to live. Slipknot, for instance, has nine members, management, and a label.
Can you imagine how diluted that money must be by the time it makes its way into the band members’ pockets?
This is why most bands focus on things like touring and merchandise to generate income. However, given the current state of the world, and the fact that most bands won’t be able to tour until well inside 2021, things have never been tougher for smaller, independent recording artists and bands.
How Wilco Changed The Game By Becoming A Business
Wilco is one of my favorite bands. I’ve followed them for years. A couple of years ago I read an interview with Jeff Tweedy about his decision to incorporate the band as a business so that the band (not the label or management) owned and controlled the band’s music and business ventures.
By cutting out the middlemen and management, you have to do more by yourself – from planning tours to raising funds for tours and recording. But at the end of the day, all the money generated from these endeavors flows back to the band. They do not have to share it with any bottom-feeders.
Jack White set up Third Man Records in 2001. It releases new music, develops artists, and reissues classic albums on vinyl. Third Man Records has two physical locations in the USA, a recording studio, and its own vinyl pressing plant.
Wilco is a big band; they’re well known and well respected. But can newer bands and artists learn from this? I think so, yeah – I mean just look at how many artists have come up just using Instagram and Spotify. Did they need a label? Nope. All they needed was a phone and a bit of talent. The DIY nature of music is coming back but corporate entities are always circling, ready to promise the earth in return for control.
I think the key thing here is not how much Spotify pays, but that bands and artists need to be savvier, more business-minded. They need to learn that, no, you do not need to give control of your music to a third-party, not if you can learn to promote and distribute it yourself. And now, thanks to things like YouTube, Instagram, and Spotify that has never been easier. Wilco and Jack White do this, as do a lot of hip hop artists. Younger and less established artists would do well to follow in their footsteps.
