Spotify, the world’s leading paid music streaming platform, announced earlier this year that it had paid over $10 billion to the music industry in 2024 alone. This brings its total payout since its launch in 2006 to nearly $60 billion. The company claims that 70% of its revenue is distributed to the music industry, making it one of the most lucrative platforms for artists and rights holders.
In its recent “Loud & Clear” report, Spotify highlighted that over 1,500 artists made more than $1 million in royalties from the platform in 2024. Independent artists and labels collectively earned over $5 billion. Compared to a decade ago, when Spotify’s annual payout was just $1 billion, today’s figures indicate a tenfold increase.
These numbers suggest that more artists are making money than ever before. In fact, in 2014, the highest-earning artist on Spotify made just over $5 million. Today, more than 200 artists surpass that amount. However, despite these promising figures, many songwriters continue to struggle financially.
The Reality Behind Streaming Royalties
One of the key issues with Spotify’s payment system is how royalties are distributed. Spotify, like most streaming services, does not pay artists or songwriters directly. Instead, payments are made to record labels and music publishers, who then distribute the earnings after deducting their own percentages. This means that while some artists may generate millions, their actual take-home amount is significantly lower.
Over the past two years, Spotify has paid over $4.5 billion to music publishing rights holders—entities that represent songwriters. In 2024 alone, these payments reached an all-time high with double-digit growth from the previous year. However, songwriters still receive only a small fraction of the streaming revenue.
Why Do Songwriters Get Paid So Little?
According to a report by MIDIA Research in 2024, Spotify pays approximately $0.004 per stream. This amount is split as follows:
- 56% goes to the recording side (labels, distributors, and artists)
- 30% is retained by Spotify
- 14% goes to the publishing side (publishers, performing rights organizations, and songwriters)
Out of the 14% allocated to publishing:
- 68% goes to songwriters
- 17% goes to publishers
- 15% goes to performing rights organizations (PROs) like ASCAP or BMI
While 68% might seem like a significant share, it is further divided among multiple songwriters, producers, and managers. Many modern songs have between 3 to 12 songwriters, meaning each person gets only a tiny portion of the revenue. By the time managers and other industry professionals take their cuts, the final payout per songwriter is almost negligible.
Structural Issues in Royalty Payments
One major issue affecting songwriter earnings is that their streaming royalties are regulated by the Copyright Royalty Board (CRB). Unlike recording royalties, which are negotiated directly between streaming platforms and rights holders, publishing rates are set through a complex legal process. This has long been criticized by the music industry for being outdated and unfair.
While there have been improvements, such as the CRB increasing songwriter and publishing streaming rates by 23% for 2023-2027 (bringing the rate to 15.35% of a streaming service’s U.S. revenue), many challenges remain. A recent controversy arose when Spotify bundled audiobooks with music subscriptions, leading to a reduction in overall royalty payouts. Billboard estimated that this move would cost the music industry $150 million in lost revenue within a year.
Are Big Labels Benefiting More?
Major record labels like Universal Music Group and Warner Music have recently renegotiated licensing deals with Spotify. While these deals have reportedly led to higher payouts for labels, they have not significantly improved earnings for independent artists and songwriters. The exact terms of these agreements remain undisclosed, raising concerns about transparency in the industry.
Did Streaming Save the Music Industry?
Despite these challenges, it is undeniable that streaming has played a crucial role in reviving the music industry. Before the rise of platforms like Spotify, the industry was in decline due to piracy and falling physical sales.
According to Spotify’s report, the 100,000th-ranked artist on the platform saw their annual earnings increase tenfold from less than $600 in 2014 to almost $6,000 in 2024. Similarly, the 10,000th-ranked artist saw earnings rise from $34,000 to $131,000 during the same period. These figures suggest that even smaller artists are earning more from streaming than ever before.
The Need for a Fairer System
While streaming has helped many artists earn a sustainable income, the distribution model remains flawed. The system was originally designed when streaming revenue was much lower, and changes are needed to ensure fair compensation for songwriters.
Various proposals have been made to reform streaming royalties, including user-centric payment models and higher songwriter royalties. However, real change can only happen if policymakers, music companies, and streaming platforms prioritize the interests of the creators who make the music industry possible.
At the end of the day, music is the foundation of the industry, and without fair compensation for songwriters, the long-term sustainability of the business remains uncertain. The challenge is to find a balance between supporting artists, rewarding songwriters, and ensuring platforms like Spotify remain viable for future growth.
Artists looking to distribute their music globally, including on Apple Music, Spotify, JioSaavn, and other platforms, can explore Deliver My Tune’s music distribution services. Reach millions of listeners and grow your audience today!
