The dominance of current music streaming platforms in the music industry has been undoubtedly led by Spotify. Ask anyone today about their favorite music streaming platform and more times than not, people will answer Spotify. But how did Spotify get to the heights it now enjoys?
A Little History on Music Streaming
Let us take a short trip into the not-so-distant past to see what led to where we are now.
The innovation of lossless compressed music file called the MP3 in the late 90s was the format that gave rise to the dawn of a new musical revolution. With the MP3, music can now be downloaded and stored by the millions in small storage hardware.
File-sharing was the forerunner to music streaming and in 1999, the pioneering pirate venture, Napster, was first to the scene. Napster was a file-sharing platform that made peer-to-peer sharing of tens of millions of music tracks – all for free!
Napster did not reign for long as Lars Ulrich, drummer to Rock Hall of Fame metal act Metallica led the assault against Napster’s racketeering, copyright infringement, and general unlawful use of music that did not belong to Napster.
Several other forerunners to the Spotify business model were launched during the mid-2000s. The iTunes Music Store, Last.fm, and Pandora were key entities that Spotify based itself on. In a nutshell, Spotify took notes from Last.fm and Pandora’s innovative music recommendation algorithm idea and combined it with the business acumen of the iTunes Music Store. In 2006, Daniel Ek and Martin Lorentzon launched Spotify and the rest is history.
The Golden Standard
Spotify and the music streaming service they execute are today’s gold standard in music as an industry. Physical records are now just a novelty, and the money is made through subscription. Spotify is the world’s largest music streaming platform making a $10.5 billion revenue in 2020 alone.
With such astronomical profit, you can’t help wonder if artists who partner with Spotify are satisfied with what the streaming giant shared with them. How much do artists make on Spotify?
How Do Spotify Artist Payouts Work?
So, do they? To “work” would mean that a payout ensures both Spotify and artists under it both get the monetary compensation that will leave both parties satisfied. As mentioned, Spotify earned a declared revenue of $10 plus billion dollars in 2020 alone. This is after payouts to all its artists. One can be forgiven if they get the impression that with billions in revenue, Spotify has given its artists their piece of the pie.
So, does Spotify give back to artists their piece of the pie? Let us see what avenues artists get to generate income on the Spotify platform. Whether artists are justly compensated by the streaming giant or not will be up completely up to you.
How Much Does Spotify Pay per Stream?
The Spotify payout rewards an artist financially by being on the Spotify roster of artists. Through royalties paid per stream, an artist also gets monetary compensation per streamed track.
Artists in South America like Brazil and Argentina are said to receive around $850 per 1 million streams. That means an artist from those regions gets $.00085 per stream, while European artists receive $5,500 for the same 1 million streams or $.0055 per stream.
Statistics say that there is an average of $.003 compensation per stream worldwide.
Factors affect your Spotify royalty rate.
Payout per stream varies depending on a lot of different factors. But note that Spotify’s secret to generating a huge annual revenue is that the Spotify streaming platform is popular all over the world. And Spotify’s global popularity varies by how much they charge for premium membership. Spotify charges differently depending on what part of the world a Spotify Premium member is from.
Denmark is charged $18.39/month while India users pay only $1.58/month for the same Spotify premium membership. US users pay $14.99 while Philippine users only pay $2.55. This assures Spotify that the whole world is a premium member!
Spotify is willing to accept lower premium membership fees instead of risking being unpopular in developing countries. Meanwhile, premium members in developed countries like in the Eu and the US don’t mind paying a higher rate.
This discrepancy is the reason artists from different countries are paid a different amount per stream.
Who Truly Benefits From the Spotify Music Streaming Service?
We’d say everyone benefits from Spotify just not in equal quantities. Spotify itself has to be on top of the pile because honestly, who complains about billions worth of annual revenue?
Not the same can be said about artists under the Spotify banner. Artists may not be getting rich off of being on Spotify, but to not be on Spotify as a recording artist these days would be a great disservice to their careers. Spotify, as said before, has been the golden standard in music distribution and is the modern equivalent of the record label.
And of course, there are the ordinary Spotify premium members like you and me who are happy that we get to listen to all our favorite artists from one convenient app on our mobile phones. As long as there are artists who are pressured to be under Spotify, we will always have the convenience of listening to them whenever, and wherever we may be.
Things could be more ideal but as they say in these more trying times; it is what it is.
Supporting Spotify Artists Besides Streaming their Songs
Not that you are privy to how artists may scrape by in Spotify, wouldn’t it be a great proposition to further support smaller artists that badly need support from fans until they make it to the big time?
Independent artists first come to mind. Being under Spotify in these early stages of their careers virtually pays them nothing in terms of monetary compensation. If we want to hear more of their songs well into the future, it is imperative to know the proper way we support them.
Here are a few simple ways we can support emerging artists on Spotify:
Be a Spotify Premium Member
Spotify pays artists more when Spotify premium members stream their songs. If you play your favorite indie artist’s songs while being on a Spotify Premium membership, you not only increase your supported artist’s Spotify pay rate but give artists a chance to improve their Spotify growth. This way you chip away at emerging artists’ problem of how to make money on Spotify.
Purchase Artist records and other merchandise
Indie artists rely heavily on the sale of their records and merchandise. They may have an online copy of their latest album up for sale or a physical one. A CD or vinyl record is a great item to have and keep. Also, buy whatever they have for sale, like shirts, stickers, and other merch. You get a little piece of fandom to cherish while helping artists continue their careers.
Watch their gigs and concerts
There are a few things that can compare to watching your favorite artist perform live. Watch them live whenever you can. This will mean the world to them while you have a great time.
Spotify is the Future
Spotify is here to stay for better or for worse. Independent and their supporters have to take what they can from the platform and do what they can to move forward in a career that takes a lot to get rolling. Once they get to a point where everything gets better, They’d be thankful for Spotify for at least being a place where they have started.