The Reality of Spotify Royalties: How Much Do Artists Actually Earn?

The Reality of Spotify Royalties: How Much Do Artists Actually Earn?

In 2024, Spotify reported a record-breaking $10 billion in royalty payouts, marking a tenfold increase from its 2014 figure of $1 billion. While this milestone highlights the growing dominance of streaming in the music industry, it also raises critical questions about how much of this money actually reaches the artists and songwriters behind the music.

A Boon for Exposure, But Not Always for Earnings

Spotify has undeniably transformed the music landscape, providing artists with unparalleled exposure and a platform to build their fan base. However, according to music publicist Eric Alper, increased visibility does not always translate into financial stability.

Spotify does not pay artists and songwriters directly. Instead, it distributes royalties to rights holders, which include record labels, distributors, aggregators, and collecting societies. These entities then determine how much each artist and songwriter receives based on their contracts.

The Breakdown: Where the Money Goes

Spotify pays approximately two-thirds of its revenue to rights holders. However, by the time these funds trickle down through the revenue chain, only a small percentage ends up in the hands of musicians.

• Signed artists: Typically receive 10-20% of total earnings after their record label takes its cut.
• Songwriters: Face additional divisions, as mechanical and performance royalties are split among multiple stakeholders.
• Independent artists: While they avoid label deductions, they still incur distributor fees and publishing splits.

Charlie Wall-Andrews, a professor specializing in creative industries at Toronto Metropolitan University, emphasizes that despite the crucial role of music in making streaming platforms valuable, actual payouts to creators remain disappointingly low.

Industry Backlash and Legal Challenges

The fairness of Spotify’s royalty model has been a long-standing debate. In 2023, the company faced a lawsuit over allegations of underpaying songwriting royalties for tens of millions of songs. Additionally, several Grammy-nominated songwriters, including Amy Allen and Jessi Alexander, boycotted a Spotify awards event in protest of the company’s decision to reduce royalty rates for songwriters and publishers.

David Israelite, CEO of the National Music Publishers’ Association, criticized Spotify’s royalty structure, pointing out that its CEO, Daniel Ek, cashed out $376 million in stock in 2024—more than the estimated $320 million paid to all U.S. songwriters combined in the same period. Furthermore, Spotify recently implemented a bundling scheme that combines its premium music service with audiobooks, further reducing the already minimal payouts to songwriters.

The Harsh Reality of Streaming Payouts

Spotify’s 2024 Loud & Clear report revealed some staggering figures:

• 1,500 artists earned over $1 million in royalties from Spotify.
• 100,000 artists generated at least $6,000.
• More than 12 million creators have uploaded music to the platform, making competition fierce.

Despite these numbers, most artists earn only pennies per stream. While top-tier artists with massive streaming numbers can make significant income, mid-level and emerging musicians often find streaming revenue unsustainable.

Potential Solutions: A Fairer Model for Artists

The current pro-rata system, where revenue is pooled and divided based on total streams, often leaves smaller artists at a disadvantage. Alper suggests a fan-powered, user-centric model, where a listener’s subscription fee goes directly to the artists they actually play. This shift could significantly boost earnings for independent and niche musicians.

“Spotify isn’t the enemy,” Alper notes, “but the system needs tweaking to ensure that more artists—especially songwriters—can thrive.”

As streaming remains the dominant way people consume music, the industry must address these disparities to ensure that artists are fairly compensated for the value they bring to platforms like Spotify.