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Spotify paid out a record £7.7bn in royalties in 2024 – debate continues about how much money artists and songwriters receive in royalties
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- Title
- Spotify pays $10bn to music industry as debate over royalties continues
- Published
- Mar 12 2025
- Word count
- 480 words
I find it odd that this article doesn't mention that Spotify reported a profit for the first time in its history last year. Seems worth mentioning when a company is patting itself on the back for how much it's paying artists, even though no one in their right mind would say it's paying those individual artists enough.
I would. Royalty rates are determined by a panel of US federal judges, the CRB. All music streaming services at least meet this requirement.
Spotify then operates on a pro rata model, allocating something like 70-80% of all income from subscriptions and ads to paying royalties. (And obviously their infrastructure is very expensive.) Shares of that are determined by the number of plays.
This means the payout is, however, a zero-sum game: the existence of Taylor Swift, Bad Bunny and The Weeknd (the most played artists, last I checked) literally takes potential income away from every other artist due to their oversized listenership.
Also, Spotify doesn't pay artists. Spotify pays record labels and distribution companies. If you're a small artist using DistroKid/LANDR/TuneCore, you probably get to keep 100% of very little. If you're a large artist signed to a label, they pay you pennies on the dollar or what they're taking in.
I've done napkin math before as well and determined that streaming at the CRB rate is easily on par with iTunes pricing. Assuming one listens to a song a couple of hundred times either way, there's no difference between ~$0.70 out of a $0.99 purchase (Apple/Amazon/etc 30% cut) vs streaming the song over the course of a year or two...and streaming will be a higher value over a longer period. And back then, Napster was the alternative to iTunes, not buying albums for $20+ in early 2000s money at stores.
The simple economic fact is that there is a vast supply of options for music now (which is an amazing thing), rather than the relatively limited homogeny of artists that had albums pressed en masse, and finite human attention. Thus, the value of the good is worth relatively little. Value comes from what customers are willing to pay, not some inherent magical property. We're now at the point that unknown artists pay middlemen to pitch tracks to people who curate large playlists on Spotify, literally paying for attention, because there's such a vast sea of new things.
It doesn't seem to me that an artist just starting out with 10k listens should only get 0.1% as much money as an established artist with 10m listens.
In an ideal world, sure. But the music business has always been tough. At least with these various streaming services, a small artist can share their music with people around the globe who randomly find it, instead of just a handful of people in their city who showed up to their one show at a random bar (and likely weren't even there to see them).
And this applies well beyond recorded music. Professional choir/chorus members are often "volunteer," even if they're performing with a symphony and/or lead vocalists who do get paid. But instrumentalists (typically) still don't make enough to live off that income. There's a running joke about how musicians have to marry someone who doesn't work as a musician... and there's some truth to it.
Isn't that the case in basically every creative space?
Lots of people want to be movie stars, professional streamers, Broadway actors, famous artists, etc, but very few ever do, because most people listen/watch/view the same stuff as most other people, so you have a very tiny handful of slots for extremely successful creative people, a few more slots for moderately successful creative people, and then a whooooooooole ton of people who can never possibly make a living doing their passion.
It would be nice if they all could of course, but the world has never worked that way.
Consumers are free to give more money to artists, but they consistently vote with their wallets to give as little as possible. How many people on Tildes bitch about price increases on streaming services even though today's consumer has access to a far wider pool of content, on demand, and at higher quality for a lower cost than they've paid in absolute and adjusted dollars than in the past?
In order for Spotify to pay individual artists "enough", there would have to be a drastic price increase. Double, triple, maybe quadruple. Spotify passes on a percentage of revenue; if they gave up their entire cut, which is completely unrealistic, it would still not be "enough". That's the economics of art in a digital age.
Alternatively, you could convince artists to leave the music publisher system that's reigned supreme all these years, but there's clearly an economic benefit for artists to sign these deals.
I probably am a good example of someone who actually does pay more than usual to artists, and it's because of Spotify. They drop advertisements for upcoming concerts, based on artists you listen to...and I went to two last year and will be going to another next month.
I wouldn't have even known Babymetal, a Japanese band, was having a US tour if not for a timely alert from Spotify that let me grab good seats right away. And I got some merch while I was there too.
And I only listen to as wide of a variety of music in the first place because one cheap Spotify subscription makes it possible. Imaging paying inflation-adjusted, pre-Napster CD prices...it would be like $30 for an album.
Though, realistically, the rise of DAWs and other home recording technology is what really drove costs down, by allowing explosive growth in the independent segment. "Livin' la Vida Loca" was the first song that was end-to-end recorded, mixed and mastered in Digital Audio Workstation software, and by the early 2000s anyone could buy Fruity Loops (now FL Studio), Logic, Cubase, Ableton, etc.. That shift happened in parallel with the rise of Napster and subsequent shift to iTunes, well before subscription streaming, and is equally important to the change in the music landscape. (I have music production tools sitting in my bedroom right now.)
Anyway, only a minuscule portion of musicians have ever been able to do it as a primarily source of income at any point in the past century (and probably any time in history). That is still the case, nothing has changed, but now everyone has much more democratic access to distribution and a greater chance of having their work seen. Given that the purpose of art is expression and communication, not commercial activity, I see that as progress.
I think it's hilarious that you're only the second person to have told me this story about Babymetal. It's great for consumers today to have a way to steadily patronize musicians and then selectively enjoy them in person. Kudos to you for living as the pirates pre-Spotify predicted how the music industry would eventually turn out.
This model works well for music, but will it work well for movies? The demise of movies hasn't come about just yet, since building a great pirating solution is slightly harder than it was for music (movies being so much larger), but it is moving in that direction. The non-tech folks in my life continue to surprise me when they mention some niche piracy services for movies. But movies don't have live performances like concerts. So I wonder how the streaming model for movies will work out for actors 5, 10, 15 years from now.