Which Music Streaming Services Are Profitable For Artists? (2024)

So, you've just released your latest track or album and distributed it to the relevant music streaming services. Your fans are tuning in, and new listeners are loving your sound. You're anticipating receiving a substantial payout at the end of the month. However, when it arrives, the royalties you receive are much lower than expected.

Every artist should understand how payouts work with music streaming services. It will help you avoid disappointments and create strategies to generate more revenue. TIDAL, Apple Music, Amazon Music, and Spotify pay artists the most, with TIDAL offering the highest rate of $0.01284. The other platforms pay a lower rate due to factors such as the total premium subscribers and listener location.

Music streaming platforms are the go-to for millions of people worldwide. You're entitled to royalties when listeners play your tracks on one of those platforms. However, since each platform is unique, the royalty payment structure differs.

This post serves as a guide to how much music streaming services pay artists. We cover the following subjects, so feel free to jump to a section that interests you:

First, let's look at the three types of streaming payouts these platforms use to compensate artists.

The Three Types of Music Streaming Payouts

1. Mechanical Royalties

According to the US Copyright Act, musicians are entitled to certain earnings whenever their musical compositions are played. These earnings are mechanical royalties. Songwriters and their publishers (the composition owners) receive mechanical royalties when a piece is reproduced physically or digitally.

The act also sets the mechanical royalty rate. The mechanical royalty rate for tracks under 5 minutes is 9.1 cents per minute. While for songs over 5 minutes, it's 1.75 cents per minute.

2. Public Performance Royalties

Public performance royalties are paid to songwriters and their publishers when a composition is performed publicly. This includes songs played from a music streaming service in a restaurant, on the radio, or at a pub. Also, when a user listens to your tracks in the privacy of their earphones.

Performance Rights Organizations (PROs) collect and pay public performance royalties to artists and publishers. They negotiate these royalties with streaming services. Typically, it's about 6%-7% of a streaming service's total revenue.

3. Payout to Recording Owners

This is the most substantial payout. It's owed to the copyright owner, which may be the record label or the artist. This payout is delivered to the rightsholder through the licensor that provided the music, typically the distributor or record label.

According to Billboard, for every $1 a music streaming service pays in royalties, rights holders earn about 73 cents. Creators receive about 25 cents, and the PRO makes roughly over 1 cent.

How Music Streaming Services Pay Artists

How music streaming services pay artists depends on the royalty payment rate and payment method. The royalty payment rate is how much you receive per stream of your songs on the platform.

That rate varies from one platform to another. Some offer higher rates because of their subscription models and various other factors.

The payment method is the formula used to calculate how royalties are paid to artists. Most music streaming platforms pay artists using one of two methods: pro-rata or user-centric.

As with the royalty payment rate, the exact payment method used can vary from one platform to another. Some music streaming services use a combination of different methods.

Understanding how streaming royalty payments are calculated is essential for your music career. It can help you decide where to upload your music to maximize earnings. Let's take a closer look at the two standard royalty payment methods.

Pro-Rata System

Most major music streaming platforms use the pro-rata system to calculate streaming royalty payments. This includes Apple Music, Spotify, and YouTube Music.

With the pro-rata system, musicians receive royalties based on the overall streams across the platform. For example, let's suppose Spotify's total streams for December are 5 million.

If you amassed 100,000 streams that month, you'd be entitled to 2% of the streaming revenue. Therefore, you get a proportionate share of the platform's income based on your streams.

With this formula, artists with the most streams on a platform benefit the most. They receive a larger revenue share than lesser-known artists with a dedicated fan base.

User-Centric System

Music streaming services like Deezer and TIDAL use the user-centric payment method. It's based on each individual listener's monthly consumption.

For example, if a user only listens to your music in June, then 100% of the subscription fee they pay will go to you. It won't be shared with other artists on the music streaming service, as with the pro-rata system.

The user-centric system draws from the pre-streaming era, where artists received all earnings from fans buying CDs. It's considered fairer because your popularity doesn't play a role in earning revenue from your fans.

Therefore, up-and-coming artists with a smaller fan base aren't disadvantaged. However, only a few platforms use this system. And to make substantial revenue, the platform would need a large paid subscriber base.

Factors That Influence Royalty Payment Rates

Royalty rates set by music streaming services vary because of various factors. The most significant include the following:

• Label/distributor agreement
• Users' country/location
• Users' subscription tier
• Number of subscribers in a given location
• Number of streams in an area per month
• Premium subscription price in a location
• Advertising revenue in a location

Whether a user is a paid subscriber significantly influences royalty payment rates. While a free user sees or hears many ads, they don't generate revenue for a music streaming service. As a result, a platform's paid subscriber base can make a substantial difference.

Moreover, the value of a play differs worldwide based on the country's economy. For instance, Spotify's premium subscription costs $12.55 in the UK, while in Nigeria, users pay about $2. Therefore, the lower subscription price results in a smaller per-stream payout.

In addition, the service's user base is an essential factor. One platform might have a low royalty payment rate but more subscribers. While another would have a high royalty payment rate but fewer subscribers. The former would generate more streams and could pay artists more per stream.

Because of these factors, all artists on the same platform have different royalty payment rates. Additionally, since agreements and figures change often, rates tend to fluctuate.

How Much Music Streaming Services Pay Artists

Several music streaming services exist to share your music and build a fan base, including the following:

• TIDAL
• Amazon Music
• Spotify
• Apple Music
• SoundCloud
• Deezer
• Pandora
• YouTube Music

However, not every platform is profitable for musicians. Below is an overview of how much each service pays artists.

*Please Note: Our numbers are based on sales in the US market. Other global markets could influence the average royalty payment rate received.

TIDAL

This user-centric streaming service pays $0.01284 per stream. Which is nearly three times as much as other music streaming services with large user bases.

TIDAL is famed for its direct-to-artist payout (DAP) program, a significant and fairer change from the pro-rata system. Artists would receive 10% of the HiFi Plus subscription fee from the subscribers who listened to their music the most.

However, TIDAL CEO Jesse Dorogusker says the service no longer offers the program. This is because emerging artists often receive a small share of earnings.

Despite this significant change, TIDAL plans to put more funding towards up-and-coming artists on the platform through its TIDAL RISING program. The CEO stated it would be more financially beneficial for artists than the DAP program.

Amazon Music

Amazon Music ranks amongst the top five largest music streaming platforms. Artists with tracks on the platform earn $0.00402 per stream. However, the country where the song is played and the subscription tier influence the amount paid.

Spotify

Spotify pays between $0.003 and $0.005 per stream. The music streaming giant uses a streamshare, or pro-rata, system to pay royalties.

Artists or rights holders receive about 70% of the streaming revenue, while Spotify keeps 30%. Additionally, Spotify's most popular streaming artists receive a share of ad revenue.

The amount you receive is based on several factors. This includes the song length and popularity and your location. And Spotify's total revenue will affect how much you're paid per stream.

Spotify is widely criticized for underpaying artists. However, it's worth considering that most users are on a free tier. This means the platform doesn't generate as much revenue from them. Still, over time it has improved its royalty payment rate.

Apple Music

Apple Music is another beneficial music streaming service for musicians. Its royalty payment rate is $0.00783 per stream, with 100 streams required to earn $1.

Besides earning revenue from streams, artists also receive a portion of their advertising revenue. However, this perk is often pennies for most artists because it's divided amongst all the musicians on the platform.

SoundCloud

In 2021, SoundCloud adopted a payment method called Fan-Powered Royalties (FPR). This user-centric payment system allows artists to be paid based on overall listening time instead of the number of streams.

The exact amount SoundCloud pays artists depends on several factors, as with other music streaming services. However, it reportedly pays artists around $0.0019 per stream.

Deezer

Despite holding 2% of the global streaming music subscription market, Deezer has a decent royalty payment rate. Artists can earn $0.0064 per stream, with 178 streams making you $1.

Deezer uses a user-centric payment system. Therefore, paid subscribers can support their favorite artists directly. Suppose a listener only tunes in to one artist per month. The artist will receive the listener's entire subscription fee in that case. However, the platform subtracts costs from that amount.

Deezer might rise among the most profitable music streaming services for artists in the coming years. This is due to its partnership with Universal Music Group. Together they aim to find new ways to increase how much revenue musicians earn from streaming.

Pandora

Pandora falls far behind other music streaming platforms in terms of paying artists. It distributes less than half as much as its competitors do. With a royalty payment rate of $0.00133 per stream, it'll take 752 streams to earn $1.

YouTube Music

Determining the average royalty payment rate for artists on YouTube Music is tricky. This is because the platform offers a variety of streaming options.

Reportedly, artists earn approximately $0.00069 per stream. Music playback on your separate videos is also counted toward your earnings. With 136 streams, you make $1, and $100 for 13,605 streams.

Which Music Streaming Service Pays Artists the Most?

TIDAL offers the highest royalty payment rates in the music industry. This could be because it only offers paid subscription tiers and a limited free plan. However, other factors also influence the platform's high royalty payment rate.

Here's a comparison of the highest to the lowest-paying music streaming services and the number of streams you'd need to make $1:

*Please Note: Our numbers are based on sales in the US market. Other global markets could influence the average royalty payment rate received.

Takeaway

When choosing a music streaming service for your tracks, the amount they pay artists matters. Some platforms offer a fair royalty payment rate, while others have a reputation for underpaying artists.

TIDAL, the user-centric music streaming platform, has the highest royalty payment rate of $0.01284. With Apple Music, Deezer, and Spotify following closely behind.

You should also consider other factors besides the payout. This includes the availability of lossless audio, hi-res audio, and free or ad-supported user accounts. The user interface and experience also play a role.

Diversifying your income from music streaming services begins with distributing your tracks to as many platforms as possible. Working with a seasoned distributor like Sugo Music Group can make this process easier.

Sugo Music Group can get your tracks onto over 200 music streaming and download platforms in 180 countries. That includes Spotify, Amazon Music, Gaana, and Tencent. Therefore, reach out to them today to increase your earning potential.