When a listener streams a song one time, how much does the artist get paid? The short answer: it depends. As a musician, you can benefit from understanding how streaming payouts to artists are calculated to make informed decisions about how to distribute your music and where to direct fans to listen.
So, what does your payout per stream depend on? Well, a lot of things.
What copyrights do you own?
There are two copyrights involved when streaming a song: the sound recording copyright and the musical composition copyright. A streaming platform needs to obtain the proper licenses and pay royalties to both sides. The type of license required and types of payouts can depend on the type of stream (more on that below).
Recording artists, sometimes represented by record labels, are entitled to be paid from the monies derived from the sound recordings. Songwriters, sometimes represented by publishers, are entitled to be paid from the monies derived from the compositions. Royalties paid to songwriters for the sound recordings are called mechanical royalties and royalties paid to songwriters for public performances are called performance royalties.
So, if you own both copyrights (i.e., you made the recording and wrote the song), you will earn more per stream.
How is your music distributed?
How you submit your music to the digital service providers (DSPs)—entities that provide digital music services (i.e., streaming platforms like Spotify and Apple Music)—also affects your bottom line per stream. This can be done through an independent distribution company like CD Baby or Distro Kid, or in the alternative, a record label. These entities obtain a license from the sound recording copyright holder to distribute the recording to DSPs. The distributors may take a cut of the revenue derived from the sound recordings prior to paying out. In general, most DSPs pay a percentage of overall revenue to distributors. Distributors typically do not collect publishing revenue, however, there are exceptions, such as CD Baby PRO and some labels that also run their own publishing companies. Therefore, the rate you have with your label and/or independent distributor will be deducted from what the DSP pays them prior to you receiving your sound recording payment for each stream. There is an extremely wide range of royalty rates with labels and independent distributors. This can vary from some indie labels offering 50%-50% net deals or bigger labels with more traditional royalty rates of a much smaller percentage. On the other hand, independent distributors might take approximately 8-10% and a one-time distribution fee, or some companies even give artists 100% of revenue in return for a flat monthly fee.
What type of stream?
The amount an artist makes per stream varies, depending on the type of stream.
On-demand streams: With on-demand streams (the most popular form of streaming), a listener gets to pick and choose the song they want to listen to, and royalties for the master recording are paid to the distributor as discussed above. With the passage of the Music Modernization Act in 2018, a blanket compulsory mechanical license was established, and the Mechanical Licensing Collective (MLC) was created. The MLC is tasked with collecting mechanical royalties from DSPs and paying out royalties directly to songwriters. Mechanical royalties are monies derived from sound recordings to pay to songwriters and/or publishers. The Copyright Royalty Board determines the percentage rates of revenue to be paid for mechanicals; as of 2022, the percentage is 15.1% of the revenue. It should be noted that an artist or publisher must register with the MLC to collect their mechanical royalties for streaming. For more information, visit: https://www.themlc.com
Non-interactive streams: Non-interactive streams occur when the listener doesn’t get to choose the specific songs they listen to, similar to radio stations. In addition to royalties for the master recording discussed above, non-interactive streams generate performance royalties just like radio. Performance royalties are monies paid to publishers who represent songwriters for public performance. Blanket licenses are granted and performance royalties are collected by performing rights organizations (PROs) such as ASCAP, SESAC and BMI. The PROs determine the royalty rates for public performances and the rates vary, with the approximate rate of about 5% of overall PRO revenue. Once again, artists and publishers must register with a PRO to collect these royalties. For more information and exact royalty amounts, visit: https://www.bmi.com or https://www.ascap.com.
The DSP that the stream occurs on can dramatically affect the payout per stream. This is because subscriber-based platforms, such as Apple Music, usually generate more revenue per subscriber compared to primarily ad-based (or hybrid) platforms like Spotify. Similarly, the location where the stream occurs can affect the numbers. All the royalties and percentages discussed above apply only to streams in the United States. Different governments and foreign PROs have different terms that affect the bottom line of international streams. There’s also more to it than just money with DSPs to consider. For example, some platforms have millions of followers that allow discovery of new music that could be a good reason to be present on those platforms even if they pay less per stream than competitors.
The bottom line is that there’s no easy answer to calculating how much an artist makes per stream because it depends on the specifics. While the seemingly low amount of pay per stream is a controversial topic in the music community, streaming compared to other methods of music listening also presents artists with a new opportunity to generate revenue. Back in the day when a musician sold a CD or vinyl to a music listener, that was the end of the sale. A listener could listen to a CD a million times or just once and the artist wouldn’t make any more or less money. Today, with the rise in popularity of streaming, the opportunity for artists to generate revenue from individual listeners are limitless.
About Brian Witkin
Brian Witkin runs a boutique entertainment law firm in San Diego. He is also an award-winning musician, producer, and CEO of Pacific Records. Brian has spent nearly two decades in the record business and is a Grammy® Voting Member of the Recording Academy. Brian’s father, Joe Witkin, was the original keyboard player of Sha Na Na, who performed at the iconic Woodstock Festival in 1969.
Note: This article is for general informational purposes only and does not establish an attorney-client relationship. The information is deemed reliable but not guaranteed. Every situation is different, and the general information contained in this article may not apply to your specific situation. The author and publisher assume no responsibility for actions taken based upon the contents of this article. Seek the advice of counsel for your specific situation.
© Law Offices of Brian A. Witkin 2022.