Spinning tunes isn’t what it used to be. If you listen to music on physical media, whether it be a vinyl LP, compact disc or cassette tape, you’re now in the minority. These days, streaming—in this case, listening to music via an on-demand service such as Spotify or Apple Music— dominates the market and accounted for nearly 80 percent of recorded music revenues in 2019.
You might imagine that the rise of streaming technology, which is by nature instantly trackable, has translated to faster and more lucrative payouts for songwriters and other music creators. Sadly, that’s not quite the case, at least yet. Royalty rates are set at a variety of different percentages, usually based on the digital service’s gross revenue for a period of time, as well as a host of other factors. Even industry professionals and publishing executives who have been in the industry for decades can find themselves confused.
This article is intended to provide a solid grounding in the financial realities behind streaming royalties. By the time you’ve reached the end, you should have a basic knowledge of how streaming works, a working familiarity with the royalties landscape, and what effect some recent—and very welcomed—legal revisions might bring.
Reality Check: Looking At The Rates
A glance at the figures that streaming services pay per song play—at least for those services which release such information—is sobering. For a creator to earn the annual, federal minimum wage (roughly $15,000 a year) from YouTube, for example, they would have to rack up over 14 million ad supported streams per year. Spotify offers a higher rate, but earning the same minimum wage would still require an annual 8 million free tier stream plays.
It's important to note that there are two basic kinds of streams. One is called “non-interactive” or “webcast” - which is more like radio, in that listeners do not control what’s played (Pandora is one example), and the other is “interactive” or “on-demand”, where the listener chooses the song, album, or playlist they hear (such as Spotify). Of these two, the on-demand plays generate more money for songwriters.
In addition, there are typically two tiers for each type of stream: One for “premium” or paid subscribers, and another for “freemium” or ad-supported subscribers. As you might expect, the paid subscription level usually generates more money than ad-supported streams.
You should be familiar with the concept of two halves of a song and how each song is composed of the “sound recording” or the “master recording” and the composition or publishing. The master recording royalties earned are typically paid to the record label, film studio, distributor or other party (whoever controls the master recording copyright of a specific song), and usually represents the majority of any discrete streaming payout.
For their work on the composition, songwriters can look forward to receiving the performance and mechanical royalties allocated to the composition. “Mechanicals,” or mechanical royalties, are usually collected by publishers via a mechanical licensing administrator, such as the Harry Fox Agency (HFA) or The Mechanical Licensing Collective (The MLC) in the US, or by a Collective Management Organization (CMO), like GEMA in Germany or SACEM in France. Performance income, or performance royalties, usually goes to your home collection society such as a Performing Rights Organization (PRO) like ASCAP or BMI in the US, or a CMO such as SUISA in Switzerland. For a recap on pay sources and collection societies, check out this blog.
The Breakdown By Subscription
With roughly 124 million subscribers,, Spotify boasts the highest number of paying users, but artists and songwriters aren't seeing a comparable cut of the earnings. Still, the percentage per play is rising: The service currently pays $0.00437 per stream, compared with $0.0038 last year. Given the number of subscribers, a songwriter may benefit from a larger audience translating into more plays, despite the low rate per stream.
Unlike Spotify, Apple Music doesn't have a free subscription, which accounts for its higher per-play rate. Also Apple voluntarily offers an elevated payout for mechanical publishing, which is good news for songwriters. Apple has also increased its payout per stream from last year, when it paid $0.0064. As of late 2019, Apple is paying $0.00735 per stream.
You’ll find several articles, including this article by Soundcharts, floating around that speak to the amount that streaming platforms pay for streams, and though the numbers are a best estimate from several sources, they give a good idea of how much (or how little) songwriters can expect from streaming. The estimated payouts, Digital Music News, include:
Keep Your Head Up
In 2018, we saw the passage of several landmark pieces of legislation: The Music Modernization Act (MMA) here in the United States, and the Copyright Directive in the European Union.
The MMA provided for the creation of a new governing body called The Mechanical Licensing Collective (The MLC). Its mission is to replace the old system of statutory mechanical royalty rates with a more equitable and flexible rubric. The MLC, which is now officially operational, administers blanket mechanical licenses to interactive streaming services in the United States that are eligible to receive one. It then collects the royalties due under those licenses from the digital service providers and pays them to the appropriate songwriters, composers, lyricists, and music publishers.
By comparison, the EU’s Copyright Directive is aimed squarely at streaming services, such as YouTube, that until now have avoided paying royalties on copyrighted music on the grounds that they were merely providing a third-party platform and thus not playing an active role in the propagation of unlicensed music. Somewhat like The MLC in the US, the provision of blanket licenses for collection agencies should lead to faster and more accurate royalty payouts for rights holders.
Make no mistake: The streaming royalty landscape is complicated, and those tiny payouts can seem bleak, but the reality is that songwriters and music creators are already beginning to experience the benefits of the recent legal reforms, and we expect the situation to only improve.
What can you do to stay on top of your streaming royalties? Make sure you have your publishing in order and stay informed and up-to-date about what you're earning, what you’re entitled to, and how copyright laws are changing to give individual creators a fairer deal. Just as well, if you want higher streaming payouts, then make sure you’re marketing and promoting your songs to encourage additional streams!
You can manage your publishing yourself, and we strive to provide all the information and tools possible to facilitate this, but remember that Songtrust exists specifically to help individuals such as yourself collect all their performance and mechanical royalties, not just in the US but all across the globe.
We’ve even created a handy little tool to help you calculate what these might be. Try our streaming royalty estimator to see what your top-performing streams could be worth!
Take control of your publishing. Maximize Songtrust for your songs and business.
We created this guide to answer a simple question: How do songwriters support themselves?
The answer is not as simple as we’d like, but our goal is to make it as clear, transparent and understandable as we possibly can.
Songtrust is more than just a rights management platform and publishing administrator - we’re a team of experts in the music community who strive to educate, support, and provide thought leadership to creators, representatives, and businesses across the music industry.
Our hope is that you’ll finish this guide with an better understanding of the business behind songwriting and have actionable resources to help you be successful.