Spotify: How Artists and Songwriters Are Compensated

Spotify has an expansive platform of over 11 million diverse artists and songwriters however, very few listeners understand how these creators get paid.

To start, the music industry has experienced unparalleled growth, exceeding 100% since 2014, predominantly attributed to the advent of streaming services. Streaming now constitutes approximately 65% of global recorded music revenue.

However, the intricacies of compensation for these artists and songwriters are far from straightforward. Contrary to common perception, Spotify does not directly compensate creators; rather, they pay the rights holders, encompassing entities such as record labels, aggregators, distributors, and collecting societies.

Each artist selects their respective rights holder and enters into a contractual arrangement. These contracts vary in specifics and grant the rights holder authorization to share the music on Spotify. So payments from Spotify to rights holders are subsequently distributed to the respective artists or songwriters.

Distinct agreements between Spotify and individual rights holders specify the revenue allocation per song. Revenue streams emanate from both premium subscriptions and advertisements from other companies or organizations.

Further delving into the process reveals two distinct domains: recording and publishing. Typically, the recording sector commands higher compensation compared to its publishing counterpart, although this can change due to contractual stipulations. Furthermore, artists are usually compensated by the recording sector while songwriters typically receive their pay from the publishing domain.

Streaming has revolutionized the music industry and has given access to a vast array of artists and songwriters however, the intricacies of compensation remain complex. Understanding how creators are paid is essential not only for aspiring musicians but also for consumers who wish to support their favorite artists.