Spotify is the largest music streaming service online, with 422 million users across 183 markets.
The company pays artists for the right to use their copyrighted songs and recordings on the platform. This is known as royalty.
Types of Royalties
Every song has two parts: the sound recording and the composition. The former describes the sound signature and the latter the lyrics and melody.
A streamed song generates both recording and publishing royalties.
- Recording Royalties
The amount of money Spotify pays to artists with the right to stream recordings on the platform. Payment is made through their label or distributor.
- Publishing Royalties
Publishing royalties are paid to songwriters and publishers of recordings used on the platform.
Calculating Royalties for Artists
This process calculates each artist’s portion of the total streams on the platform every month. It then multiplies that with the company’s net revenue to establish how much it owes a particular rightsholder.
The net revenue represents what is left when taxes, processing fees, and commissions are subtracted from the income of the streaming service.
How Artists Get Paid
Spotify pays record labels or distributors once a month using Streamshare. Artists then get paid according to the contracts they have with these labels. The company has no hand in these agreements.