Music streaming services are now the largest source of revenue for recorded music. In 2019, music streaming accounted for $7.1 billion or 63.6% of all recorded music revenue, which reached $11.1 billion.
To compare, CD sales revenue amounted to $4.3 billion and 55.2% of total recorded music sales in 2009, but fell sharply to $614.5 million and accounted for only 5.5% of total revenue in 2019. Meaning, throughout this 10 year period, CD sales slumped by nearly 7 times.
So, the music industry has had a major shift toward streaming services, but what platforms should artists focus on?
At first sight, it might seem that creators should concentrate on music streaming services that pay the most per play. However, there is another important factor — the number of users an artist can reach.
To help artists and those interested in the music industry navigate the complex streaming service landscape, we provide real-world revenue data as well as the userbase of the most popular streaming services.
Napster tops the list with a $0.00916 payout per-stream, which amounts to $9,160 per 1 million clicks. To earn the US monthly minimum wage of $1,260, artists will have to average over 137 thousand streams per month. Those who want to make the US monthly median wage ($3,714) will have to get more than 405 thousand hits.
Apple Music is second on the list with $0.00675 revenue per play, which means that 1 million listens will rake in $6,750 for the artist. For artists to earn minimum wage, they will have to reach nearly 187 thousand plays per month. For artists who wish to earn the US median wage — $3,714, they will have to look for 550 thousand streams.
Deezer takes the third place with $0.00562 revenue per hit, which amounts to $5,620 for 1 million streams. Artists on Deezer will have to get 224 thousand clicks to earn $1,260. To earn the US median wage, artists will have to get nearly 661 thousand plays.
Amazon Music sits in fourth place, paying out $0.00426 per play or $4,260 for 1 million listens. Creators on this platform will have to get almost 296 thousand plays to earn a US monthly minimum wage of $1,260. To bring in the US median wage, artists will have to score around 872 thousand streams.
Spotify, arguably the most popular music streaming service, compensates artists $0.00348 per hit, or $3,480 for 1 million plays. Singers will have to get at least 362 thousand clicks to see $1,260 hit their bank accounts. To get $3,714, artists should aim for around 1.07 million plays per month.
Pandora, one of the oldest players in the market, offers around $0.00203 revenue per play or $2,030 for 1 million listeners. On Pandora, creators normally need 621 thousand listeners to earn a US monthly minimum wage of $1,260. To earn the medium wage of $3,714, Pandora will squeeze out 1.83 million plays per month.
YouTube, the most popular streaming service overall, pays the least to creators — $0.00154 per play or $1,540 per 1 million hits. Just to earn $1,260, musicians will have to reach 818 thousand views. And finally, to earn $3,714, YouTube will require an average of 2.4 million clicks.
As a side-note, the per-stream payout rate is in constant flux, since it depends on multiple factors — main of which are: the listener's country and currency, whether the user has a paid or free account, the specific artists royalty rate, and the percentage of ownership the artist has on the song.
Userbase
Userbase is the second most important element when considering potential revenue, so it is vital to consider this factor before jumping on a specific platform.
Even though Napster has a considerably higher per-play payout rate than other services, you can expect that a total stream count will be minuscule compared to Spotify and YouTube. Napster has only 32 million users, of which 2.5 million are paid subscribers.
In comparison to Napster, Apple Music provides the potential to reach a wider audience since this platform has over 68 million paid users. Following Apple Music comes Deezer, a service that has only 16 million active listeners, out of which 7 million pay for a premium subscription.
Amazon Music is one of the more popular platforms which has 55 million paid subscribers. A music streaming service that is becoming more popular by the day — Spotify, has over 299 million subscribers as of October 2020.
The old-timer Pandora has 60.9 million listeners, but only 6.2 million decided to purchase a premium subscription.
Finally, the Google-owned platform — YouTube can boast of its 2 billion users. On the other hand, only 20 million users decided to upgrade to a premium subscription, which explains the lower payout rates.
Each artist has to weigh the advantages and disadvantages of these services, keeping in mind the two most important variables — users and payout rates.
Finally, most artists do not have exclusive deals with any of the music streaming platforms, which allows them to upload music to all of them. After seeing the results, they can shift their focus to markets that bring the most profits.
Hopefully, this real-world data provides valuable insights into the music streaming industry.
Methodology
We used data from the following sources:
Robert still listens to MP3s but wants wants to know which music service pays artists best
Thu 31 Oct 2019 08.00 GMT
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I’m a big music fan and enjoy listening to music through my PC and phone, but I feel stuck in the last century as I still listen to my MP3 collection. I refuse to get Spotify, as it’s such a bad deal for the artists. Are there any alternatives that treat the artist well? Robert
Your problem is that you don’t really have a problem. I’m in almost exactly the same position, only slightly worse, because I still use an MP3 player to listen to albums in MP3 format. The main difference is that I’m almost completely happy about not using any music streaming services. They are not obligatory. If you don’t need them, don’t use them. Spend the money on downloads or CDs instead.
As always, there is no universal answer because it depends on all sorts of factors. These include the kinds of music you enjoy, how you listen to it, and why you listen to it.
Streaming music services are very good for people who like popular music and are singles-oriented. (Yes, I know you can listen to albums. Most people don’t.) They also provide playlists that are much like thematic replacements for live radio or, as we used to call it, background music. Apart from Today’s Top Hits on Spotify, there are playlists of happy songs to wake up to, relaxing music to unwind to, party music to dance to, music to go with various types of exercise, music to fall asleep to plus any number of genre-specific playlists.
Streaming music services may have limited appeal for classical music or jazz fans who are album or even box set oriented, and who care deeply about knowing who is playing what, when and how. That’s me.
For example, Herbert von Karajan and the Berlin Philharmonic recorded Beethoven’s nine symphonies four times and they are different, even though they sometimes have the same soloists in the ninth. Simon Rattle’s set with the Vienna Philharmonic is even more different. It’s the same for versions of The Messiah, Bach’s St Matthew Passion and any opera you can think of. As far as I can tell, streaming music services just don’t care about this kind of thing, except when someone like Ed Sheeran releases half a dozen different versions of the same song.
Having said that, I did like Pandora’s streaming music service, and would still use had it not been withdrawn from the UK market. Pandora lets you create your own radio station by seeding it with something you like. I had a William Orbit station, and Pandora’s algorithms surfaced all sorts of fascinating stuff by musicians I had (mostly) never heard before. It was brilliant. For those fully on-board with Spotify, its algorithmic Discover Weekly playlist can be a source of similar inspiration for both new and old music, but it requires you listen to everything through the service and invest time in liking or disliking songs to teach it what you want.
Today’s mainstream radio stations are deliberately bad at music discovery, because they know listeners will switch over if they don’t keep hearing the same familiar stuff. That leaves a hole that streaming services could fill, if only they were as good as Pandora. In theory, specialised playlists can do the job, but finding them can feel like more work than it’s worth.
Streaming music services are notorious for paying minuscule amounts for playing songs, and several major artists have not joined or removed their music in protest. Whether the payments are good or bad depends to some extent on how you look at it: they are not good if they are replacing download sales, but not so bad if they’re replacing radio plays. However, all the major services have been losing money, and most probably still are. Even Spotify, the biggest and richest service with 80 million paying subscribers, would struggle to pay significantly more.
Spotify was launched in Sweden in 2008 and made its first quarterly profits this year. However, it’s predicting an operating loss of €31-€131m for the next quarter, despite growing its number of monthly active users by 30% in the past year to 191 million. It’s a numbers game, and smaller rivals don’t have Spotify’s economies of scale.
Digital Music News has tried to establish how much various music services pay for streaming. According to its analysis, Napster pays the highest rate at $0.019 per stream, followed by Jay-Z’s Tidal at $0.0125 and Apple at $0.00735 per stream. YouTube pays the lowest rate of only $0.00069 per stream. Spotify is now, it seems, somewhere in the middle ground, paying about $0.00437 per stream.
That isn’t a lot of money for most of the artists with music on Spotify, because 10,000 plays only pays $43.70. However, a song that gets 10m streams will earn $43,700, and big hits can earn a lot. Ed Sheeran’s Shape of You has been streamed more than 2bn times, which would be worth $8.74m at current rates. Three other Sheeran songs have been streamed more than a billion times, according to Wikipedia’s list.
Another benefit is that singles can stick around earning money for years after they would have gone out of stock at record shops. A successful artist with a back catalogue of half a dozen albums on Spotify – perhaps 50 or more tracks – could do quite well, especially if their music fits easily on popular playlists. In other words, your grandmother might like it.
Spotify’s stated aim “is to harness Spotify’s ability to drive discovery to connect artists with fans on a scale that has never before existed with the goal of enabling 1 million artists to live off of their work”. That would be nice. However – as with sales of records, blockbuster movies, books, YouTube videos and so on – the bulk of the money goes to the people with the biggest hits.
So, if your musical tastes favour mainstream pop, you shouldn’t worry too much about Spotify’s pay rates. Every time you stream a song by Ed Sheeran, Drake, Justin Bieber, Adele, Ariana Grande and so on then you are “voting” their songs up the charts. The higher they go, the more people will play them, and the more money these superstars will make.
But if your tastes are relatively, or even absolutely, obscure, then you should find other ways to support your favourite artists. Even if you never play any songs by Ed Sheeran et al, Spotify is going to send them your money. The “minor artists” you are playing will get almost none of it.
As a result, the vast majority of musicians are not making enough to live on from streaming, but they shouldn’t expect to. As with radio plays, their best hope is to attract an audience. They can do that on a music service like Spotify – Justin Bieber did it on YouTube, Billie Eilish on SoundCloud – without having to go via record labels, DJs and other gatekeepers. After that, they can create their own communities, like Amanda Palmer, the Grateful Dead or Lady Gaga.
The best way to support musicians you care about is to buy their albums on CD or digitally from Bandcamp, go to their concerts, buy their merchandise, join their fan clubs, follow them on Instagram, subscribe to their Patreons, and so on. That way, they will get far more of your cash than they would get from Spotify and similar services. Better than that, they will feel their work is appreciated, which is what most artists actually want.
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Topics
- Digital music and audio
- Ask Jack
- Spotify
- Music streaming
- Internet
- features
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