Now Streaming: How Much Money Can Be Made on Spotify and Apple Music?
How are artists making money on two of the biggest streaming platforms: Spotify and Apple Music?
Last year alone, the music industry made $43 billion. Digital platforms such as Spotify, Deezer, Tidal, and Apple Music have revolutionised the way we listen to music, but at what cost? And, more importantly, how are artists making money on two of the biggest streaming platforms: Spotify and Apple Music? Before we attempt to answer that question, let’s take a quick look at the rise of the two streaming giants.
Money made via streaming is filtered through a funnel-system of logistics and licences, with many people waiting for a slice of a very small amount of money
Since its launch ten years ago, Spotify has remained the streaming platform of choice for most listeners. In July of this year, it was reported that the service was available in 65 regions with 180 million monthly active users around the world. 83 million of those were paying subscribers. Impressive numbers, sure, but the service is still yet to make any money. Spotify’s financial records for its second quarter as a public company, released in July, showed the company had lost $458 million in revenue.
How exactly does a hugely-popular company with 83 million paying customers manage to make such a big loss? All streaming platforms must pay for licensing every time a user streams a song and, when built up, these licensing payments become pretty hefty. As more users sign up, streaming numbers rise and therefore, more money goes towards licencing. Inevitably, it’s hoped that the streaming platforms will be able to work out a more sustainable option with publishers in order to make money but it seems we’re not quite at that point yet.
Out of that $43 billion the music industry made in 2017, only 12 percent of it was given to musicians (actually up from 7 percent in 2000). Any money made via streaming is filtered through a funnel-system of logistics and licences, with many people waiting for a slice of a very small amount of money. A chart featured in a recent report by Citigroup, Putting The Band Back Together: Remastering the World of Music, attempts to demonstrate this:
Three years ago, Apple finally unveiled its Spotify rival in the form of Apple Music. Having kickstarted the digital music revolution with the iPod and iTunes years earlier, the launch of the subscription service was considered to be a relatively-late move for the leading tech empire.
However, in just three years, Apple’s subscription service has managed to notch up more than 35 million subscribers. Growing at a quicker rate than Spotify, it's already been suggested that Apple Music is catching up to Spotify’s U.S subscription numbers.
The fact that Apple Music comes pre-installed on iPhones and other Apple products isn’t lost on publishers and it’s surely contributing towards the tech giant being able to secure exclusives and lower licencing costs than Spotify. Also, Apple Music functions on a subscription-only service whereas Spotify offers an ad-supported free version. Whilst free listeners have to endure adverts, they aren’t really helping to fund the music industry.
154 streams on Spotify or 78 streams on Apple Music would be counted as one sale on the Billboard Top 100 chart
The amount of money a musician can make off a single track on streaming is hard to pinpoint as it all depends on individual artist agreements and how many people were involved in the recording, producing, and releasing of the song. However, there is some data out there to give you a rough idea.
Research conducted by The Trichordist identified that Spotify was paying out an average per stream rate of $0.00397, a 24 percent decrease from 0.00521 in 2014. Apple Music, meanwhile, was paying almost double than Spotify with a per stream rate of $0.00783. For a bit of context, 154 streams on Spotify or 78 streams on Apple Music would be counted as one sale on the Billboard Top 100 chart.
Artists have already publicly called out the low profits to be made off streaming. In 2015, Taylor Swift famously refused to put her ‘1989’ album onto all streaming platforms except Apple Music. At the time, the singer said: “I’m not willing to contribute my life’s work to an experiment that I don’t feel fairly compensates the writers, producers, artists, and creators of this music.” However, her back catalogue was eventually put back on all streaming services last year.
Out of the ten leading streaming providers, Xbox Music provided the best stream rate for music makers at $0.02730 but with just 0.65 percent of the streaming market share, compared to Spotify’s 51.51 percent and Apple's 22.29 percent, it’s not going to make much difference in the grander scheme of things.
For artists today, particularly independent artists, it’s important to not bite the hand that feeds when it comes to streaming. If you want to make a presence for yourself, you have to be on the leading streaming platforms, such as Spotify and Apple Music, but you will have to refer to other routes such as touring, publishing, and advertising in order to make real money.
A recent article in the New York Times discussed how Spotify has started to quietly sign direct licencing deals with a number of independent artists who aren’t attached to major record labels. Giving these artists more opportunity to pitch their way onto the top Spotify playlists, the deal also provides artists and their representatives a bigger payout.
The success of these deals could help to reshape the streaming industry and perhaps offer a more favourable option to those trying to make it in the music world. Bigger players, such as the Taylor Swift’s and Frank Ocean’s of the world, need to continue to push for change and make noise if they want to see better payouts in streaming.