According to ex-Design Ethicist at Google Tristan Harris, “We all ‘live in a city called the attention economy.'” Digital service providers, a.k.a. music streaming service, thrive on the attention economy. While they enable artists to reach global audiences without touring or direct advertising, these platforms often make headlines for their payouts.
But how do their payouts work? And how can artists get the most out of DSPs?
Platforms such as Spotify, Tidal, Apple Music, Amazon Music and Deezer don’t have a fixed “pay-per-stream” rate. Instead, there are a variety of different payouts systems (800 systems for Spotify only). The rate depends on variables such as:
- The listener’s country/territory
- Whether the listener uses the freemium, ad-supported version or the paid, subscription model
- Promotional stream
- Distributor/label negotiated rate
- Pricing/Currency/Inflation in each territory
When taking all of these factors into consideration, we can conclude that all streams are equal, but some are more equal than others. That being said, artists need to take other elements into consideration, instead of cutting DSPs out completely.
When comparing it to the pre-DSP era, 1 million streams on an album was actually equivalent to approximately 1000 album sales, which wouldn’t make an artist a star in the pre-DSP era. While more and more artists are reaching 1 million streams, a lot of them are using these numbers and insights in their favour by actually targeting certain geographical areas and making the most of these statistics when approaching industry people.
Furthermore, by bypassing the expenses that are associated with physical releases, independent artists can make more money by eliminating extortionate costs. 1.5 million premium streams on Spotify on an album that’s released independently is approximately $5,700 in terms of 1000 physical album sales, which isn’t a lot, especially if you need to recoup expenses. Therefore, if you’re an independent artist, DSP streaming often works out in your favour, as there are no label or publisher cuts in the mix.
A tonne of music blogs and industry players have tried to calculate the exact figures. According to Forbes, “for 1 million plays of a song, artists receive roughly the following payout from these streaming services: Amazon Music $5,000; Apple Music $5,000-$5,500; Google Play $12,000; Pandora $1,400; YouTube $1,700.” And Spotify? Roughly $3000-$6000 (4.5 cents per stream). Furthermore, there are a couple of streaming royalty calculators on the net that can help you gauge how much money you’re going to make from streaming.
Dissecting these variables
Both Spotify and Apple Music value a U.S. stream more than a stream coming from, say, India. This is mostly because the U.S. subscription costs $10, while the Indian one costs less than $2. When it comes to the free, ad-supported version, advertisers pay more for a Spotify US placement than a Spotify India one.
Moreover, the listener’s subscription plan level also changes the rate per stream. E.g. Spotify pay more for a stream from a subscribed listener than a freemium level listener. It’s important to note that Apple Music does not have a free version. Therefore, Apple can pay a higher rate per stream as all users are paid users.
In November 2020, Spotify launched a new beta version of a new system where labels and artists agree to a “promotional recording royalty rate” in return for an enhanced algorithm that automatically put these tunes in front of potential listeners. Since this feature has only been introduced in a few territories, we have no data about how much money we’re talking about.
Distributors and labels also affect the pay-per-stream. Due to negotiations with Spotify, certain distributors and labels get more money per stream than others. The Merlin network, which includes distro services such as CD Baby, DistroKid and AWAL as well as labels like SubPop and Mad Decent, has bargained for the same rate for all the distributors and labels in its network. However, this doesn’t mean that each distro service and label in its network has opted-in for these deals. This is why certain labels/distro services, even within the same network, have a higher pay rate than others.
Move towards more artist-friendly payouts
Apple and Spotify respond to criticism
In March 2021, Spotify launched the “Loud & Clear” microsite. This microsite aims to educate artists on the ins and outs of Spotify streaming royalties. In its official press release, Spotify claimed that “Loud & Clear” “aims to share more info on how the music industry economics and artist payment works.” The PR continues: “For this reason, Spotify will address key issues in this site, such as Spotify’s role in the music industry, understanding how artists get paid, the value of 1 million streams, or the number of artists making a living on Spotify.”
This move comes amid calls by The Union of Musicians and Allied Workers, a group of musicians and music industry workers who have called for a fairer industry in general. Their “Justice At Spotify” campaign has been key to bringing DSP issues to the forefront, especially considering the effect that COVID-19 had and continues to have on musicians’ incomes. UMAW’s vision includes a penny per stream for rights holders, a user-centric payment model as well as equity when it comes to DSP dealings with majors vs indie labels.
In April 2021, Apple announced (via a letter that was viewed by The Wall Street Journal) that it pays a penny per stream for every artist whose music is on the Apple Music service. Furthermore, in this same letter, Apple said that they give 52% of revenues to labels, with the rest of the money going directly to the artists.
Click here to read the full letter.
Soundcloud’s & Bandcamp’s Initiatives
In April 2021, Soundcloud also rolled out its new revenue model, which aims to level the playing field for indie artists by enabling listeners to “tip” their favourite artists. This fan-powered model could potentially prove to be a game-changer, as this system will pay artists according to their listener’s habit – the more Artist X’s fans listen to Artist X’s music, the more money Artist X gets. This direct monetisation system largely depends on whether or not the fan has subscribed to SoundCloud Go+ and on how many ads the fan has consumed.
This move, alongside Soundcloud’s partnership with Twitch (which allows artists to monetise live streams), signifies a step towards artist-friendly and user-centric models that truly support the artists. Bandcamp’s revolutionary Bandcamp Fridays (launched in March 2020) proved to be indispensable for artists whose income largely depended on touring and live performances. This initiative continues to position Bandcamp as one of the leading artist-friendly services on the net.
The Growing Importance of Trigger Cities
In the last couple of years, the concept of trigger cities has gained traction. The increasing globalised nature of the music industry, as well as the Global South and the East’s growing importance in breaking artists, have shifted Western artists’ gaze to these previously-“ignored” areas.
“Trigger cities” refer to those cities around the world that have high music consumption rates, coupled with low advertising rates. The algorithm in these areas works in favour of the artist as it helps artists grow their global audience. By targeting these cities and audiences via paid ads, your fanbase and streaming numbers will grow faster than if you’re targeting audiences in Western hubs such as New York or London.
According to Chartmetric, the world’s top trigger cities are:
1. Mexico City, Mexico
2. Lima, Peru
3. Bogotá, Colombia
4. Santiago, Chile
5. Jakarta, Indonesia
6. Bangkok, Thailand
7. Guayaquil, Ecuador
8. Istanbul, Turkey
9. São Paulo, Brazil
10. Ankara, Turkey
Before investing money in any of these cities, it’s important to devise a paid ad strategy. Research which cities and audiences tend to favour your particular style of music, and focus on these cities. E.g. if you’re a rock band, target Mexico City rather than Jakarta, as the latter is more pop, hip-hop and electronica-oriented.
By thinking outside the box, artists can reach the global audience that’s available at their fingertips. Sure, trigger cities’ audiences may not have a high pay-per-stream rate; however, by gaining a sizeable audience in these burgeoning global cities, you’re ensuring an explosion in streaming numbers, leading to increased attention from global industry tastemakers and decision-makers. Furthermore, by opting for a mix of DSPs rather than sticking to one, artists can diversify their audiences plus benefit from all the recent features that different DSPs have been introduced, such as Apple’s 1 penny per stream, Soundcloud’s Twitch partnership and the Spotify-Merchbar alliance. By using DSPs as launchpads, artists can build a long-term fan strategy that reflects the demands of the modern music industry.